<p>If one option is better for rich and experienced people while another is better for vulnerable individuals, use smart defaults, which pre-select different options for different people to try to benefit all people.</p><p>When that is not possible, always choose the option that benefits vulnerable employees, <strong>because they are typically more likely to keep default options</strong>.</p>

Think about vulnerable employees when choosing the default option

<p>Another effective tool to reduce inequities and improve decisions is to eliminate options that are inferior to other options in every way, which are called <strong>dominated options</strong>.</p><p>Like other nudges, removing these options benefited people with low socioeconomic status most because they were less likely to have the knowledge needed to determine which options were most beneficial to them.</p>

Remove options that are worse for all employees

<p>Employees often face <strong>overly complex decisions</strong> with too many options, paperwork burdens, or hard-to-understand terms. These burdens, sometimes called sludge, almost always harm vulnerable and low-SES people most.</p><p>In many cases, firms can reduce or remove these burdens, or at least provide tools to help their employees make good decisions.</p>

Remove sludge

<p><strong>Defaults can be used</strong> by firms and policymakers <strong>to make beneficial behaviors </strong>easier and more automatic. During the first wave of COVID-19, Amazon and other employers automatically sent free masks to all employees. These changes can be very beneficial, especially for the poor and vulnerable.</p>

Make it automatic

<img src="https://hbr.org/resources/images/article_assets/2021/03/Mar21_30_HeleneBaum.jpg" width="630" height="354"><div class="caption" dir="ltr">
				<span dir="ltr">Illustration by Hélène Baum-Owoyele</span>
		</div><div more-caption="more" close-caption="close" dir="ltr">
		<span dir="ltr">Summary.&nbsp;&nbsp;&nbsp;</span>
		<span dir="ltr">There are massive gaps between low-SES and high-SES Americans in retirement savings, COVID-19 vaccine uptake, and many other outcomes. Nudges can reduce gaps like these if used well, because they typically impact low-SES individuals most, according<span dir="ltr">...<button dir="ltr">more</button></span></span>
	</div><p dir="ltr">Across the United States, millions of people are now eligible to get a Covid vaccine. However, the signup process is often unnecessarily complex. New York City’s NYC Healthy sign-up portal, for example, included as many as 51 questions and a request to upload a scanned health insurance card. As a result, many people, especially the elderly, poor, and less digitally literate, struggled or failed to make an appointment when they were first eligible. It doesn’t have to be this way. Nudges can be used to simplify and streamline sign up to require only a few clicks, or even make the vaccination process more automatic. To make the process more automatic, second-dose appointments can be <a href="https://jamanetwork.com/journals/jama/fullarticle/186162" dir="ltr">scheduled by default</a> and individuals can be told that a vaccine dose has been <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3780267" dir="ltr">automatically set aside</a> specifically for them, both of which can increase the likelihood that they get vaccinated.</p><p dir="ltr">Our <a href="https://journals.sagepub.com/doi/10.1177/0022242921993186" dir="ltr">recent research</a> shows that nudges, which make decisions simple or more automatic, dramatically reduce barriers that contribute to inequality. Nudges, in fact, reduced socioeconomic inequities in every type of decision we examined, including Covid-19 health decisions, retail purchases, and financial decisions.</p><p>Take one example: retirement savings. More and more companies are automatically enrolling employees into retirement plans to help them save more for retirement. You might think that low-income employees would opt out rather than contribute 6% of their income towards a retirement plan, because they are more likely to need their paycheck for basic needs. However, our data suggests the opposite: People with low socioeconomic status&nbsp;(SES) are more likely to retain default retirement options compared to people with higher socioeconomic status. When 34 U.S. employers switched their retirement plans to automatic enrollment, retirement savings more than doubled among low-income employees whereas the savings and welfare of high-income employees were relatively unaffected. High-income employees are more likely to change the default if it does not fit and save for retirement whether or not they are automatically enrolled by their employer.</p><p>Firms that set default retirement contribution rates that would be optimal for low-socioeconomic status employees can therefore help these employees and reduce retirement savings gaps. We also tested other tools to simplify financial, retail, and health decisions, which removed inferior options or sorted them from best to worst. All of these reduced socioeconomic disparities by helping vulnerable individuals most. These findings give firms and policymakers a clear path to reduce socioeconomic disparities:</p><p dir="ltr"><strong dir="ltr">Remove sludge.&nbsp;</strong>Like the complex vaccine sign-up, employees often face overly complex decisions with too many options, paperwork burdens, or hard-to-understand terms. These burdens, sometimes called sludge, almost always harm vulnerable and low-SES people most. In many cases, firms can reduce or remove these burdens, or at least provide tools to help their employees make good decisions. For example, some firms have provided tools to help employees determine which health care plan is best for them (e.g., Picwell). For retirement decisions, employers can also provide similar tools that help employees visualize the long-term benefits of saving more for retirement and putting more of their investments in stocks compared to bonds, cash, or savings accounts.</p><p dir="ltr"><strong dir="ltr">Make it automatic.&nbsp;</strong>Defaults can be used by firms and policymakers to make beneficial behaviors easier and more automatic. During the first wave of Covid, Amazon and other employers automatically sent free masks to all employees. Additionally, Congress has considered making earned income tax credits automatic to get much-needed money to all eligible citizens. Similarly, college financial aid (FAFSA) forms can be sent with pre-filled answers, and colleges can automatically notify qualifying individuals about guaranteed financial aid (an automatic notification that had substantial benefits among low-income prospective students when implemented at the University of Michigan). These changes can be very beneficial, especially for the poor and vulnerable.</p><p dir="ltr"><strong dir="ltr">Think about vulnerable employees when choosing the default option.&nbsp;</strong>Because defaults impact vulnerable individuals most according to our research, it is important to choose a default option that would benefit these vulnerable employees. If one option is better for rich and experienced people while another is better for vulnerable individuals, the former option should not be set as the default. In one case, a well-intentioned nudge to promote green (yet expensive) electricity negatively impacted the decisions and welfare of the poor most, because they were most likely to <a href="https://www.sciencedirect.com/science/article/pii/S014098831930413X?via%3Dihub" dir="ltr">stick with the default</a> and could least afford the costly green energy. One good policy in cases like these would be to use smart defaults, which pre-select different options for different people to try to benefit all people. When that is not possible, the needs of vulnerable employees should be prioritized, because they are typically more likely to keep default options.</p><p dir="ltr"><strong dir="ltr">Remove options that are worse for all employees.&nbsp;</strong>Another effective tool to reduce inequities and improve decisions in our research involved eliminating options that are inferior to other options in every way, which are called dominated options. Like other nudges, removing these dominated options benefited people with low-SES most. Dominated options are surprisingly common in the health care plans and 401(k) options that firms offer to employees. When choosing a health care plan at one large U.S. firm, more than half of employees chose dominated options, which were more expensive for them no matter how much or how little they spent on health care that year (and with no added benefits). People with lower income were especially likely to choose a dominated plan, costing them over $300 per year of much-needed money. According to our research, low-SES people benefited most from removing these inferior options primarily because they were less likely to have the numerical, health, and financial knowledge needed to determine which options were most beneficial. Many firms have the power to eliminate dominated options, such as inferior health care plan options or inferior retirement allocation options with higher fees (and equivalent portfolios). Making these changes would be a win-win. It would improve welfare overall and also reduce inequities by helping the vulnerable most.</p><p>Making these four changes would be effective and cheap. Nudges are inexpensive and get more bang for the buck compared to other techniques that firms use to reduce inequities, such as offering financial education or discounts. Nudges are therefore a win-win for managers and employees.</p><UL><LI><author-avatar data-url="" data-author-name="Kellen Mrkva" data-js-target="author-avatar">
					KM
				</author-avatar><div dir="ltr">
					<span dir="ltr">
						<a href="https://hbr.org/search?term=kellen%20mrkva&amp;search_type=search-all" dir="ltr">Kellen Mrkva</a> is Postdoctoral Scholar at Columbia University’s Center for Decision Sciences and an incoming Assistant Professor of Marketing at University of Bath, UK.
					</span>
		</div></LI><LI><author-avatar data-url="" data-author-name="Eric J. Johnson" data-js-target="author-avatar">
					EJ
				</author-avatar><div dir="ltr">
					<span dir="ltr">
						<a href="https://hbr.org/search?term=eric%20j.%20johnson&amp;search_type=search-all" dir="ltr">Eric J. Johnson</a> is the Norman Eig Professor of Business at Columbia Business School in New York, and the author of a book about choice architecture “The Elements of Choice: Why the Way We Decide Matters.” He also directs the Center for Decision Sciences.
					</span>
		</div></LI><LI><author-avatar data-url="" data-author-name="Crystal Reeck" data-js-target="author-avatar">
					CR
				</author-avatar><div dir="ltr">
					<span dir="ltr">
						<a href="https://hbr.org/search?term=crystal%20reeck&amp;search_type=search-all" dir="ltr">Crystal Reeck</a> is Assistant Professor of Marketing at Temple University and Associate Director of the Center for Applied Research in Decision Making.
					</span>
		</div></LI><LI><author-avatar data-url="" data-author-name="Nathaniel Posner" data-js-target="author-avatar">
					NP
				</author-avatar><div dir="ltr">
					<span dir="ltr">
						Nathaniel A. Posner is lab manager of Columbia’s Center for Decision Sciences and an incoming Marketing PhD Student in Consumer Behavior at Columbia Business School. 
					</span>
		</div></LI></UL>

Thoughtfully designed enrollment processes can reduce unequal outcomes in anything from vaccinations to retirement plans.

personaldevelopment

Personal Development

communication

Communication

<p dir="ltr">Across the United States, millions of people are now eligible to get a Covid vaccine. However, the signup process is often unnecessarily complex. New York City’s NYC Healthy sign-up portal, for example, included as many as 51 questions and a request to upload a scanned health insurance card. As a result, many people, especially the elderly, poor, and less digitally literate, struggled or failed to make an appointment when they were first eligible. It doesn’t have to be this way. Nudges can be used to simplify and streamline sign up to require only a few clicks, or even make the vaccination process more automatic. To make the process more automatic, second-dose appointments can be <a dir="ltr" href="https://jamanetwork.com/journals/jama/fullarticle/186162">scheduled by default </a>and individuals can be told that a vaccine dose has been <a dir="ltr" href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3780267">automatically set aside </a>specifically for them, both of which can increase the likelihood that they get vaccinated. </p>

<p dir="ltr">Our <a dir="ltr" href="https://journals.sagepub.com/doi/10.1177/0022242921993186">recent research </a>shows that nudges, which make decisions simple or more automatic, dramatically reduce barriers that contribute to inequality. Nudges, in fact, reduced socioeconomic inequities in every type of decision we examined, including Covid-19 health decisions, retail purchases, and financial decisions. </p>

<p>Take one example: retirement savings. More and more companies are automatically enrolling employees into retirement plans to help them save more for retirement. You might think that low-income employees would opt out rather than contribute 6% of their income towards a retirement plan, because they are more likely to need their paycheck for basic needs. However, our data suggests the opposite: People with low socioeconomic status (SES) are more likely to retain default retirement options compared to people with higher socioeconomic status. When 34 U.S. employers switched their retirement plans to automatic enrollment, retirement savings more than doubled among low-income employees whereas the savings and welfare of high-income employees were relatively unaffected. High-income employees are more likely to change the default if it does not fit and save for retirement whether or not they are automatically enrolled by their employer. </p>

<p>Firms that set default retirement contribution rates that would be optimal for low-socioeconomic status employees can therefore help these employees and reduce retirement savings gaps. We also tested other tools to simplify financial, retail, and health decisions, which removed inferior options or sorted them from best to worst. All of these reduced socioeconomic disparities by helping vulnerable individuals most. These findings give firms and policymakers a clear path to reduce socioeconomic disparities: </p>

<p dir="ltr"><strong dir="ltr">Remove sludge.  </strong>Like the complex vaccine sign-up, employees often face overly complex decisions with too many options, paperwork burdens, or hard-to-understand terms. These burdens, sometimes called sludge, almost always harm vulnerable and low-SES people most. In many cases, firms can reduce or remove these burdens, or at least provide tools to help their employees make good decisions. For example, some firms have provided tools to help employees determine which health care plan is best for them (e.g., Picwell). For retirement decisions, employers can also provide similar tools that help employees visualize the long-term benefits of saving more for retirement and putting more of their investments in stocks compared to bonds, cash, or savings accounts. </p>

<p dir="ltr"><strong dir="ltr">Make it automatic.  </strong>Defaults can be used by firms and policymakers to make beneficial behaviors easier and more automatic. During the first wave of Covid, Amazon and other employers automatically sent free masks to all employees. Additionally, Congress has considered making earned income tax credits automatic to get much-needed money to all eligible citizens. Similarly, college financial aid (FAFSA) forms can be sent with pre-filled answers, and colleges can automatically notify qualifying individuals about guaranteed financial aid (an automatic notification that had substantial benefits among low-income prospective students when implemented at the University of Michigan). These changes can be very beneficial, especially for the poor and vulnerable. </p>

<p dir="ltr"><strong dir="ltr">Think about vulnerable employees when choosing the default option.  </strong>Because defaults impact vulnerable individuals most according to our research, it is important to choose a default option that would benefit these vulnerable employees. If one option is better for rich and experienced people while another is better for vulnerable individuals, the former option should not be set as the default. In one case, a well-intentioned nudge to promote green (yet expensive) electricity negatively impacted the decisions and welfare of the poor most, because they were most likely to <a dir="ltr" href="https://www.sciencedirect.com/science/article/pii/S014098831930413X?via%3Dihub">stick with the default </a>and could least afford the costly green energy. One good policy in cases like these would be to use smart defaults, which pre-select different options for different people to try to benefit all people. When that is not possible, the needs of vulnerable employees should be prioritized, because they are typically more likely to keep default options. </p>

<p dir="ltr"><strong dir="ltr">Remove options that are worse for all employees.  </strong>Another effective tool to reduce inequities and improve decisions in our research involved eliminating options that are inferior to other options in every way, which are called dominated options. Like other nudges, removing these dominated options benefited people with low-SES most. Dominated options are surprisingly common in the health care plans and 401(k) options that firms offer to employees. When choosing a health care plan at one large U.S. firm, more than half of employees chose dominated options, which were more expensive for them no matter how much or how little they spent on health care that year (and with no added benefits). People with lower income were especially likely to choose a dominated plan, costing them over $300 per year of much-needed money. According to our research, low-SES people benefited most from removing these inferior options primarily because they were less likely to have the numerical, health, and financial knowledge needed to determine which options were most beneficial. Many firms have the power to eliminate dominated options, such as inferior health care plan options or inferior retirement allocation options with higher fees (and equivalent portfolios). Making these changes would be a win-win. It would improve welfare overall and also reduce inequities by helping the vulnerable most. </p>

<p>Making these four changes would be effective and cheap. Nudges are inexpensive and get more bang for the buck compared to other techniques that firms use to reduce inequities, such as offering financial education or discounts. Nudges are therefore a win-win for managers and employees. </p>

<ul><li><author-avatar data-author-name="Kellen Mrkva" data-js-target="author-avatar" data-url="">KM </author-avatar><div dir="ltr"><span dir="ltr"><a dir="ltr" href="https://hbr.org/search?term=kellen%20mrkva&amp;search_type=search-all">Kellen Mrkva </a>is Postdoctoral Scholar at Columbia University’s Center for Decision Sciences and an incoming Assistant Professor of Marketing at University of Bath, UK. </span> </div> </li><li><author-avatar data-author-name="Eric J. Johnson" data-js-target="author-avatar" data-url="">EJ </author-avatar><div dir="ltr"><span dir="ltr"><a dir="ltr" href="https://hbr.org/search?term=eric%20j.%20johnson&amp;search_type=search-all">Eric J. Johnson </a>is the Norman Eig Professor of Business at Columbia Business School in New York, and the author of a book about choice architecture “The Elements of Choice: Why the Way We Decide Matters.” He also directs the Center for Decision Sciences. </span> </div> </li><li><author-avatar data-author-name="Crystal Reeck" data-js-target="author-avatar" data-url="">CR </author-avatar><div dir="ltr"><span dir="ltr"><a dir="ltr" href="https://hbr.org/search?term=crystal%20reeck&amp;search_type=search-all">Crystal Reeck </a>is Assistant Professor of Marketing at Temple University and Associate Director of the Center for Applied Research in Decision Making. </span> </div> </li><li><author-avatar data-author-name="Nathaniel Posner" data-js-target="author-avatar" data-url="">NP </author-avatar><div dir="ltr"><span dir="ltr">Nathaniel A. Posner is lab manager of Columbia’s Center for Decision Sciences and an incoming Marketing PhD Student in Consumer Behavior at Columbia Business School. </span> </div> </li> </ul>

Design Systems with Your Most Vulnerable Users in Mind

Think about vulnerable employees when choosing the default option

Remove options that are worse for all employees

Remove sludge

Make it automatic

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