Three Education Programs that Work

The state of the American education system can be pretty discouraging. Despite the challenges levied inequities in achievement, uneven funding, and disparities in graduation rates, though, many policymakers are still striving to increase the number of students in poverty experiencing academic success. But where should they start?

One place to look is the Washington State Institute for Public Policy’s Benefit-Cost Database. We’ve used WSIPP to look at workforce development strategies before, but the state cost-benefit analysis database also has information on interventions that range from criminal justice to health care to higher education. Here, we look at pre-K through 12 interventions.

These results need to be taken with a grain of salt. While the methods are rigorous, they are prepared for policymakers in Washington State, so the policy may operate differently in a place like Ohio. That being said, they still give us some guidance for policies that be used to improve academic outcomes for students in poverty. Below are the three programs that have the highest per-participant net benefits in WSIPP’s education policy database.

Becoming a Man (BAM) with High-Dosage Tutoring

“Becoming a Man” is a cognitive behavioral therapy-based behavioral program focused on skill training and exposure to prosocial adults for disadvantaged high school-aged young men. This program is conducted in a one-hour weekly group sessions where participants learn character and social-emotional skills such as considering others’ perspectives, evaluating consequences ahead of time, and reducing automatic decision making. WSIPP’s analysis evaluated the impacts of Becoming a Man combined with daily, two-to-one ratio hourly math tutoring sessions.

While the program costs $4,700 per participant, it yields over $40,000 in per-participant benefits due to improved test scores and increased labor market earnings associated with them. This means that not only does the program yield net social benefits, but the increased wages garnered from the program will lead to increased tax revenue that will pay for the cost of the program in the long run. This also means that a federal (or even a state) government would be incentivized to fund such a program for budgetary reasons alone.

The drawbacks of Becoming a Man are typical. Like any educational intervention, the payoff takes time. WSIPP estimates that about 12 years will pass before the benefits of this program exceed the costs. This is faster than some other educational programs since its participants are high-school age, but still some time to wait. Additionally, the program has some uncertainty to it. Since this program has only been evaluated in limited circumstances and benefits hinge on the program leading to test scores which lead to labor market earnings, there is some uncertainty about whether they will pan out. In the limited evaluation of the program that has been carried out, though, the results were so positive that WSIPP is optimistic about future applications of this model.

Consultant Teachers: Literacy Collaborative

While Becoming a Man focuses directly on students, the Literacy Collaborate model indirectly impacts students by coaching teachers. Literacy coaches are trained for up to 35 days at local universities then provided with ongoing training support after placement in schools. Coaches work one-on-one with teachers to improve instructional practices. The evaluation WSIPP used focused in particular on the impact of the model on classrooms with children in early primary years, grades K-2.

Literacy Collaborative costs are very low, coming out to only $780 per student according to an Ohio State University study of the program in Columbus, Ohio cited by WSIPP. This means the program costs one-sixth the cost to operate as Becoming a Man. This is likely because of the “teach the teacher” model, where less resources can be used to impact more students. Benefits are also large, at about $28,000 in new future labor market earnings per child impacted, less than Becoming a Man but still substantial. This means it is also a program that “pays for itself” down the road.

This program has one similarity to Becoming a Man and one glaring difference. The similarity is that the program takes a long time to pay off, though even longer than Becoming a Man at an estimated 16 years before the program yields net benefits. The difference is that the WSIPP Monte Carlo simulations used to predict the probability the program has net benefits showed net benefits in 100% of simulations. This means that the program is a slam-dunk to provide benefits if carried out correctly in the right environment. This is likely because of the program’s low cost: as long as it can cover the $780 per student, it will yield net benefits.

Double-Dose Classes

The final of these three programs is deceptively simple: double-dose classes. If a student is struggling in math or reading, that student will be enrolled in two math or reading classes instead of one, thus doubling their instructional time.

It is surprising how effective this simple intervention is. At the low cost of only about $500 per participant (marginal costs of another student in another class are fairly low), about $18,000 in new future labor market earning benefits are accrued. In addition, there is a small impact on crime from the program as it has been found to reduce crime rates as well. Because of its low cost and the future labor market benefits, the program also pays for itself in the long run.

Double-dose classes have certainty of yielding net benefits of near the same level as Literacy Collaborate, with 98% of simulated scenarios resulting in a net-benefit program. Additionally, double-dose classes yield benefits in about ten years, quicker than Becoming a Man or Literacy Collaborative.

These are only three of the 42 educational programs WSIPP has determined yield net benefits, so it really only scratches the surface of tools policymakers have to improve academic outcomes for students in poverty. What I take away from this, though, is that there is no reason to get cynical about K-12 education in the United States. We have tools that work: we just need to use them.

9 Studies that Rocked the Policy World in 2019

As 2019 comes to a close, it’s a good time to reflect on the state of policy research in the past year. 2019 was a big year for policy research, with impactful studies coming out of diverse institutes such as NBER, the CBO, and the National Academies of Sciences, Engineering, and Medicine. Below are nine studies that particularly stood out in over the past year in informing policy debates.

National Academies: A Roadmap to Reducing Child Poverty

In December 2015, Congress passed an appropriation measure that included a provision for the National Academies of Sciences, Engineering, and Medicine to research and present policy options for cutting the American child poverty rate in half in the next ten years. Three years later, the panel of 15 leading poverty researchers released a detailed, 600-page study of child poverty in the United States, along with microsimulated policy packages designed to reduce child poverty in the United States.

A conservative, $9 billion plan was proposed by the study committee. The package of tax credit, minimum wage, and job training policies would reduce child poverty about one fifth, making it the most cost-effective package the panel came up with though it still fell short of the 50% child poverty reduction goal. To hit that goal, the committee concluded the federal government would have to spend $90-110 billion, utilizing either a mix of tax credits and housing and food assistance expansions or a package of tax credits, minimum wage increases, and a combination of child allowance, child support assurance, and immigration liberalization measures.

CBO: Key Design Components and Considerations for Establishing a Single-Payer Health Care System

In May of 2019, the Congressional Budget Office released its long-awaited report on single-payer health care. In characteristic CBO fashion, the study rankled partisans on both sides, revealing the complexities of redesigning the U.S. health care system from scratch while declining to project costs of any particular proposal.

This study was particularly important because of the shortage of dispassionate, evenhanded analysis of single-payer proposals in the United States. There is plenty of reading to do on single-payer in the U.S., but opinions are usually marred by rosy predictions of extreme reductions in spending or ideological opposition to state participation in the health care markets. This CBO report lays out how single-payer health care operates in the six countries that currently have a single-payer systems and walks policymakers through twelve questions they will have to answer if interested in designing a single-payer system. This report should be required reading for any advocate or detractor of single-payer health care as well as in undergraduate or graduate level courses on the U.S. health care system.

Moody’s: Stress Testing States 2019

This study is unique to this list in a couple of ways. First, it is the only study on this list carried out by a firm owned by a publicly-traded corporation. Most corporations like this are less focused on creating non-revenue generating policy relevant research than centers like CBO and NBER. Second, this is the only entry on this list that is a regular study put out on an annual or semiannual basis. Though the methodology of this study is not new, it is rigorous and is particularly relevant as economists debate how close the next recession is and state policymakers debate how big their nest egg should be when this recession hits.

In this October 2019 study, Moody’s Analytics does the hard work that state budget offices usually decline to do, estimating what potential shortfalls in state revenue and shocks to budget needs will look like under different recession scenarios. While this report was covered rather rosily, with many outlets reporting that a majority of states are prepared for a moderate recession, Moody’s still found a number of states that would require belt tightening, especially under conditions of a severe recession. Both fiscal conservatives and advocates for the poor should read this study if they want to understand the tradeoffs between fiscal sustainability and poverty alleviation we make in current budgets and what decisions are kicked down the road to future state budgets.

NBER: Shrinking the Tax Gap: Approaches and Revenue Potential

Studies out of the National Bureau of Economic Research often speak less to headline-grabbing policy problems than those in the CBO or the National Academies. That being said, the beauty of work published in NBER is that it unearths key policy problems that impact lots of people underneath the surface of current policy debates and authors are often encouraged to put forth bold policy proposals to solve these problems.

This November 2019 study is penned by an unlikely pairing of young Penn Law Professor Natasha Sarin and Larry Summers, as big a star as you get in the world of economics. The study addresses a decidedly unsexy topic of uncollected taxes and proposes an equally unsexy policy package of audits, increased reporting requirements, and IT modernization to increase revenue collection by the IRS. What’s sexy are the numbers: Sarin and Summers estimate that these low-cost administrative changes could raise $1 trillion in extra revenue over the next ten years, enough to finance a myriad of new programs or tax rate reduction packages, including being able to finance on its own the most expensive policy packages for reducing child poverty in that National Academies report listed above.

CBO: The Effects of Tariffs and Trade Barriers in CBO’s Projections

An addendum to economic projections might not seem like a anything worth writing home about, but CBO Economist Daniel Fried’s August 2019 explanation of the impact of the trade war on the U.S. economy was a classic example of the Congressional Budget Office playing the part of the “skunk at the company picnic.” Fried reported that tariffs imposed by the Trump Administration in 2018 reduce the size of the U.S. economy by 0.3%, costing the average U.S. household about $580. Also characteristic to CBO, the explanation includes a couple of paragraphs about the uncertainty of these estimates. Overall, the 90-page economic outlook update mentions the word “tariffs” 124 times, interpreting trade policy as a significant factor in U.S. economic growth in the upcoming years.

NBER: A Market for Work Permits

This month, leading international poverty economist Martin Ravallion teamed up with former World Bank colleague Michael Lokshin to put forth an ambitious proposal for breaking the stalemate around high-skill work permits in the United States. Lokshin and Ravallion acknowledge that citizenship and residency barriers create a de facto “entitlement” to work in a certain country based on accident of birth. Provocatively, the two economists ask what would happen if citizens interested in pursuing nonmarket pursuits such as caring for children could sell their right to work in the country to immigrants itching for opportunity to use their skills in the United States. Loshkin and Ravallion estimate that a seller of a permit could make $16,000 in the first year of the program and that poverty would be reduced by a third by the infusion of new resources from selling of work permits and tax revenue from new migrants’ earnings. The impacts are projected to fade as immigration markets stabilize over time, but Loshkin and Ravallion still project impacts to be substantial ten years down the road, providing thousands of dollars to sellers of work permits and continuing to substantially reduce poverty.

Upjohn: Making Sense of Incentives: Taming Business Incentives to Promote Prosperity

Timothy Bartik is one of the most prolific and policy-relevant economists in the field of business incentives and in the policy world in general. His work developing cost-benefit models particular to the goal of raising local wages has illuminated the world of business incentives and has been instrumental in understanding the potential of well-designed early childhood programs in promoting local economic development. In his October 2019 book, Bartik pulls together the literature on business incentives for the age of Amazon HQ2.

Like any good policy researcher, Bartik puts his money where is mouth is, laying out a framework for an “ideal” state business incentive program focused on getting the largest local wage impact bang for incentive buck invested. Bartik suggests targeting economically stressed counties with slack employment capacity and high-tech counties likely to generate larger local economic development benefits. He suggests creating a basis of infrastructure and workforce development services, then following up with customized business services, and finally creating limited, state-financed, up-front tax incentives open to all firms in targeted areas.

CBO: The Effects on Employment and Family Income of Increasing the Federal Minimum Wage

Once again, the CBO is not afraid to wade into choppy policy waters, this time estimating the employment and income impacts of proposals to raise the federal minimum wage to $10, $12, and $15. Again, the CBO rankles those on the left and right by projecting minimum wage increases would have substantial impacts on employment while also reducing income inequality and boosting average wages for families in and near poverty. Notably, the July 2019 report finds that a $10 minimum wage would have negligible effects on both employment and incomes while a $15 minimum wage would boost average family wages for those in poverty by 5% at the likely cost of over 1 million jobs nationwide. Also notable are the range of employment impacts: CBO projects as little as no employment impact and as much as 4 million jobs lost under a $15 minimum wage scenario.

NBER: How Research Affects Policy: Experimental Evidence from 2,150 Brazilian Municipalities

In this study, which Scioto Analysis has written about before, U.S. economists team up with Innovations for Poverty Action to evaluate how policymakers respond to policy information. In two studies of municipal policymakers in Brazil, researchers find that not only do policymakers apply policy research when they are exposed to it, but they also have a willingness to pay for this research. While Scioto Analysis’s existence is a testament to this fact, it is exciting to see the lesson learned in a large-scale experimental setting. With better evidence comes better policy, and only through partnerships between researchers and policymakers will policy be able to ultimately be improved.

Here’s to a great 2019 in policy research and hope for an even better 2020!

Workforce Development Strategies Can Alleviate Poverty If Done Right

In Harry Holzer’s book Where Are All the Good Jobs Going?: What National and Local Job Quality and Dynamics Mean for U.S. Workers, the Georgetown economist argues that “good” jobs aren’t going away—they’re just changing in character. In particular, good-paying jobs now require more analytical communication skills than in the past and thus are being filled by more highly skilled workers.

Policymakers interested in reducing poverty have thus been interested in finding ways to improve the skills of low-income residents of their community. Unfortunately, many job training programs have not been found to be effective as reported in a Council of Economic Advisers study earlier this year. So what strategies are available for local policymakers interested in effectively increasing access to training for residents experiencing poverty?

One tool we have to answer this question is the Washington State Institute for Public Policy (WSIPP), the most sophisticated cost-benefit analysis institute in the country. WSIPP has been commissioned by the Washington State legislature to study over three hundred different public policy interventions and to estimate the monetized impact of each of these interventions. While WSIPP’s estimates are prepared for policymakers in the state of Washington and thus have limitations for extrapolation to other contexts, they still can be informative for policymakers in other states considering workforce strategy.

Below is an overview of the per-participant net benefits of the ten workforce development programs WSIPP has analyzed. The programs WSIPP has studied fall into four major categories: career academies, job search and placement, case management, and training/work experience. As can be seen below, WSIPP has found significant differences both between and within these categories of interventions. Let’s take a look at each of these categories one by one.

Washington State Institute for Public Policy

Career Academies

Career and technical education academies have been described as “school within a school” high school programs that foster connections between schools and local employers. They are designed to build both vocational and academic skill sets for students to apply in workforce and postsecondary settings. WSIPP analyzed the results of studies of California’s Career Academies and Linked Learning program for its cost/benefit estimates.

These estimates suggest that career and technical education academies yield the highest net social benefits of all the workforce interventions studied, amounting to nearly $9,600 in net benefits per participant. Benefits mainly accrue from improved labor market earnings associated with employment, about two-thirds of which accrue to participants and one-third accruing to taxpayers. Career and technical education academies also yield $2.70 per $1 invested in the program, so provide an attractive tool for policymakers working under a firm budget constraint.

The drawback of these programs is that benefits accrue over a long time horizon, estimated to take almost a decade for the program to break even, compared to instant payoff for job search and placement and case management programs and 3-5 year payoffs for training/work experience programs. Career and technical education academies are also fairly expensive, costing an estimated $5,700 per participant, ten times the cost of job search and placement programs and thirty times the cost of low-cost case management programs. This means that career and technical education programs would cost more to assist the same number of people, though the return on that cost would be larger.

Job Search and Placement

Programs that focus on job search and placement are brief interventions lasting from a few hours to two months comprised of supervised job search, job search workshops, or job clubs for unemployed individuals. These programs are usually targeted towards unemployment insurance claimants or TANF (welfare system) participants.

Job search and placement programs yield $2,000 in benefits per participant and $4.71 per dollar invested in the program, making them moderately cost-effective from a net benefits perspective and very cost-effective from a cost/benefit ratio perspective. Benefits also accrue immediately compared to the 8-year lag for career and technical academies and are cheap at about $500 per participant.

The drawback of these programs is that benefits mainly accrue to taxpayers, with taxpayers enjoying nearly three times the benefits of program participants between increased tax revenue and decreased public assistance spending. While the average participant in a job search and placement program walks away with $1,100 in increased labor market earnings, she also loses $400 in public assistance, decreasing the effectiveness of the program as an antipoverty tool.

Overall, job search and placement programs are quicker but less effective tools than career and technical academies. That being said, they represent a better tool than a status quo of inaction since they do yield benefits for both participants and taxpayers.

Case Management

Case management services usually comprise counseling and job search and retention services and referrals to work supports such as child care subsidies, transportation, education, and training. Case management can be conducted via orientations, assessments, interviews, or telephone calls in individual or group sessions.

Interestingly, WSIPP’s estimates for the cost effectiveness of case management hinge strongly on the characteristics of the participants. Unemployed individuals benefit greatly from case management, accruing $2,700 in labor market benefits at the cost of only $200 per participant. Current or former welfare recipients, in contrast, only only accrue an average of $200 in labor market earning benefits at a much higher cost of about $3,000 per participant.

The takeaway from these findings is that case management programs can be quite effective, but only if targeted towards unemployed individuals and not current or former welfare recipients.

Training/Work Experience

Training and work experience are what we usually think of when we talk about workforce development. These services may comprise job search and placement assistance, adult education, English as a second language, GED, vocation training, child care, transportation, and paid and unpaid jobs. Programs can start with training and then move to work experience, consist of an individualized employment plan from an employer, or just consist of job training or work experience.

Work experience on its own is a moderately effective intervention, yielding a net of $1,600 in labor market earnings per participant after subtracting benefit reductions. Adding training to a work experience program makes the benefits per participant higher (a net of $5,100 after subtracting benefit reductions), but the higher costs associated with training lead to lower net benefits than work experience on its own. Targeting work experience/training interventions towards welfare recipients can lead to higher social yields, though, due to decreased spending on public assistance. This makes this sort of targeting attractive to state and federal policymakers, but potentially less attractive to local policymakers who have less to gain from reductions in public assistance spending.

Targeting work experience and training interventions towards youth yield substantial net costs to the tune of over $10,000 per participant. This is because these interventions are especially costly when targeted towards youth and have very low yields to the tune of only about $150 per participant. Training without work experience has large labor market benefits per participant of $6,000 per participant, but are incredibly costly, making the approach much less attractive than work experience-focused interventions.

Takeaways

Overall, WSIPP’s analysis leaves us with some good guidance for policymakers looking to reduce poverty through workforce interventions. First, career and technical academies are incredibly effective but long-term investments in workforce. Policymakers looking for cheaper, quicker interventions can invest in case management specifically targeted towards unemployed individuals and job search and placement programs. As far as training/work experience programs go, work experience is a key ingredient and should generally be supported, except when targeted towards young people, who do not tend to benefit from such programs. A mixture of short- and long-term interventions could be a good formula for improving skills to reduce poverty.

How Local Governments Can Create High-Paying Jobs for Residents

How do we create living wage and high-paying jobs for residents of neighborhoods of concentrated poverty? One tool we have are business incentives, or, as leading national business incentive economist Timothy Bartik describes them, “tax breaks, cash grants/loans, or services that are (1) targeted at an individual firm, or some industry or group of firms, and (2) intended to promote job growth in a state, or in a local geographic area that is big enough to be a local labor market.”

Business incentives are a (some may say “the”) key tool for creating good jobs at the local level, but economists estimate that anywhere from 75-98% of business incentives have no impact on the decisions of firms to relocate, expand, or retain workers.

In light of this discouraging evidence, local policymakers are right to ask how they can use business incentives more effectively. One of the things that makes Bartik a leader not just in business incentives but in policy research in general is his willingness to put his money where is mouth is and lay out proposals for better policy on the topic he studies. In his recent book Making Sense of Incentives: Taming Business Incentives to Promote Prosperity, Bartik lays out his proposal for an “ideal state incentive program.” While this is tailored to state governments, lessons can be gleaned for local governments as well.

Target distressed areas with high unemployment

Jobs in distressed areas are more likely to go to local residents. Bartik suggests targeting counties, but at the local level, counties and municipalities may want to target certain zip codes or census tracts based on unemployment, poverty levels, or other indicators of economic distress. In particular, looking at objective measures that areas lack adequate jobs can be good guidance for local governments.

Start with basic services supporting economic development

Bartik suggests prioritizing general economic development services over funding services for specific businesses, specifically mentioning infrastructure and high-quality programs for skills development. This is a suggestion that can be directly adopted by local government. Neighborhoods of concentrated poverty often have poor infrastructure, making them unattractive for business. Investment in road and utility infrastructure can improve the ability of these neighborhoods to attract business. These neighborhoods also tend to have lower education levels, so skill training services provided or subsidized by city or county agencies could help improve workforce prospects in neighborhoods and provide partners for businesses interested in locating or expanding in these neighborhoods.

Next, prioritize funding for customized business services

Bartik suggests block granting state funds to counties, but at the local level, these funds could probably be managed by a development agency. He suggests funding be spent on services for “tradable industries”. This means that industries should compete in state or national markets: funds spent on firms that compete locally just shift jobs around the local market rather than bringing new business to the region.

Bartik mentions the following examples of customized business services: manufacturing extension services, small business development centers, business incubators, customized job training, and discretionary hiring subsidies for firms that hire into newly created jobs local nonemployed residents referred and placed via local workforce agencies. All these are strategies that can be used by local governments, especially small business services, customized job training, and hiring subsidies.

Lastly, Bartik suggests a level of funding for these customized services that would provide quality services to all targeted firms. His suggestion is $10 billion nationally. Scaled down on a per-person basis to an example jurisdiction like Franklin County, that would come out to $40 million spent on customized business services, which amounts to about 9% of the county budget—a significant number. For reference, raising this amount of new funds from county sales taxes, the broadest tax the county raises, would require an increase in the county sales tax rate from 1.25% to about 1.4%.

Make tax incentives limited in costs, up front, and open to tradable firms of all sizes

It should go without saying that tax incentives should not exceed the amount owed to local government, but having an explicit policy can keep costs from spiraling out of control. Bartik also suggests making payments up front and using clawbacks to enforce performance measures. This is because businesses value present dollars greater than future dollars, so incentives are more effective if they are front-loaded rather than accruing years down the road. Bartik also recommends making incentives a legal entitlement or having specific provisions that level the playing field between smaller and larger firms.

These are just four suggestions, but the takeaway is this: business incentives can be done better with smarter targeting, more attention to infrastructure and customized services, and prudent policy around tax incentives. Strategies such as these can pay off for residents of neighborhoods of concentrated policy.

Mapping Neighborhoods of Concentrated Poverty in Franklin County

Mapping technology has contributed a lot to understanding the impact of geography on public well being. Luckily, you don’t have to be a GIS whiz to work with geographic data. The US Census Bureau provides a pretty solid tool for analyzing geographic disparities.

For instance, let’s look at the way poverty is distributed throughout Franklin County, Ohio, using only Census Bureau tools. Below you can see a map of poverty prevalence in Franklin County generated using the Census Bureau’s tools. To generate this map, I simply used the American Fact Finder’s search for census tract five-year average poverty rates from 2017 then chose an arbitrary point - 25% poverty, and split the census tracts accordingly. I played with a few different poverty thresholds and tried three classes and four classes, but I think this two-category split best shows the concentration of poverty within the county.

Figure 1. Concentrated Neighborhoods of Poverty in Franklin County

Zooming in, we can see which neighborhoods have the most concentrated poverty. Overall, this visualization suggests six neighborhoods of concentrated poverty: Downtown/Near East Side, the East Side, the South Side, the West Side, Linden, and Ohio State Campus.

Downtown/Near East Side

Figure 2. Concentrated Poverty in Downtown/East Side

Besides a little pocket in the King-Lincoln district, every census tract from the Scioto River to Alum Creek and between I-70 and I-670 is over 25% poverty. This may seem surprising to people talking about the “gentrification” of what is coming to be called “Old Towne East” along with the rapid building of downtown condos, but poverty is still quite persistent on the Near East Side and downtown. These numbers may change, though, over the coming years. Since this data lags back to 2012 in order to increase sample size, there is a possibility we will see this area start to turn more green in the coming decade.

East Side

Figure 3. Concentrated Poverty on the East Side

Poverty on the East Side stretches from the Fifth Avenue neighborhoods north of Bexley to the neighborhoods east of James Road and west of Yearling Road in the Eastmoor/Whitehall area all the way down to the old Eastland Mall area. While the west side of Whitehall has tracts of concentrated poverty, the east side of Whitehall is notably better off.

South Side

Figure 4. Concentrated Poverty on the South Side

South side neighborhood poverty is an interesting story. You can see the Brewery District, German Village, Schumacher Place, and Merion Village neighborhoods around Schiller Park are all under 25% poverty, but to the east in Southern Orchards and to the south in Hungarian Village, we still see concentrated poverty. We also see concentrated poverty in the Driving Park and Alum Creek Road areas to the southeast and even poverty stretching all the way down the Lockbourne Road area before it gets to Obetz and South High Street all the way down to the 270 loop. With development around Parsons Road, some are wondering if the Southern Orchards area will see declines in poverty rates, but poverty still seems to be persistent in the area for the time being.

West Side

Figure 5. Concentrated Poverty on the West Side

Concentrated poverty on the West Side of Columbus is kind of a tale as old as time. Tracts of concentrated poverty predominate Franklinton and much of the greater Hilltop area and even the tract hugging the west side of the Scioto River opposite Marble Cliff. Notable are two tracts of concentrated poverty outside the 270 loop, signaling some suburban concentrated poverty on the West Side. A bright spot is the Westgate area, which is experiencing lower poverty rates than Greater Hilltop around it. Eyes will be on Franklinton as large development projects may impact local poverty rates in East Franklinton over the next few years.

Linden

Figure 6. Concentrated Poverty in Linden

Linden is another neighborhood that has garnered a lot of attention for its poverty. The area of concentrated poverty centered in Linden also spills over into the Northland, North East, and North Central areas. Many City of Columbus antipoverty projects have been centered in the Linden area, likely because of its geographic size and the extent of concentrated poverty in the area.

Ohio State

Figure 7. Concentrated Poverty in the Ohio State Campus Area

Probably the strangest neighborhood of concentrated poverty in Franklin County is that around the Ohio State University campus. As we’ve written before, college student concentration can impact poverty rates quite substantially, so much so that the Census Bureau has written briefs on how college students impact poverty rates. Dealing with college poverty can be deceiving because it is often (but not always!) temporary, volitional, and maybe even incorrect. Place-based poverty interventions in this neighborhood should likely take different forms than those in other neighborhoods due to the unique circumstances of poverty in a college area.

As you can see, some simple mapping can tell you some very interesting stories about poverty in a place like Franklin County. Using maps like this can help guide policymakers towards place-based policies to reconcile these geographic disparities. But place-based approaches need to be tailored towards specific neighborhoods. For instance, a keen eye may have noticed a dot of red on the southern border of Franklin County that didn’t get an analysis here. Well that tract covers the Rickenbacker National Guard Base, which means the “poverty” problem here is quite different from that in Linden or on the West Side. This type of mapping only gets you so far on its own: you need to marry this geographic data with an understanding of the local conditions each neighborhood is facing in order to craft smart place-based antipoverty policy.

Childcare Subsidies Can Be an Effective Anti-Poverty Tool

Over the past few years, child care and early education have emerged as key public policy problems. This trend has come about in a time of increased participation in the workforce by mothers and rising costs for childcare.

With the growth of childcare as a public policy problem, child care subsidies have become a larger part of US antipoverty policy. In particular, child care subsidies help families fight poverty in two ways: by providing parents with resources and by giving children a boost that leads to wage growth down the road.

Child care subsidies reduce current poverty

A child care or preschool slot provided for free to a family has the effective value of $9,500 in Ohio. This makes the total benefit for a family with two children ($19,000) higher than the average social security benefit ($17,000 annualized), the average unemployment benefit ($16,000 annualized), the average disability benefit ($9,000), the average Medicare benefit ($8,000), the average Affordable Care Act tax credit benefit ($6,000), the average Medicaid benefit ($6,000), the average Pell Grant ($4,000), the average earned income tax credit ($3,000), and the average SNAP (formerly “food stamps”) benefit ($3,000 annualized).

Data sources linked above

While one child in public childcare eclipses seven of nine major safety net items above for the average recipient, two children in public childcare makes public childcare the most generous major safety net measure in the United States, worth 91% of the value of the federal poverty level for a family of three, even though public benefits such as child care benefits are not counted in measuring income towards the official poverty measure. Child care subsidies are an important tool for reducing poverty among poor families directly.

Child care subsidies alleviate intergenerational poverty

In addition to supporting families today, child care subsidies can be a tool for fighting intergenerational poverty. High-quality early childhood education has been shown in experimental settings to have wage benefits down the road for low-income children in particular in addition to crime and health benefits. In Timothy Bartik’s book Investing in Kids, the labor economist models a universal pre-k program with income-based fees, coming to the conclusion that the long-term wage boost to low-income children would be 11,000 times as large as the wage boost to high-income children as a function of previous expected wages.

Bartik, Investing in Kids

If child care subsidies are progressive and ensure proper quality, they can be an effective tool for breaking intergenerational poverty.

Poorly deployed childcare subsidies can hurt families and children

While these results seem to paint a rosy picture for child care as a tool for equity, results from Canada should give us some pause. In the late 1990s, Montreal instituted a universal child care program without any quality controls. An analysis comparing Montreal to other provinces after the reform found children to have higher anxiety and aggression and worse development scores and health outcomes after the reform, while parents exhibited more hostile, inconsistent parenting behaviors along with less parental satisfaction and even higher levels of maternal depression. One of the possible explanation for these results is that children were getting less time to interact and build strong relationships with parents at young ages.

The balance of the evidence suggests that childcare subsidies smartly deployed can be a strong tool for reducing family and intergenerational poverty. That being said, subsidies should be deployed with caution in order to ensure that they are targeted towards high-quality programs and that they do more to encourage rather than discourage positive family interactions.

No, Columbus is not a startup city

Columbus’s startup community gets a lot of love, and we at Scioto Analysis like to celebrate it as well,as a startup ourselves. With that in mind, I was surprised when a colleague at lunch yesterday told me Columbus has one of the weakest startup industries in the country.

Of course, I went straight for the data. The Ewing Marion Kauffman Foundation publishes a comprehensive annual report on startup activity by metro area. Using IRS data collected by the Bureau of Labor Statistics, Kauffman compiles the “startup density” of the top 40 metro areas in the country, defined as the number of firms less than a year old that employ at least one person besides the owner per 1,000 total businesses.

Columbus’s startup density is in the bottom quintile nationally, only outpacing five other metro areas: Cincinnati, Providence, Milwaukee, Pittsburgh, and Cleveland. While the average large metro area has 83 startups per 1,000 businesses, Columbus punched in at 66 startups per 1,000 businesses in 2017, 20% lower than that average. Columbus looks a little better when you compare it to other regional metro areas, but still only falls in the middle of the list of seven metro areas in Ohio and neighboring states.

But doesn’t Columbus have a strong job market? And don’t small businesses drive job growth? Not so fast. By compiling jobs data from the Bureau of Labor Statistics, we can see that Columbus’s employment growth was basically flat from 2017-2018, placing it in the bottom quintile of large metro areas in job growth ahead of only San Diego, New York, Sacramento, Chicago, and Pittsburgh. Columbus even looks weak regionally, especially compared to high-growth Indianapolis and even against other Ohio cities Cincinnati and Cleveland.

Finally, let’s look at the relationship between the two variables. Using a standard correlational analysis, we can see that there is a weak relationship between startup density and job growth. Among our regional metro areas, six are clumped in the bottom left quadrant, showing low levels of both startup density and job growth compared to other large metros nationally. While Cleveland, Cincinnati, and Philadelphia follow the national trend fairly well, Pittsburgh, Columbus, and Detroit each have more sluggish job growth than their startup density would predict. Also note Indianapolis, which has 12% more startups per 1,000 businesses than the average regional city, but four times the job growth as the average regional city, making it the regional outlier.

Despite all these troubles, Columbus continues to grow in population and economic activity. It may have been that 2018 was a particularly bad year for Ohio, so these trends could reverse in 2019. That being said, it is hard to truly make the case that Columbus is a startup Mecca. Columbus is merely average regionally and quite weak nationally when it comes to startup prevalence.

The Top 5 Studies of Scioto Analysis's First Year

Today, Scioto Analysis celebrates its first birthday. Over the past year, Scioto Analysis has served clients in five different states and has analyzed issues ranging from tax to health and human services to environmental and education policy. Below are Scioto Analysis’s top five studies of its first year.

1. Waiting for Services: Nebraska’s Developmental Disabilities Waiting List
   In October, Scioto Analysis partnered with Disability Rights Nebraska and the Nebraska Consortium for Citizens with Disabilities to study the waiting list for developmental disability services in the state of Nebraska. While all Nebraskans with developmental disabilities are entitled to services to help with every day living, gaining capacity, and employment, the average Nebraskan with disabilities waits seven years to get these services. In this study, Scioto Analysis found that this was due to a $33 million shortfall in state spending from 2008 to 2016 that caused the state waiting list for services to slowly grow over that time period.
   

2. Earned Income Tax Credit Refundability: A Cost-Benefit Analysis
   As a social enterprise, Scioto Analysis is committed to improving the quality of public policy analysis at the state and local level, which includes demonstration projects of key analytical techniques. This August study was the first best-practices cost-benefit analysis of a state policy in Ohio in over a decade. Scioto Analysis found that proposals to expand Ohio’s state earned income tax credit would raise the average worker’s wages by hundreds of dollars along with growing the economy, increasing employment, increasing college enrollment, and reducing instances of low birthweight.
   

3. Ohio’s Economy: 2009-2016
   While gross domestic product is the most common indicator used to measure economic growth in the United States, it leaves out key economic considerations such as the cost of inequality and environmental damage and the value of housework and higher education. The genuine progress indicator (GPI) is an alternative indicator that measures economic growth through 26 different economic, environmental, and social indicators. When Scioto Analysis launched in November last year, it partnered with Gross National Happiness USA to measure Ohio’s GPI since the Great Recession. Scioto Analysis found that rising inequality had taken a significant bite out of Ohio’s economy since the end of the great recession, costing the average person about $900 a year.
   

4. Cost-Benefit Analysis in Ohio: Building State Policymaking Infrastructure
   In order to carry out its double bottom line mission, Scioto Analysis carried out a study in April assessing Ohio’s use of cost-benefit analysis in state policymaking. Scioto Analysis identified 27 studies from 2012 to 2018 that at a very minimum assessed direct costs and measured outcomes, though did not find any studies that followed the eight best practices of cost-benefit analysis.
   

5. Beyond the Gas Tax: How Automation Opens the Door for Vehicle Miles Traveled Fees
   In March, Scioto Analysis released a white paper on vehicle miles traveled fees for autonomous vehicles. By taking advantage of the efficiency gains of automation and the availability of data due to computerization, state and local governments will have new opportunities very soon to implement the “holy grail” of capturing the costs of driving.
   

It’s been a great first year for Scioto Analysis and more high-impact analysis is in the works. Stay tuned to see what great stuff we have in store for the upcoming year!

Let's Talk about Benefits Cliffs

If you’ve been to a public meeting about poverty, you’ve probably seen someone stand up and smugly let you know about a little thing called a “benefits cliff.”

If you haven’t heard of a benefits cliff, here’s a simple explanation: a well-designed social welfare program has a “phase out” schedule. The idea is that if you make more money, you slowly lose your benefit. Take the earned income tax credit. The earned income tax credit slowly phases out for people making more income so that beneficiaries of the credit don’t lose all their money at once. 

Figure 1. EITC Model

Compare this to a program like SNAP (formerly “food stamps”), which has a strict income cutoff, after which you are no longer eligible for the program. So in Ohio, if a single worker makes $16,000 in a year, she is usually eligible for about $2,400 in food assistance, making her effective income $18,400. But if she crosses that wage threshold and make $16,500, she loses her benefit, meaning her effective income drops by almost $2,000—just for getting a raise! 

Figure 2. SNAP Model

Emily Campbell of the Center for Community Solutions is Ohio’s resident expert on benefit cliffs. She had modeled benefits cliffs for different family sizes and has presented extensively on the topic. As you can see from the graphic below, benefit reductions should theoretically slow income growth at many points in the income distribution.

Figure 3. Center for Community Solutions Benefits Cliff Model

 In particular, according to this model, we should see a lot of single-parent two-child families “clumping” at about $17/hr annualized, which equals about $35,000. This is because, according to this model, making anywhere from $35,000 to $56,000 annually results in the same net income, so less work is better in this situation.

When I studied this problem as my capstone in graduate school, I found some evidence of clumping in publicly-available income data, but the effects were small. While there is a lot of theory and anecdotal evidence of the impact of benefits cliffs on work output and human capital development, there is little empirical evidence to demonstrate these impacts are actually happening.

Reasons to be skeptical about arguments about the impact of the benefits cliff include behavioral explanations. Human beings are pretty lousy at interpreting the tax and benefit system. It’s hard to make the argument on one hand that low-income people need financial literacy training and on the other hand that they are deciphering a complex benefits system to maximize their return for a given work input.

That being said, it is hard to argue the benefits cliffs have no impact at all. In my capstone work, I did detect some evidence for limited “clumping” at certain incomes which could have been driven by benefits cliffs incentives. So what do we do about these design problems?

The first step is to acknowledge them for what they are: design problems. It is pretty easy to redesign programs to phase out benefits rather than reducing them all at once: it’s just a change in the benefits schedule. The state of Ohio did it recently with child care benefits, albeit in a convoluted way by only allowing the phase-out range to apply to previous recipients (take your kid out of child care for a month and get a raise? Lose your benefit) and thus building in a strange incentive for benefit continuity. That being said, the new program creates less negative incentives than the last. Smart design can prevent these problems from occurring in the first place.

States are more hamstrung with federal programs like SNAP which have strict income cutoffs which states generally don’t have the flexibility to change. This is where states need to get creative. Case management combined with targeted cash or in-kind transfers can help supplement income when benefits disappear, creating bridges towards sustainable middle-class incomes. But the best way to deal with a benefits cliff is to make sure it doesn’t exist in the first place, which means good design at the onset of a program.

Rob Moore is the principal for Scioto Analysis.

Ohio's Water Quality Still Lags Other States

Last year, Scioto Analysis conducted a study of Ohio’s economy using an alternative, “GDP+” framework called the “genuine progress indicator”. This was the first Genuine Progress Indicator study in Ohio since 2012 and tracked Ohio’s recovery from the Great Recession, calculating the size of the economy in every year from 2009 to 2016 using 26 different economic, environmental, and social indicators.

That same year, researchers at the University of Vermont calculated a “point-in-time” measure for all fifty states for the year 2011. The nice thing about this report is that we can use this data to compare Ohio’s economy compared to the economy of the other 49 states.

On most indicators, Ohio is characteristically pedestrian, falling within half a standard deviation of the state mean per-capita cost or benefit. For four indicators, though, Ohio deviates from the average state, and all but one of these are in a negative direction.

Water Pollution
Ohio’s worst indicator compared to other states is water pollution. The cost of water pollution to the average state resident in Ohio in 2011 was $219 compared to $139 for the average state, one and a half standard deviations higher than the mean. This should not be surprising for those who lived through the Cuyahoga River Fire, but these numbers show that Ohio’s water pollution struggles are far from ancient history. Water quality has become a problem recently as algae blooms in Lake Erie and other lakes have cost Ohioans in property values, tourism industry, and natural resources. University of Toledo Economist Kevin Egan has proposed a phosphorus tax to capture the cost of runoff where it begins, but state policymakers have shied away from the proposal, leaning towards regulations and education.

Personal Consumption
The largest portion of the genuine progress indicator is personal consumption expenditures, or consumer spending on goods and services, which makes up over a third of gross impacts in the measure. The average Ohioan spent about $31,000 on goods and services in 2011, compared to about $34,000 for the average state, making this also the largest single shortfall for Ohio compared to other states in absolute terms, but also among the highest in relative terms as Ohio’s personal consumption expenditures per capita were three-quarters of a standard deviation lower than the average state. This may be a symptom of higher poverty and lower incomes in Ohio than the average state.

Motor Vehicle Crashes
The bright spot in this report is that Ohio experiences less motor vehicle crashes than the average state. In 2011, Ohio had about 9 fatal crashes per 100,000 people, compared to the average state that had 12 fatal crashes per 100,000 people (about two-thirds of a standard deviation lower). This means Ohio had less medical costs, time lost at work, and most importantly deaths per person than the average state, leading to savings of about $1,500 per person. It’s hard to say exactly what is causing the lower crash levels in Ohio, but with Wyoming, North Dakota, and Montana all experiencing the higher rates of over 20 fatal crashes per 100,000 people, it may have to do with density or speed limits.

Higher Education Attainment
Back to the bad news: Ohioans are generally less educated than the average state. In 2011, about 25% of Ohio’s adult population had a bachelor’s degree or higher, compared to about 28% for the average state, which makes Ohio’s attainment rate about half a standard deviation lower than the average. This leads to an a lost $400 per capita in greater civic engagement, longer life expectancy, better child education, and more optimal family sizes. This may owe to Ohio’s history as an industrial state and its reliance on industries that require less education than others. If Ohio’s higher education attainment rate was the same as the average state, Ohio would have about a quarter million more bachelor’s degrees in its workforce. The Ohio Department of Higher education has set a goal to reach 65% attainment of working-age degree, certificate, or workforce credentials by 2025, which could mean a half million more bachelor’s degrees in the state workforce.

Ohio doesn’t do terribly in this comparative analysis, but it does provide room for improvement: Ohio has models in other states that have less water pollution, stronger consumer economies, and more educated workforces. Ohio should be happy, though, that motor vehicle crashes are not as bad as they are in other states. One limitation of this data, though, is that the most recent study only captured information from 2011. Ideally, the federal government, through the US Bureau of Economic Analysis, would conduct a 50-state analysis of state genuine progress indicators every year. Until then, we will lean on independent analyses done by the University of Vermont, Scioto Analysis, and other firms to provide us with this key economic information.