From Working Poor to Working Class
Could a national program benefit low-wage earners?

Winter, 2008, Volume 30, Number 1

Greg Duncan discusses New Hope at the National Press Club in Washington, D.C.

In 2005, more than 5 million American children lived in families in which an adult worked full time but the family was still poor. Hope for these families exists, according to IPR Faculty Fellow Greg J. Duncan, in a program called New Hope that helped bring many working families out of poverty in Milwaukee and is ready for a national test.

In a presentation at the National Press Club in Washington, D.C., on December 12, sponsored by the Brookings Institution’s Hamilton Project, Duncan told the audience that this rigorously evaluated program could constitute a new national approach to encourage work among those unemployed and reward low-income earners in the workforce.

Duncan, an economist, noted that the New Hope program hits the “trifecta” of values—it “makes work pay;” its full-time work focus resonates with the business community, the public, and participants themselves; and its social-contract nature respects and challenges participants. He led the evaluation of the program and co-authored Higher Ground: New Hope for the Working Poor and Their Children (Russell Sage Foundation, 2007) with Aletha C. Huston and Thomas S. Weisner.

The New Hope Project
New Hope was created and backed by a unique coalition of community activists, business leaders, and academics in Milwaukee. By the time it launched in 1994, 1,400 low-income families had volunteered for a chance to participate in this program that promised them a wage supplement and subsidies for childcare and healthcare in exchange for working a minimum of 30 hours per week. Temporary community service jobs were also available for those unable to find 30 hours of work in the private labor market.

	Policy briefing attendees take notes during the speakers’ presentations.

“This is not a typical welfare-to-work program focused on long-term welfare recipients,” Duncan noted at “New Hope: A Policy Model for the Working Poor and Their Children,” a 2007 IPR policy briefing. “New Hope opened its doors to all low-income adults—men and women, regardless of whether they lived with children—who want to make work, work.”

The overall poverty rate for New Hope families dropped by 16 percent—and the decrease in poverty persisted even when the earnings supplements stopped after three years.

“New Hope doesn’t work for everyone,” cautioned Julie Kerksick, director of the project, at the same briefing. It appeared particularly effective for roughly half of the enrolled families facing only one major employment barrier such as affordable childcare or little work experience.

More significant, perhaps, were the program’s indirect effects on children. Teacher interviews showed that during the program New Hope children were both achieving more and behaving better in the classroom, with the strongest effects observed for boys.

“The gains for the boys are substantial,” Duncan said. “It’s similar to the effect of the Head Start program on kids or having a dramatically lower class size.” Also noteworthy was the ethnographic evidence indicating that parents appeared to use the program to get their boys into more after-school programs and away from gangs.

Is New Hope Worth What It Costs?
At the IPR policy briefing, businessman and philanthropist King Harris underlined that pulling people out of poverty and into living-wage jobs should be at the heart of the nation’s domestic policy agenda. “But,” he asked, “can we afford to provide these benefits on a mass basis along the lines suggested by New Hope?”

In totaling up average income plus the value of benefits such as childcare and healthcare, Harris calculated that the program pushed average family income just above poverty level. This was the equivalent of an average gain in income of between $1,400 and $1,900 per family but at a cost of about $6,600 per participant. (With recent increases in work supports offered by states, Duncan now estimates the program costs to be roughly half that much.)

Harris, who worked for the manufacturing and publishing conglomerate Pittway Corporation from 1971 to 2000, eventually serving as its President and CEO, also pointed out how expensive the daycare component was and that the program’s health benefits, used by half of participants, covered elective procedures, name-brand prescription drugs, mental health benefits, and dental care.

Panelists Greg Duncan, Julie Kerksick, and King Harris continue their discussion of the New Hope Project after the policy briefing.

“I think we could provide very base-level benefits to everyone in the country,” Harris said. But in light of the nation’s budget deficit, “We cannot afford benefits as rich as those offered by the New Hope program.”

Duncan acknowledged the childcare component cost the most, but whether the program is affordable depends on the value placed on the benefits to children. “I’m an economist by training,” he stressed. “I am loath to recommend a policy that can’t conceivably generate more benefits than costs.”

Duncan said that a straight economic tally based on the benefits from the increased work effort of participants does not add up—the increases in earnings were only a fraction of the program cost. But the economic value of the benefits for children should be part of the equation as well, he noted. If the gains that New Hope children experienced were made permanent, this would translate into an increase in their total lifetime earnings and reductions in crime rates that could easily exceed the program’s costs.

Harris did find other ideas intriguing, such as creating public service jobs, expanding daycare (but making it more affordable), and providing one-stop service centers for low-wage workers instead of “punting them all over the place.” In particular, he was most intrigued by the idea of a 30-hour workweek.

“As a businessman, I thought back to the factories and businesses we ran, and we could have created a lot of 30-hour per week jobs,” Harris said. “If there were a national program to encourage businesses to create jobs at 30—and not 40 hours—per week for women with children under 10 or 12 years old, it’s not only doable, it wouldn’t cost us a penny.  And you might see some of the outcomes that you saw in the New Hope book nationwide.”

Michael Alvarez, outreach coordinator for Sen. Barack Obama, noted that a plan like this would play well on both sides of the aisle, due the work requirement. But it also would have to be “sold” to the American people and to the business community to get it implemented at a national level.

In looking at the future of welfare reform, New Hope looks promising enough to be put on the table, Duncan said. Similar programs in Connecticut, Minnesota, and Canada have also enjoyed success.

“This is a program that we know works,” Duncan emphasized. “It really makes good on America’s promise that ‘If you work, you shouldn’t be poor.’”

Added Kerksick, “Even if you can’t do it all at once, it’s still important to have the vision of a comprehensive anti-poverty promise that if you do your bit, we will do ours.”

Panelists:
Greg Duncan is an IPR faculty fellow and Edwina S. Tarry Professor of Education and Social Policy at Northwestern University. King Harris is chairman of Harris Holdings, Inc. and a senior executive at Chicago Metropolis 2020. Michael Alvarez was outreach coordinator for Sen. Barack Obama (D-Ill.). Julie Kerksick is director of the New Hope Project in Milwaukee.

To view the video, please see: www.northwestern.edu/ipr/events/briefingMarch07.html or please go to www.newhopebook.com for more information.