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Innovative New Hope Project helps low-income workers and their families, UT professor who co-authored study says

An innovative approach to reducing poverty has improved the well-being of low-income adults and children, according to a report released today (April 16) on Milwaukee’s New Hope Project.

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AUSTIN, TexasAn innovative approach to reducing poverty has improved the well-being of low-income adults and children, according to a report released today (April 16) on Milwaukee’s New Hope Project.

Over a two-year period, New Hope increased participants’ employment, reduced their poverty, and — perhaps most striking — improved their children’s classroom behavior, school performance and social competence. The new report was released by the Manpower Demonstration Research Corporation (MDRC), which is conducting a full-scale evaluation of New Hope.

New Hope was ambitious, reaching out to all low-income workers in two target areas in Milwaukee and providing a comprehensive package of supports, including affordable health insurance and child care assistance, two critical needs of poor working families.

“A major policy challenge for the nation is improving the well-being of low-income workers and their children,” said Dr. Robert C. Granger, director of the evaluation. “New Hope set out to make a difference for these families, and it did.”

Dr. Aletha C. Huston, professor of child development at The University of Texas at Austin and second author of the report, agreed. “It is striking how even modest changes in employment and available resources can have substantial effects on child and family well-being,” she said.

The New Hope Program

New Hope was designed and operated by the New Hope Project Inc., a community-basednonprofit organization in Milwaukee. It offered participants an earnings supplement designed to lift them out of poverty, when combined with state and federal Earned Income Credits, provided they worked at least 30 hours a week.

The program also offered these workers low-cost health insurance and child care, if they needed these services. For participants who could not find full-time work, the program offered access to “community service jobs” — short-term subsidized jobs in nonprofit agencies, designed to be stepping stones into regular employment.

With the help of project representatives, participants could access any or all of these services on an as needed basis for a three-year period. The program operated in a flexible, client-focused and respectful environment. Designed as a demonstration project, New Hope began operating in 1994, enrolling about 700 people through December 1995 and providing benefits through December 1998. Participation was voluntary.

New Hope in Context

With welfare reform, falling welfare caseloads and an increase in the number of low-wage jobs, the attention of policymakers is focused on the needs of low-income workers. New Hope was designed to address those needs and was tested in an environment with a strong economy and a mix of other initiatives seeking to help low-income people by supporting work.

“Wisconsin is an acknowledged leader in implementing reforms that encourage work,” said Dr. Johannes M. Bos, senior research associate at MDRC and lead author of the study. “It is encouraging that New Hope made a difference beyond the opportunities created by the favorable Milwaukee labor market and the existing policies and programs.”

Key Findings on Employment and Income

The report distinguishes between two groups of New Hope participants. Two-thirds of the participants were not working full time when they entered the study. Among these participants, and compared to a control group that was not in New Hope, the program reduced by half the number who were never employed during the two years of the study (from 13 percent for the control group to less than 6 percent for New Hope participants).

Over the two years, participants earned $1,389 more than the control group, a difference of more than 13 percent. (This does not include the earnings supplement.) Their incomes were $2,645 (also approximately 13 percent) more than the control group’s. As a result, more of these participants had earnings-related income above the federal poverty level, although the majority remained poor, primarily because they did not consistently work full time (and could receive New Hope benefits only when they did).

Also, many did not apply for the state and federal Earned Income Credits, even if they qualified. Many used community service jobs, and most of those who used these jobs found regular unsubsidized employment afterwards. “New Hope shows how you can increase work by making work pay and offering opportunities where they are needed,” said Bos.

One-third of the participants were working full time when they entered the study. Thus, the authors state, New Hope had little opportunity to increase employment among such workers. However, the program did not leave them unaffected. Having the support of the program, these workers somewhat reduced their work hours (compared to the hours worked by the control group), mostly by cutting back on overtime and second jobs.

New Hope improved parent-child relations in the families in this group, possibly because these families were better able to balance work and family life. New Hope did not increase the income of participants who already were employed full time, but it reduced these participants’ use of public assistance, cutting second-year AFDC and Food Stamp benefits by $719, or more than 30 percent, compared to control group levels.

The report’s authors note that past programs that set out to supplement the incomes of low-income workers were sometimes found to reduce work effort. They add that New Hope, which was targeted at all low-income workers, not just at welfare recipients, is unusual because it maintained, and even increased, employment levels. It did so by requiring participants to work 30 hours a week on average and by offering subsidized employment to those who needed it.

New Hope’s Effects on Children

A critical aspect of this study is its complementary focus on assessing the well-being of families and children, capturing outcomes that are not easily measured in dollars and cents. Using surveys of parents, children and teachers, a team of researchers at MDRC and at several universities found that, compared to a control group, parents in New Hope had less stress, fewer worries and better parent-child relations. There were substantial positive effects on children’s classroom behavior, school performance and social competence.

These effects occurred primarily for boys, who also showed reductions in problem behavior and higher educational and occupational expectations. (On these measures, the authors observe, girls generally do better than boys, leaving less room for improvement. New Hope brought the outcomes of boys and girls closer together.)

The effects on children may be related to families’ increased access (through New Hope, and compared to the control group) to better-quality child care, greater use of after-school care and the children’s increased participation in structured activities, such as sports and clubs.

Who Was in New Hope?

Unlike most work programs for low-income people, New Hope did not focus exclusively on welfare recipients. By extending its offer to all low-income workers in two target areas, New Hope actively recruited and served groups that are usually excluded from these programs, such as single men and households without children. New Hope participants also were more work-ready than people usually served by these programs, with 38 percent employed at enrollment, and 85 percent having had some full-time employment experience.

Thirty-seven percent did not receive cash assistance, Medicaid or Food Stamps. Twenty-two percent of all participants were married, and 28 percent were men. Participants’ average age was 32. About half of the New Hope sample are African-American, one fourth are Hispanic and most of the remainder are of European or Asian descent.

What Did It Cost?

The report acknowledges that it is too soon to write a final assessment of New Hope’s costs and benefits. Long-term benefits are not yet measured and nonfinancial benefits were not yet quantified. With that caveat, the study finds program expenses of approximately $9,000 per participant for the first two years, which decrease to about $7,200 once welfare savings and community service work are taken into consideration. A subsequent report, based on five years of follow-up, will include a comprehensive analysis of all relevant benefits and costs.

Policy Lessons

The study concludes that New Hope represents a useful tool for helping low-income workers earn their way out of poverty. Based on the results of their study, the authors emphasize the need to look for program effects that are not expressed in dollar terms when designing and evaluating programs to help low-income workers. They warn against a single-minded focus on work effort and earnings, pointing out that the study suggests that modest reductions in overtime and second jobs can actually benefit families, even if they translate into lower earnings.

With regard to subsidized community service employment, the authors point out the importance of that component to participants who — even in a strong economy — had difficulty finding full-time work and who otherwise might not have qualified for program benefits. Developing a system of such jobs, they claim, is possible without drawing many workers out of unsubsidized employment into subsidized work.

The report advises policymakers who want to improve the well-being of children in lowincome families to pay close attention to child care and out-of-school activities for preschool and school-age children. The study suggests that these services can have substantial beneficial effects on child outcomes.

About This Evaluation

The evaluation, conducted by MDRC, in collaboration with scholars from the UT Austin, Northwestern University, the University of Michigan and the University of California at Los Angeles, describes the implementation, effects, and costs of the New Hope program. The study began in August 1994. A first report, covering program implementation, was released in 1997.

The study is based on a random assignment research design. Between August 1994 and December 1995, approximately 1,360 adults applied to New Hope and were assigned, at random, to one of two groups: the New Hope program group, who were eligible to receive New Hope benefits, or the control group.

This group differed from the program group only in that they were excluded from New Hope. Follow-up data (from surveys and administrative records) have been collected on participants and control group members, and differences between outcomes for program and control group members are attributable to New Hope. Embedded within the larger evaluation is a smaller study, called the Child and Family Study (CFS), which includes 745 parents and 927 children, conducted in collaboration with the MacArthur Foundation Research Network on Successful Pathways through Middle Childhood.

The parents were randomly assigned to New Hope or to the control group and are included in analyses that incorporate the whole sample. The purpose of the CFS is to better understand the effects of New Hope on families and children.

The new report is titled New Hope for People with Low Incomes: Two-Year Results of a Program to Reduce Poverty and Reform Welfare. The principal authors are Johannes Bos, Aletha Huston, Robert Granger, Greg Duncan, Tom Brock and Vonnie McLoyd.

Who Funded This Evaluation?

The evaluation of New Hope is funded by the John D. and Catherine T. MacArthur Foundation, the Helen Bader Foundation, the Ford Foundation, the state of Wisconsin Department of Workforce Development, the W. T. Grant Foundation, the Annie E. Casey Foundation, the U.S. Department of Health and Human Services and the National Institute of Child Health and Development.

About MDRC

The Manpower Demonstration Research Corporation is a nonprofit, nonpartisan research organization with 25 years’ experience designing and evaluating social policy initiatives.