Policy & Practice June 2015

Figure 1

The federal government invests approximately $9.1 billion each year into workforce development. While individuals come to these programs to find a job or receive skills training to access higher wage jobs, many also come with multiple financial chal- lenges, such as having little or no access to credit, high debt, low savings, and irregular cash flow. Living in these circumstances makes it much harder to quickly bounce back from a financial emergency, such as a car repair or a child care disruption, and can cause individuals to miss work. Although serious, these kinds of challenges are not uncommon. The Consumer Financial Protection Bureau finds that one in five employees reported they had skipped work in the past year to deal with a financial problem, possibly making it difficult to maintain employment.

WAGES $2,200 increased yearly pay for clients receiving financial counseling at Center for Employment Opportunities .

Higher job placement rates for clients receiving financial JOB PLACEMENT

HOURS WORKED

Participants who opened a checking account secured 12 additional hours of work per week in the Small Business Services program.

counseling at the Capacity Building Initiative .

Source: Building Financial Counseling into Social Service Delivery: Research and Implementation Findings for Social Service Programs (New York: Department of Consumer Affairs, 2014).

All of these barriers start and end with the state of a household’s finances and take a toll on a household’s finan- cial stress and ability to manage finances. Recent research from the field of behavioral economics has shown that low-income households are so overwhelmed by the constant worry about money that their “mental bandwidth” becomes dramatically reduced, 1 creating a tunneling effect that reduces their ability to make good long-term financial decisions. This stress can hinder job performance and retention. Integration of Financial Capability Financial capability services and workforce development programs, like TANF and one-stop centers, share similar goals; both focus on ensuring that individuals have the tools to participate in, contribute to, and benefit from the mainstream economy. These services are strongly interrelated and become more effec- tive when combined. Financial capability services have a track record of increasing employment outcomes while addressing the other dimen- sions of an individual’s financial life. Evaluations have shown that by inte- grating financial capability services into employment services, job place- ment rates, number of hours worked, wages, and job retention all tend to increase (see Figure 1). Services into Workforce Programs Yields Improved Employment Outcomes

Barriers to Employment are Linked to Household Financial Insecurity While finding a job creates a finan- cial challenge in and of itself, there is more going on underneath the surface. Research from the Urban Institute shows that adults entering workforce development programs generally have four or five financial challenges beyond unemployment which, taken together, can create barriers to gaining employ- ment and exacerbate a household’s ability to become financially stable. These barriers can include: Š Š Transportation issues due to lack of savings to purchase a car or repair a car, or lack of affordable public transportation. Additionally, indi- viduals may have low credit scores, making financing a car unaffordable. Š Š Child care issues , including lack of affordable and quality child care, lack of transportation to child care, child care hours that do not match their work schedule, and child care being closed on holidays or weekends. Inevitably, these chal- lenges involve relying on friends and family for informal child care, which can also be unreliable and inconsistent. Š Š Unstable housing can cause commutes and transportation to change frequently and make applying for employment difficult due to the lack of a permanent address. Additionally, budgeting can be especially difficult if housing is unstable and costs can change rapidly.

Kate Griffin is the vice

president of Programs at the Corporation for Enterprise Development (CFED).

Jeremie Greer is the vice president of Policy and Research at CFED.

Alicia Atkinson is a policy analyst on the Policy and Research team at CFED.

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Policy&Practice June 2015