Evaluating Financial Capability Services Provided in a Workforce Development Program

• Published date: 01 December 2019
• Author: J. Michael Collins,Mia Nafziger
• Date: 01 December 2019
• DOI: http://doi.org/10.1111/joca.12262

WINTER 2019 VOLUME 53, NUMBER 4 1775

J. MICHAEL COLLINS AND MIA NAFZIGER

Evaluating Financial Capability Services Provided in a

Workforce Development Program

This eld study explores the effects of an offer of nancial counseling

provided to low-income people exiting welfareassistance in a workforce

development program. While only about one-third of workers actually

took part in counseling, those who did were able to reducethe amount of

debt they had in collections. Wedid not nd other statistically signicant

effects on nancial behavior or well-being, however. People living at

or below poverty levels of income may need more intensive nancial

support services than counseling can provide. This study illustrates the

challenge of engaging participants in nancial capability services, as

well as the limitation of interventions like counseling for people who

have very low incomes.

Workforce development programs serve nearly 23 million people annually

(U.S. Department of Labor 2016). These locally administered programs

are operated by the Department of Labor, in cooperation with the Depart-

ments of Education and Health and Human Services. In 2017, more than

$3 billion of federal appropriations was allocated to training and employ-

ment services programs targeted to youth and adults (U.S. Department of

Labor 2017). Many of these programs are authorized by the Workforce

Innovation and Opportunity Act (WIOA). Passed in 2014, WIOA is a

revision of worker training programs dating back more than four decades.

WIOA requires states to develop a coordinated strategy for the delivery

of workforce programs, including certain core activities. One provision

in WIOA is a requirement that states consider offering nancial capa-

bility and inclusion services (§681.500 Pub. L. 113–128). Policymakers

included these types of standards based on the idea that offering nancial

services, counseling, or education as part of workforce programs can

enhance nancial self-sufciency. However, few studies have examined

how nancial capability and inclusion services embedded into workforce

development programs affect lives of participants.

J. Michael Collins (jmcollins@wisc.edu) is professor in the La Follette School of Public

Affairs and School of Human Ecology, University of Wisconsin at Madison and Mia Nafziger

(nafzigermk@gmail.com) is graduate student in the La Follette School of Public Affairs, Universityof

Wisconsin at Madison.

The Journal of Consumer Affairs, Winter 2019: 1775–1796

DOI: 10.1111/joca.12262

Copyright 2019 by The American Council on Consumer Interests

1776 THE JOURNAL OF CONSUMER AFFAIRS

This eld study examines one large workforce development program

that piloted the use of nancial capability and inclusion services at certain

program locations during certain months, but not at others. Using cohorts of

workers entering the program at sites with and without counseling, we are

able to estimate the causal effects of access to nancial counseling as part

of this program. After one year, we nd reductions of collections balances

among those workers who were offered counseling at their program

site, but few other effects. This study illustrates that while nancial

capability services can be integrated into public programs, the impact

of these approaches for people will be limited for people in nancial

distress.

BACKGROUND

Many people appear to lack basic nancial literacy, measured in either

objective knowledge questions or subjective self-assessments (Lusardi

and Mitchell 2014). A lack of basic nancial literacy is also associ-

ated with a range of nancial problems (Braunstein and Welch 2002;

Xiao and O’Neill 2016). These patterns are more pronounced among

low-income consumers, younger people, and people with lower levels of

educational attainment (Robb et al. 2015). Financial education programs

help low-income people to learn more about nancial issues (Collins 2013)

but teaching basic nancial literacy can be time and resource intensive

and may not attract the learners most in need of services (Meier and

Sprenger 2013).

One option to help people with low nancial literacy is to offer targeted

nancial counseling services (Disney, Gathergood,and Weber 2015; Xiao,

Sorhaindo, and Thomas Garman 2006). Financial counselors provide

clients with specic advice on nancial issues in one-on-one sessions,

frequently to people in crisis (Consumer Financial Protection Bureau

2016). Like education, counseling may provide information, but rather

than a group or online class with specic learning objectives, counseling

attempts to diagnose, and then take steps to resolve, people’s nancial

problems. Prior studies show nancial counseling can help people facing

hardships to prioritize debt payments, correct errors in credit reports,

dispute or discharge older liabilities, and modify loan payments (Carpena

et al. 2017; Elliehausen, Christopher Lundquist, and Staten 2007; Wang

2010). Counseling can also help people to navigate systems and make

difcult decisions (Delgadillo 2014). Financial counseling is distinct from

nancial coaching, which is more goal-oriented, and focuses less on acute

problems (Theodos, Stacy, and Daniels 2018). However, poorly designed