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Using Machine Learning to Create an Early Warning System for Welfare Recipients


  • Sansone, Dario

    (University of Exeter)

  • Zhu, Anna

    (RMIT University)


Using high-quality nation-wide social security data combined with machine learning tools, we develop predictive models of income support receipt intensities for any payment enrolee in the Australian social security system between 2014 and 2018. We show that off-the-shelf machine learning algorithms can significantly improve predictive accuracy compared to simpler heuristic models or early warning systems currently in use. Specifically, the former predicts the proportion of time individuals are on income support in the subsequent four years with greater accuracy, by a magnitude of at least 22% (14 percentage points increase in the R2), compared to the latter. This gain can be achieved at no extra cost to practitioners since the algorithms use administrative data currently available to caseworkers. Consequently, our machine learning algorithms can improve the detection of long-term income support recipients, which can potentially provide governments with large savings in accrued welfare costs.

Suggested Citation

  • Sansone, Dario & Zhu, Anna, 2021. "Using Machine Learning to Create an Early Warning System for Welfare Recipients," IZA Discussion Papers 14377, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp14377

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    References listed on IDEAS

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    3. Moreno Badia, Marialuz & Medas, Paulo & Gupta, Pranav & Xiang, Yuan, 2022. "Debt is not free," Journal of International Money and Finance, Elsevier, vol. 127(C).

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    More about this item


    income support; machine learning; Australia;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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