How Employers in Poor Countries Are Using Nudges to Help Employees Save Money

Tuesday, June 19, 2018

By Joshua Blumenstock, Michael Callen, Tarek Ghani

One of the most common ways to get people to save is through their employer. In particular, behavioral economics—that marriage of economics and psychology that has put terms like “nudge” into the popular lexicon—has provided a powerful tool for increasing savings, in the form of the default enrollment. The idea is simple: people save more in retirement accounts when they are automatically enrolled by their employer than when they have to sign up themselves. Most U.S. employers have adopted default savings programs, but the idea is only just entering  poor countries, where saving is less common. According to World Bank figures, half of adults in high-income OECD countries save in a formal account; in developing economies, it’s only one in five. But we now have some evidence about how to scale nudges to help change this.

Photo courtesy of Victor Camilo.

Source: Harvard Business Review (link opens in a new window)

behavioral economics, employment, global development