From the Ending Poverty in California Blueprint: Eliminating ‘Transaction Costs’ in California’s Safety Net

Category: Listening Sessions, Personal Stories, Poverty News & Policy Updates, The Safety Net

February 23rd, 2023

Patrice Berry is the Chief Impact Officer of EPIC.

Editor’s Note: This article is adapted from Ending Poverty in California: A Blueprint for a Just and Inclusive Economy, a roadmap for eliminating poverty in California developed by the Stanford Center on Poverty and Inequality (lead author, David Grusky).

California’s safety net is intended to help individuals and families striving for economic mobility  through programs that include unemployment benefits and assistance with basic needs like food, housing, healthcare, childcare, and more.

There are three main areas in which California’s safety net is failing to provide the support it needs to:

  • Excluded Households (e.g., undocumented and mixed status households)
  • Transaction Costs
  • Workplace Benefits 

In this article, we’ll review the “transaction costs.” We’ll examine excluded groups and workplace benefits in future articles.

The Transaction Costs Problem

Unfortunately, in 2023, taking advantage of California’s safety net means jumping through a lot of hoops.

Receiving benefits (and renewing them) can cost quite a lot in terms of time, money, anxiety, and dignity. 

The applications can be long and confusing. They may include intrusive or even demeaning questions. There are also duplicative reporting, verification, and other unnecessary requirements. And on top of it all, there can be monetary costs for things like tax preparation assistance or software. 

These types of barriers—the hidden “transaction costs”—all reduce program participation and are summarized here:

  • Time— The application and renewal processes require significant time and multiple steps 
  • Punishments—There are often punitive, disincentivizing requirements for receiving and retaining benefits
  • Dignity—The application and documentation process can be intrusive
  • Risk—There is at least a perceived exposure to risk (especially in the case of undocumented immigrants).

As important as eligibility is, safety net scholars tell us that it is only half the battle. Californians who are eligible for benefits don’t always apply. And sometimes they stop receiving benefits even when they remain eligible. The above factors shed light on why.

California’s Participation Problem

The transaction costs outlined above reduce participation in safety net programs. In fact, bureaucratic systems have historically been designed in this fashion to discourage anyone seen as “undeserving”—particularly people of color—from securing benefits.

The participation problem has historically been misunderstood as simply one of “excessive paperwork,” an interpretation that ignores the regressive systemic design and problematic transaction costs that cannot be overcome simply by removing paperwork or building an app. 

Five Changes To Make

There are five structural changes that need to be undertaken:

Eliminate Onerous Requirements

Eliminate all program rules that require clients to jump through hoops rather than engage in activities that will actually improve their lives. These hoops include: 

Californians must challenge the punitive impacts of unnecessary federal requirements—such as “make work” program requirements—while still meeting all federal mandates. It must also challenge status quo practices—for example, by converting in-person interviews to telephone or online meetings.

Coordinate Programs

Requirements should be coordinated across programs. This means providing automatic referrals and unifying caseworker training. Any single meeting with a caseworker should provide an opportunity to ensure that an individual’s eligibility can be determined for all available programs.

Integrate and Automate Data 

Federal, state, and local government must work to align and share data between programs. In the absence of a common application, this means pre-filling application forms, enabling automatic documentation of income and calculation of benefits, and automatically triggering referrals for Californians who are likely eligible for support. For example, when a low-wage worker files for unemployment benefits we should automate an application for CalFresh. 

If our data systems for employment, social services, and tax administration were integrated in ways like this, we could more easily identify gaps, reduce barriers to enrollment, and alleviate burdensome administrative processes.

Unify Benefit Systems

We can show respect and preserve Californians’ dignity by delivering benefits through a single integrated system focused on inclusion and repairing harm. This unified benefit system would eliminate a false distinction between a tax system that provides benefits to high-income households and a safety net that provides benefits to lower-income households. Fully aligning and integrating data makes this unified system possible

Remove Financial Barriers

Removing financial barriers might include providing free tax preparation assistance, free ITIN application assistance, and ensuring affordable internet access.


We have an unparalleled opportunity to build a unified safety net that fully eliminates the long-standing “administrative burden” problem. In short, it involves:

  • Reducing transaction costs
  • Eliminating dignity-stripping and time-consuming barriers
  • Integrating and automating data
  • Delivering benefits through a single integrated system 
  • Removing financial barriers to needed assistance

Although some of these changes can only happen at the federal level, much of the work can be done right here in California (statewide and at the local level).