The Problem
Despite a range of U.S. government efforts to address the needs of low-wage workers—from the Earned Income Tax Credit and Temporary Assistance to Needy Families, to Medicaid and the State Child Health Insurance Program—even full-time employment leaves more than 3 million households below the poverty line and more than 3 million children without health care. Furthermore, this fragmented approach to assistance leaves several contingents of the needy without sufficient support, including low-wage men and women without children.
The Proposal
This proposal draws on the previously piloted and successful New Hope model—which guarantees incomes above the poverty line for those who document a thirty-hour work week, identifies community-service jobs for those without private sector employment, subsidizes health care, and assigns caseworkers to families. The pilot program increased participants’ employment rate and earnings growth by 5 percentage points each, and lowered participants’ poverty rate by 8 percent. To serve as a more comprehensive demonstration of this approach, states could compete to be selected among the five states that would compete for $10 million in annual funding for New Hope modeled programs.
Abstract
Despite the political rhetoric of “making work pay,” in 2005 some 3.7 million households included a full-time worker and yet lived in poverty. Our paper makes the case for a national program offering the kind of work supports that were part of the New Hope program, a policy experiment that operated for three years in Milwaukee, Wisconsin in the mid- to late-1990s. New Hope was created by a coalition of community activists and business leaders. It provided a set of work supports for full-time workers — parents and nonparents, men and women — that would lift them out of poverty, ensure that they had access to quality child care and health insurance, and, if needed, provide a temporary community service job to help get them on their feet.
A random-assignment evaluation of New Hope showed that the program reduced poverty, increased employment, and, perhaps most importantly, boosted the achievement and positive behavior of children. We estimate that a scaled-up New Hope program would cost roughly $3,300 per participant per year and that, with reasonable assumptions regarding the valuation of child impacts, would yield benefits well in excess of costs.
Evidence from other states and two Canadian provinces suggest that New Hope could be implemented by states. Given the different ways in which states would likely implement the New Hope model to fit their unique needs and delivery systems, we propose a five-year demonstration and evaluation in five states.
