Much of the current effort to find new strategies for helping the poor is focused on finding ways to link income support more closely to work or work-related activities. The New Hope Project in Milwaukee, Wisconsin, offers an innovative approach to reducing poverty, reforming welfare, and addressing the economic insecurity of low-income workers. It seeks to increase employment and reduce poverty by creating better financial incentives to work and by changing labor market opportunities; it offers assistance that enables poor people to support themselves and their families through full-time employment. New Hope serves as a model program for planners involved in the design of welfare reform and antipoverty programs nationwide. It addresses many issues on the nation's social policy agenda, including the design and operation of the Earned Income Credit (EIC) for low-income workers, community service jobs for people who need employment, and access to health insurance and child care for working families.
Participation in the program is voluntary, and eligibility is based on income and a willingness to work at least 30 hours per week. Adults (defined as age 18 or over) are eligible regardless of whether or not they have children or are current or past recipients of public assistance. Persons meeting these criteria are eligible to receive these benefits or services:
- help in obtaining a job, including access to a time-limited, minimum-wage community service job (CSJ) if full-time employment is not otherwise available;
- a monthly earnings supplement that when combined with federal and state EICs brings most low-wage workers’ incomes above the poverty level;
- subsidized health insurance, which gradually phases out as earnings rise; and
- subsidized child care, which also gradually phases out as earnings rise.
New Hope staff are actively involved with participants — explaining the rules for accessing the various program components, providing information on health and child care services, reaching out to those not active in the program, and serving as coaches to support individuals’ employment efforts.
New Hope operates outside the existing public assistance system, though it is designed to be replicable as government policy should the demonstration findings be favorable. It is funded by a consortium of local, state, and national organizations interested in work-based antipoverty policy, as well as by the State of Wisconsin and the federal government. It was designed and is operated by a community-based nonprofit organization, the New Hope Project, and thus provides insights into the role nongovernmental agencies can play in income support.
One goal of the project is to provide credible information to policymakers on the implementation, effectiveness, and costs of the New Hope approach. In 1994, program designers initiated a demonstration of the program in two inner-city areas in Milwaukee. New Hope operated in two racially and ethnically diverse areas of the city (defined by two zip codes) that are economically depressed, but nevertheless contain working residents and households that do not fit the stereotypes of "dysfunctional" families. Geographic targeting of New Hope was intended to concentrate resources in two areas with high levels of poverty, thus allowing a more detailed analysis of program context than would be possible in a program that served a wide geographic area.
New Hope contracted with the Manpower Demonstration Research Corporation (MDRC) to conduct an independent evaluation of the program's context, implementation, impacts on key outcomes, and costs. Among the central questions in the evaluation are: How much will New Hope services actually be used, and do those with access to New Hope achieve better outcomes than those with access to the pre-existing service supply? In order to provide a reliable test of the difference the program made, applicants were randomly assigned in a lottery-like process to either a program group (with access to New Hope services) or a control group (with no access to New Hope services, but able to seek other services). The differences in the two groups’ outcomes over time (for example, their differences in employment rates or average earnings) are the observed impacts of the program.
This report examines the creation of the New Hope Project, the implementation of the demonstration, the labor market and neighborhood context of the experiment, and the use of program services by participants. It offers insights on program design, administrative and operational issues, and benefit use rates in New Hope. A future report will analyze program impacts and costs.
The early findings on implementation and program use, reported here, reveal that the New Hope package of benefits and services has considerable appeal for participants seeking to work and support themselves and their families. Even though this program may differ from reforms contemplated elsewhere, it has much to teach about the nature and appropriate responses to issues arising as programs change to supplement the payoff from work.
Findings in Brief
A. Demonstration Context
- New Hope was implemented in a strong labor market and a time of rapid change in the welfare system. In late 1995 at the point that recruitment for New Hope ended, the unemployment rate in the Milwaukee metropolitan area was low. However, much of the growth in jobs, especially those open to workers without a high school diploma was occurring in suburban locations difficult for residents of the New Hope neighborhoods to reach by public transit. Thus, while these strong labor market conditions increased the overall probability that those in New Hope could find an unsubsidized job and access program benefits, CSJs would still remain important for some participants. In addition, the public welfare system in Milwaukee and the State of Wisconsin was undergoing major reform. Within Aid to Families with Dependent Children (AFDC), program participation and work requirements increased over time and the caseload dropped substantially. At the same time, cash assistance under the county’s General Assistance program ended. These contextual factors do not invalidate the basic comparisons involved in the study of program impacts because they affect both those served within New Hope and those in the control group, but probably a more disadvantaged group applied for the program and fewer participants needed CSJs than would otherwise have been the case.
- Within this changing context, New Hope offered a distinct package of benefits and services with broader eligibility rules than normal in income support programs. For most single individuals and families without children, New Hope's benefits were not available under any other program. Even for families with children — the group typically served in public assistance programs — the package of benefits was unique. For these families, some of New Hope's benefits are available through other sources; subsidized health insurance and child care are available through public assistance programs and Medicaid, and earnings supplements are available through the federal and state EIC. However, paid CSJs are typically not offered. Furthermore, one premise of New Hope's design is that the combination of benefits is more than the sum of its parts because together they address the main barriers to the achievement of an income above poverty through work. Also, the assistance and "coaching" of New Hope project representatives can help participants take greater advantage of the services than they otherwise might.
B. Program Implementation
- Recruitment for the New Hope Demonstration occurred over a 16-month period beginning in July 1994 and produced a diverse sample for this research that in many ways reflected the characteristics of the eligible population in the neighborhood. Program applicants resembled in most ways the larger pool of neighborhood residents eligible for the program and interested in its services. Applicants included those traditionally served in public assistance programs (for example, unemployed parents with dependent children) and also low-income working parents and adults without dependent children. Recruitment proved a difficult challenge for New Hope staff. Key problems were finding ways to bring the program to the attention of potential applicants and explaining the geographic eligibility rules and program participation requirements. However, when people who met the program’s eligibility rules attended an orientation explaining the program, most found it an attractive option and applied to participate in the demonstration.
- The community-based organization operating New Hope successfully put in place the intended program services. Program services were fully implemented and available to program group members. A vital role is played in the New Hope program by the "project representatives," staff who explain program services, compute benefits, and monitor participation for their caseloads of approximately 75 participants each. Despite such efforts, participants had some difficulties understanding how the various parts of the New Hope offer worked.
- The random assignment impact research design was successfully implemented, providing a means to understand the net impact of New Hope on key outcomes. The goals of achieving a diverse and sizable sample were met; the background characteristics of the program and control groups are similar, allowing a comparison of the program and control groups’ levels of employment, earnings, public assistance receipt, family and child outcomes (where applicable), and other key measures. These findings, based on follow-up using administrative records and a survey, will be the subject of a later New Hope evaluation report.
C. Program Use
- At some point in the year following random assignment, approximately three-quarters of the applicants accepted into the New Hope program group worked full time and claimed a program benefit. Use of New Hope benefits is affected by the availability of and changes in other "safety net" programs, as described earlier in this summary. During the follow-up period for this report, earnings supplements were most frequently used (by 72 percent of the program group), followed by health insurance (38 percent), and child care (23 percent). Twenty-four percent took a CSJ for at least a day as a way to meet the New Hope requirement of employment. About 60 percent of these CSJ workers made a transition to a full-time, unsubsidized job at a later point in the follow-up period, which qualified them for New Hope benefits.
- People used the program in many different ways, with differences in use reflecting their different initial circumstances, their ability to find and retain a full-time job, and their desire to maintain contact with the program. After an initial start-up period (defined as the first three months after random assignment), 32 percent of the program group used benefits steadily or nearly so, 39 percent intermittently, and 29 percent not at all. Since most participants do not use services continuously, it appears that New Hope serves principally as a resource for those beginning employment and as a support and safety net for those who obtain a job. Later data collection will provide details about reasons for nonuse of program benefits.