Learning from the Work Rewards Demonstration: Final Results from the Family Self-Sufficiency Study in New York City

Abstract

This report summarizes the final findings from the Opportunity NYC‒Work Rewards demonstration. Launched in 2007 by the Mayor’s Office for Economic Opportunity (formerly the New York City Center for Economic Opportunity), this randomized controlled trial tested three strategies for increasing employment and earnings of families receiving Housing Choice Vouchers, which are public subsidies for private market rentals. The report looks at two of those strategies: the Family Self-Sufficiency program (“FSS-only”) ― the main federal effort for increasing employment and earnings and reducing reliance on government subsidies among housing-assisted families ― and an enhanced version of FSS (“FSS incentives”). FSS offers case management to connect participants to job and training services and helps them build their assets: As housing-assisted families’ earned income increases, so does their share of the rent; under FSS, an amount based on the increased rent portion can be saved in an interest-bearing escrow account maintained by the housing agency and paid to participants when they graduate from the program. Graduation requires that the household head is working and that the family is not receiving welfare in the 12 months leading up to graduation. In FSS incentives, special cash work incentives were offered to encourage sustained full-time employment. This report presents results for the six years following study enrollment:

- Close to half of FSS enrollees graduated during the six years of follow-up, and about a third graduated with an escrow payment. Those assigned to FSS incentives earned more escrow than those assigned to FSS-only. Among graduates, the FSS-only group received an average of about $3,800 in escrow payments and the FSS incentives group received about $4,900.

- Both programs increased educational enrollment but not degree or certificate attainment, increased participants’ savings and connection to banks, and reduced the use of check cashers.

- Neither program produced statistically significant improvements in labor market outcomes overall or for participants who were already working when they enrolled in the program.

- FSS incentives increased employment and earnings for participants who had not been working at baseline. Although the control group began to catch up late in the follow-up period, cumulative earnings effects remained large and statistically significant for the nonworking subgroup.

- Both programs reduced receipt of Temporary Assistance for Needy Families in Year 5, which appears to be associated with FSS graduation requirements, but they did not significantly reduce housing voucher receipt or housing subsidy amounts.

- Benefit-cost findings suggest that over a 10-year period, both FSS interventions produced a net economic gain for households headed by individuals not working at baseline. This estimate is larger and more certain for FSS incentives than for FSS-only. But the higher cost of FSS incentives (due substantially to the special work incentives and higher escrow payments) means that, although it is advantageous for initially nonworking participants, taxpayers are less likely to see a positive economic return from that intervention than from FSS-only.

MDRC is leading a national evaluation of the FSS program, commissioned by the U.S. Department of Housing and Urban Development, which will place these findings in a national context.

Keywords: housing vouchers, work incentives, benefit-cost analysis, random assignment

JEL Classification: C93, D61, H24, I38, J38