Testing Innovations Locally to Change the Way We Fight Poverty
January 8, 2014Print
This post was written by Kristin Morse and Carson Hicks of the New York City Center for Economic Opportunity and first appeared as exclusive commentary for the Spotlight on Poverty and Opportunity blog. We are cross-posting with their permission.
Our program ideas come from city agencies, local nonprofits, and evidence-based models from other parts of the world and are designed to facilitate broader reforms in public service delivery. Variants of the CEO model have been replicated by the cities of Philadelphia, Richmond, and Hartford, and specific programs have been replicated nationally through a Social Innovation Fund grant.
Local programs are also able to adapt and respond more quickly to new realities facing low-income people. For example, CEO recognized that stagnating wages and current job growth patterns make it imperative to find ways of supplementing the incomes of low-wage workers.
Low-wage work represents 58 percent of jobs gained during the recent economic recovery, a trend unlikely to reverse in the coming years. By 2020, the U.S. Department of Labor estimates that a clear majority of new jobs created – whether in retail, food service, health, or personal care – will be low-skill, low-wage jobs requiring only a high school diploma.
These trends present both new opportunities and challenges for poor Americans. The good news is that a growing economy provides new job options for the many prospective workers who have only a high school credential or less. In New York City for example, 80 percent of young black males and 83 percent of young Latinos are out of school and have no more than a high school diploma. Yet the clear downside is that for too many workers, full-time employment is still not enough to climb out of poverty. Nearly half of all poor adults in New York City are working; 18.3 percent of them in full-time, year-round jobs.
In response to these trends, this year we are testing the impact of an expanded Earned Income Tax Credit (EITC) for single adults, to see if a more generous credit can encourage employment and substantially decrease poverty amongst individuals in the same way it has for families with children. CEO’s pilot provides an opportunity to see if higher returns increase work participation and provide enough income to move more workers out of poverty.
The program, Paycheck Plus, will mimic an expanded EITC and offer a wage supplement of up to $2,000 and extend eligibility up to $30,000 in annual income (the current federal EITC for single tax filers offers a maximum credit of $475 and tops out at about $13,000, making a full-time worker at minimum wage ineligible). The pilot will enroll participants in a random assignment evaluation to determine the impact of the credit. This experiment, led by the social science research organization MDRC and the Food Bank for New York City – New York City’s largest volunteer income tax assistance provider – will operate alongside the income tax filing process even though payment is not an actual tax credit. Participants will be eligible to earn the enhanced wage supplement for three years, and the program will include a combination of employed and unemployed individuals as well as non-custodial parents. The evaluation will look at employment, earnings, financial stability, and non-custodial parents’ support of their children.
This initiative is emblematic of CEO’s approach to developing innovative new polices and utilizing rigorous testing to gauge their effectiveness. The EITC expansion is one of many CEO programs providing crucial support to vulnerable New Yorkers. And over time, this culture of innovation and experimentation has the potential to bring about even greater changes in New York City and serve as a catalyst for local innovations in urban areas across the nation.
When it comes to the working poor, we know that new strategies – like an expanded EITC – are needed. Because of local initiatives like CEO, poverty is neither out of sight nor out of mind; the right strategies must ensure, however, that the poor are also not out of luck.
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Kristin Morse is the executive director and Carson Hicks is the director of programs and evaluation for the New York City Center for Economic Opportunity (CEO).