This paper appears in Low Wage Workers in
the New Economy,which was edited by R. Cazis and M. S. Miller
and published by the Urban Institute Press in 2001.
We know how to
get low-income people to go to work: build a strong and growing
economy filled with jobs, make work pay through generous tax
credits and welfare programs that allow working people to
keep more of their benefits, and implement programs with employment
and training services and time-limited welfare benefits to
encourage people to work. However, we know little about the
types of policies that will help people stay employed and
increase their earnings over time. This paper seeks to partially
fill the gap by pulling together recent evidence on how pre-employment
services and financial work incentives can promote sustained
employment and earnings growth.
The paper describes
results from 13 programs begun since the early 1990s that
share several important characteristics. First, each tested
a policy designed to help or encourage single-parent welfare
recipients to work. Second, each program now has enough information
to assess whether the programs promoted sustained employment
and promoted growth in hourly wages or quarterly earnings.
Finally, each of the programs was studied by the Manpower
Demonstration Research Corporation (MDRC) using a rigorous
experimental research design that many people think gives
the most reliable information about the effects of new policies.
[1] In these studies, people were assigned at random to either
a program group which was required to participate in an employment
and training program or was offered a financial work incentive,
or a control group which was not.
In other ways,
the programs are quite diverse. They operated in a number
of places: Atlanta, Georgia; Columbus, Ohio; Detroit, Michigan;
Grand Rapids, Michigan; Portland, Oregon; Riverside, California;
seven counties in Minnesota; and the Canadian provinces of
British Columbia and New Brunswick. The programs vary in origin;
most were part of state welfare-to-work programs funded under
the Job Opportunities and Basic Skills Training (JOBS) program
of the Family Support Act of 1988 (FSA), but one was a Canadian
federal demonstration to test the effects of supplementing
the earnings of long-term welfare recipients, and one was
begun as a test of a change to the old AFDC program. Most
important, the programs used different methods to help or
encourage parents to find work. Two relied solely on financial
work incentives that supplemented the earnings of people who
went to work, ten used employment and training services such
as job search assistance or adult basic education, and one
combined financial work incentives with employment and training
services.
The studies described
in this paper provide useful information on policies that
promote sustained employment, but they are not perfect. First,
they included only welfare recipients and therefore cannot
indicate how their strategies would affect a broader group
of low-skill workers. Second, their primary objectives were
to get people to go to work, and none of the programs used
post-employment strategies to help people stay employed or
advance. [2] Third, they did not collect information on the
types of jobs people held, so they cannot directly tell us
whether people who went to work because of these programs
advanced in their jobs. In addition, only one of the studies
has information on hourly wages over time, so that little
can be said about these programs’ effects on growth in hourly
wages. Finally, researchers studying the programs used a short-term
measure of sustained employment, and it is impossible to know
at this time whether the programs will help people to stay
employed for long periods of time.
Despite these
drawbacks, the studies can provide useful information on sustained
employment and growth in earnings. Their key lessons include
the following:
-
Programs
with financial work incentives can promote sustained employment.
Three programs supplemented the income of people who went
to work. All three programs increased the number of people
who worked. In addition, all three programs encouraged
most people who went to work to stay employed for a year
or longer. This makes sense. By providing families with
extra income, the programs provided a reason to keep working
and provided financial resources to weather temporary
crises such as child care or transportation problems.
-
Programs
that emphasize going to work immediately can promote sustained
employment, but not all programs are equally effective.
Four programs used pre-employment services such as
job club to help people find jobs. Of these programs,
two were more effective than the others at promoting sustained
employment. The two less effective programs emphasized
job search and work experience almost exclusively. The
two more effective programs used a broader mix of job
search and adult basic education. In addition, the most
effective program operated in a strong economy, and its
staff urged people to wait for “good” jobs that paid more
than the minimum wage, were full-time, and offered opportunities
for advancement.
-
Programs
that emphasize building skills through adult basic education
can promote sustained employment, but most of the programs
studied had small effects. Six
programs required people to enroll in adult basic education
or vocational training to increase their employability.
The programs generally had modest effects on employment
overall and on sustained employment. There is some evidence,
however, that requiring all people to enroll in basic
or vocational education is as effective at promoting sustained
employment as requiring all people to look for work initially.
In two sites, programs were run side-by-side, one requiring
most people to look for work initially, and one enrolling
most people initially in adult basic education or vocational
training. In these sites, the two approaches increased
the number of people who went work and stayed employed
by about the same amount.
-
Sustained
full-time work may be the key to increasing hourly wages.
One program supplemented the earnings of people who
worked full-time (30 hours or more per week) but did not
reward part-time work. People who went to work because
of the incentive therefore worked full-time, and many
of them were able to sustain their full-time employment.
In this program, wages were more likely to increase for
people who were offered the incentive than for people
who were not offered the incentive.
-
Pre-employment
services focused on getting people to work can result
in earnings gains over time, but growth in earnings may
be more closely linked to sustained employment. Programs
that used pre-employment services to encourage immediate
work increased the number of people whose earnings increased
over time. Programs that had the largest effects on sustained
employment, however, were also the most likely to result
in earnings that increased over time.
The story is complex and somewhat
speculative. There is not just one way of increasing retention,
earnings, or wages. Financial work incentives appear consistently
effective, but employment and training services are also effective
in some settings. Details on these points are presented in
the sections below.
I. Description
of Programs
The programs studied in
this paper include ten programs that were evaluated as part
of the National Evaluation of Welfare-to-Work Strategies
(NEWWS); two versions of the Minnesota Family Investment Program
(MFIP); and Canada’s Self-Sufficiency Project (SSP). [3] Brief descriptions of
the programs are provided below. An appendix provides more
details on data sources and the way that sustained employment
and earnings growth were defined.
-
Labor Force Attachment (LFA) programs
in Atlanta, Grand Rapids, and Riverside. [4] These programs required most participants to
look immediately for work, usually through a job club
that lasted from one to three weeks. People who completed
job search without finding a job were often then enrolled
in adult basic education, vocational training, or work
experience.
-
Education-focused
programs in Atlanta, Grand Rapids, Riverside, Columbus
and Detroit. [5] Six programs studied under NEWWS emphasized
education: “human capital development” (HCD) programs
in Atlanta, Grand Rapids, and Riverside;two programs in Columbus that tested different
forms of case management; and one program in Detroit.
In each of these programs, most participants were initially
placed into education and training programs, particularly
adult basic education and vocational training
-
Portland,
Oregon JOBS Program. This was an employment-focused
program that used job search for people who were considered
ready to work but allowed people who were thought to
need more skills to enroll initially in short-term adult
basic education or vocational training before looking
for work. As a result, only about one-third of participants
in the program were required to look for work immediately,
one-third were allowed to participate in education or
training, and one-third were not assigned to any activity
within three months of entering the program because
they had already left welfare or begun working. As
in the three LFA programs, staff in Portland emphasized
to clients that the goal of the program was to get a
job. Unlike the LFA programs, however, the Portland
program encouraged participants to wait until they found
“good” jobs that paid more than the minimum wage, were
full-time, and offered opportunities for advancement.
-
Minnesota
Family Investment Program (MFIP).
[6] Begun in 1994 to test whether financial incentives
would encourage welfare recipients to work, MFIP allowed
working welfare recipients to keep more of their welfare
benefit than they could under AFDC. For example, a
mother of two who worked 20 hours per week and earned
$6 per hour received almost $250 per month more in income
under MFIP than under AFDC. In addition, MFIP required
people who received welfare for 24 or more months over
a three-year period to participate in employment and
training services. MFIP’s services required most people
to look for work and encouraged them to take jobs quickly,
especially in comparison with the employment services
available to the control group through AFDC. To understand
the effects of MFIP’s incentives alone, some individuals
were assigned to a program (called MFIP Incentive Only)
that offered them the financial incentive but did not
require them to participate in employment and training
services.
-
Canada’s
Self-Sufficiency Project (SSP). SSP offered a three-year
earnings supplement to selected single-parent long-term
welfare recipients in British Columbia and New Brunswick.
The earnings supplement was a monthly cash payment available
to single parents who had been on welfare for at least
one year and who left welfare for full-time work (30
hours or more per week) within a year of entering the
program. The supplement was paid on top of earnings
for up to three continuous years, as long as the person
continued to work full-time and remained off welfare.
While collecting the supplement, an eligible single
parent received an immediate payoff from work; in most
cases, her total income before taxes was about twice
her earnings.
The period covered
by these studies runs from the middle of 1991 until the end
of 1998. People were first randomly assigned to program and
control groups in Riverside in June 1991, and random assignment
for the Riverside sample covered in this paper concluded in
June 1993. Since results for Riverside include four years
of information for each person, the period covered ends in
the middle of 1997 for the last people randomly assigned.
The most recent information comes from Portland, where random
assignment took place between February 1993 and December 1994.
Because of the four-year follow-up period in Portland, information
for the last person randomly assigned in Portland comes from
the end of 1998.
II. Evidence on Sustained
Employment
Lesson 1: Programs with financial work incentives can increase sustained
employment.
Two of
the programs — SSP and MFIP Incentive Only — did nothing but
try to make work pay by allowing welfare recipients to keep
more of their welfare benefits when they went to work (MFIP)
or by providing them with an earnings supplement if they went
to work full-time (SSP). A third program — the full MFIP program
— combined the program’s financial work incentives with mandatory
employment-focused services. All three programs increased
employment, and all three programs increased sustained employment.
Evidence on the
effects of financial incentives is presented in Table 1. As
in all of the tables in this paper, results are based on experimental
comparisons. That is, average outcomes for the entire
program group were compared with average outcomes for the
entire control group. When the table refers to the proportion
of people who did something, it consequently refers to the
proportion of all people who were assigned to a program
group or a control group; it does not refer merely to the
people who ever worked.
The first three rows of Table
1 show the effects of SSP on full-time employment and on whether
SSP increased sustained full-time employment. [7] The first row of the table indicates that 42.5 percent of the
program group worked full time early enough in the follow-up
period that we could determine whether they stayed employed
for a year or longer. During the same period, only 27.3 percent
of the control group worked full time. The difference in
outcomes between the two research groups indicates the effect
of the program. In this case, it indicates that SSP increased
the proportion of people who ever worked full time by 15.2
percentage points, an increase of 55.6 percent over what the
control group did without the supplement offer.
Table
1: Effects of Programs with Financial Work Incentives on Sustained
Employment
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
Program
|
Control
|
Effect
|
Percentage
|
|
Employment outcome
|
Group (%)
|
Group (%)
|
(Difference)
|
Change (%)
|
|
SSP
|
|
|
|
|
|
|
|
|
|
|
|
Ever
worked full time
|
42.5
|
|
27.3
|
|
15.2
|
***
|
55.6
|
|
| |
Left
full-time work quickly
|
21.6
|
|
17.0
|
|
4.6
|
***
|
27.4
|
|
| |
Stayed
employed full time for a year or more
|
20.9
|
|
10.4
|
|
10.6
|
***
|
101.8
|
|
|
MFIP Incentives Only
|
|
|
|
|
|
|
|
|
|
Ever
worked
|
44.4
|
|
39.2
|
|
5.2
|
|
13.3
|
|
| |
Left
work quickly
|
12.2
|
|
13.5
|
|
-1.3
|
|
-9.6
|
|
| |
Stayed
employed for a year or more
|
32.2
|
|
25.7
|
|
6.5
|
***
|
25.3
|
|
|
MFIP
|
|
|
|
|
|
|
|
|
|
Ever
worked
|
50.5
|
|
39.2
|
|
11.4
|
***
|
29.1
|
|
| |
Left
work quickly
|
16.3
|
|
13.5
|
|
2.8
|
|
20.7
|
|
| |
Stayed
employed for a year or more
|
34.2
|
|
25.6
|
|
8.6
|
**
|
33.6
|
|
Source: Calculations
from 18- and 36-month follow-up survey data in SSP and 36-month
follow-up survey data in MFIP.
Notes:
Two-tailed t-tests were applied to differences between the
outcomes for the program and control groups. Statistical significance
level are indicated as: * = 10 percent; ** = 5 percent; ***
= 1 percent.
Impact
may not appear to be the difference between the program group
and control group outcomes due to rounding.
People who ever worked full
time can be divided into two groups: those who stopped working
full time quickly, and those who did not. The next two rows
of the table report two composite outcomes: (1) the proportion
of the program and control groups that found full-time jobs
but stayed employed full time for less than a year,
and (2) the proportion that found full-time jobs and stayed
employed full time for a year or more.
How should these measures
be interpreted? At one extreme, all people encouraged by
SSP to work full time might have stopped working quickly (after
less than a year). In that case, the effect of the program
on the proportion who worked full time for a year or more
would be zero, and its effect on the proportion who worked
full time for less than a year would be as large as its effect
on full-time employment overall (15.2 percentage points).
At the other extreme, all
people encouraged by SSP to work full time might have done
so for a year or more. In that case, the effect of the program
on full-time employment that lasted a year or more would be
the same as its effect on full-time employment (15.2 percentage
points), and the effect on full-time employment that lasted
less than a year would be zero.
The actual results show that
neither of the extremes occurred. Most, but not all, of the
initial full-time employment generated in SSP did last at
least a year. In particular, more than twice as many people
in the program group as in the control group found full-time
jobs and stayed employed full-time for a year or longer —
20.9 percent compared to 10.4 percent. That is, SSP increased
sustained full-time employment by 10.6 percentage points.
The second panel of Table
1 shows similar results for people who were offered MFIP’s
financial incentives but who were not required to participate
in its employment services. [8] While 39.2 percent of the control
group worked at some point, 44.4 percent of the program group
did, for an increase of 5.2 percentage points. Like SSP, MFIP’s
incentives primarily increased sustained employment: the incentives
increased employment of a year or more by 6.5 percentage points,
even more than it increased employment overall.
The third panel of Table 1
shows similar results for people in MFIP who were not only
offered the program’s financial incentives but also required
to participate in its employment services. Combining incentives
with mandatory employment services appears to be somewhat
more effective than offering incentives alone. The full MFIP
program increased employment overall by more than 10 percentage
points and increased sustained employment by nearly 10 percentage
points.
The three programs that tried
to make work pay produced consistent results. All three increased
employment, and all three increased sustained employment much
more than they increased temporary employment. This makes
sense. Incentives in MFIP and SSP were available every month,
giving people a reason to keep their jobs or to find new jobs
when they lost work, and giving them financial resources to
weather crises such as problems with child care or transportation.
Lesson 2:
Programs that emphasize going to work immediately can promote
sustained employment, but not all programs are equally effective.
Table
2 shows results on sustained employment for four JOBS programs
that were focused on getting people to go to work — LFA programs
in Atlanta, Grand Rapids, and Riverside, and the program in
Portland. As described earlier, the LFA programs required
almost all participants to initially enroll in job search,
most commonly in job clubs lasting from one to three weeks.
As a result, nearly 90 percent of participants in the Atlanta
and Grand Rapids programs and about 70 percent of participants
in the Riverside program initially looked for work. In Portland,
in contrast, only people considered job-ready were required
to look for work, while those considered most in need of basic
skills were allowed to enroll in adult basic education or
vocational training.
According to the
results in Table 2, the four employment-focused programs had
quite varied results, both in terms of how much they encouraged
people to find work, and how much they increased sustained
employment. The most successful program at increasing employment
overall was Riverside LFA, which increased employment by 10.6
percentage points. At the other extreme, Atlanta’s LFA program
increased employment by only 3.5 percentage points. In between
were Grand Rapids LFA (5.5 percentage points) and Portland
(7.0 percentage points).
The programs
also differed substantially in whether they resulted in sustained
employment. In Portland and Atlanta LFA, the increase in
sustained employment was as big as or bigger than the increase
in employment overall. For example, Portland increased employment
overall by 7.0 percentage points and increased sustained employment
by 6.7 percentage points. Atlanta LFA increased sustained
employment by 5.9 percentage points even though it increased
employment overall by only 3.5 percentage points. In contrast,
Grand Rapids LFA and Riverside LFA increased primarily short-term
employment.
Table 2: Effects of Employment-Focused
Welfare-to-Work Programs on Sustained Employment
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
Program
|
Control
|
Difference
|
Percentage
|
|
Employment outcome
|
|
Group (%)
|
Group (%)
|
(Effect)
|
Change (%)
|
|
Atlanta LFA
|
|
|
|
|
|
|
|
|
|
|
Ever
worked
|
|
74.6
|
|
71.1
|
|
3.5
|
**
|
4.9
|
|
| |
Left
work quickly
|
|
36.8
|
|
39.3
|
|
-2.5
|
|
-6.3
|
|
| |
Stayed
employed for a year or more
|
|
37.8
|
|
31.9
|
|
5.9
|
***
|
18.6
|
|
|
Grand Rapids LFA
|
|
|
|
|
|
|
|
|
|
|
Ever
worked
|
|
85.1
|
|
79.6
|
|
5.5
|
***
|
6.9
|
|
| |
Left
work quickly
|
|
51.3
|
|
47.8
|
|
3.4
|
*
|
7.1
|
|
| |
Stayed
employed for a year or more
|
|
33.9
|
|
31.8
|
|
2.1
|
|
6.6
|
|
|
Riverside LFA
|
|
|
|
|
|
|
|
|
|
|
Ever
worked
|
|
66.6
|
|
55.9
|
|
10.6
|
***
|
19.0
|
|
| |
Left
work quickly
|
|
35.4
|
|
28.7
|
|
6.7
|
***
|
23.3
|
|
| |
Stayed
employed for a year or more
|
|
31.1
|
|
27.2
|
|
4.0
|
***
|
14.6
|
|
|
Portland
|
|
|
|
|
|
|
|
|
|
|
Ever
worked
|
|
80.3
|
|
73.4
|
|
7.0
|
***
|
9.5
|
|
| |
Left
work quickly
|
|
37.6
|
|
37.4
|
|
0.3
|
|
0.8
|
|
| |
Stayed
employed for a year or more
|
|
42.7
|
|
36.0
|
|
6.7
|
***
|
18.5
|
|
Source:
Calculations from employment reported to state unemployment
insurance systems.
Notes:
Two-tailed t-tests were applied to differences between the
outcomes for the program and control groups. Statistical significance
levels are indicated as: * = 10 percent; ** = 5 percent; ***
= 1 percent.
Impact
may not appear to be the difference between the program group
and control group outcomes due to rounding.
It is not clear why the programs had such different effects
on sustained employment. Three possible explanations are the
mix of education and job search used in the different programs,
attitudes of staff about the effectiveness of the LFA strategy,
and economic conditions.
Atlanta LFA and
Portland used a broader mix of job search and adult basic
education than did Riverside LFA and Grand Rapids LFA. As
described earlier, this mix was an explicit part of Portland’s
program. Although it required nearly everyone to initially
look for work, Atlanta LFA made substantial use of adult basic
education for people who looked for work without finding a
job. In contrast, Riverside LFA required many people who
failed to find work to continue looking for work, and Grand
Rapids LFA placed much of this group into unpaid work experience.
This does not imply that relying primarily on adult basic
education is a key to sustained employment, but rather that
the mix of job search and adult basic education may be important,
perhaps because programs that use both job search and education
can target each strategy at people who would benefit from
them. Lesson 3 will discuss results for several programs
that required most people to enroll in education programs.
Atlanta LFA and
Portland also differed from Riverside LFA in the services
that case managers thought would best help welfare recipients
move to work. In both Portland and the Atlanta LFA program,
twice as many staff preferred human capital development to
quick job entry as a strategy for moving clients to work.
In Riverside’s LFA program, in contrast, nearly all case managers
preferred labor force attachment to human capital development
as a means of moving people to work.
A third possible
explanation for the larger increases in sustained employment
in Atlanta and Portland is the state of the economy. Between
1993 and 1998, employment grew in all four sites, but the
unemployment rate was by far the highest in Riverside, particularly
in the early part of the program.
[9] When Riverside’s program moved people to work quickly,
it was in a poor economy that might have provided short-term,
temporary, or undesirable jobs. The economy was strong in
Grand Rapids during this period, however, suggesting that
a strong economy is not enough to ensure the employment services
will generate increases in sustained employment.
The fact that
Riverside’s program increased short-term employment more than
it increased sustained employment should not necessarily be
viewed as negative. The primary goal of the program was to
help people go to work, and Riverside’s program was the most
effective of the four employment-focused programs in accomplishing
this goal. It does suggest, however, that a program that tries
to get people to go to work as quickly as possible may need
other features such as post-employment services to help people
stay at work and advance in their careers (although the few
experimental evaluations of post-employment strategies have
not been encouraging).
Lesson 3:
Programs that encourage most people to build skills through
adult basic education can also increase retention, but most
of these programs had small effects.
The third major approach to encouraging
welfare recipients to work (in addition to financial incentives
and job search) is by increasing their skills and thereby
increasing their attractiveness to employers and their ability
to earn a living wage. Table 3 presents results on sustained
employment for six programs that required most people to enroll
initially in adult basic education or vocational training.
Overall, these programs did not promote much sustained employment.
Nevertheless, focusing on basic education appears to be as
effective as focusing on job search in encouraging sustained
employment.
Table 3: Effects of Education-Focused
Welfare-to-Work Programs on Sustained Employment
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
Program
|
Control
|
Difference
|
Percentage
|
|
Employment outcome
|
|
Group (%)
|
Group (%)
|
(Effect)
|
Change (%)
|
|
Atlanta HCD
|
|
|
|
|
|
|
|
|
|
|
Ever
worked
|
|
74.2
|
|
71.1
|
|
3.0
|
**
|
4.3
|
|
| |
Left
work quickly
|
|
36.8
|
|
39.3
|
|
-2.5
|
|
-6.3
|
|
| |
Stayed
employed for a year or more
|
|
37.4
|
|
31.9
|
|
5.5
|
***
|
17.3
|
|
|
Grand Rapids HCD
|
|
|
|
|
|
|
|
|
|
|
Ever
worked
|
|
82.9
|
|
79.6
|
|
3.3
|
**
|
4.1
|
|
| |
Left
work quickly
|
|
49.0
|
|
47.8
|
|
1.2
|
|
2.4
|
|
| |
Stayed
employed for a year or more
|
|
33.9
|
|
31.8
|
|
2.1
|
|
6.6
|
|
|
Riverside HCD
|
|
|
|
|
|
|
|
|
|
|
Ever
worked
|
|
| |