A Social-Impact Investing Challenge

Around the nation, a new way of improving communities is being tested — social-impact investing, or “pay for success.” Someone puts money up for a measurable outcome like 10 percent less recidivism in a particular locality, and if it works, the local government pays a return on the investment.

The NY Times wrote yesterday that a well-known investment in New York, supported by money from Goldman Sachs, did not meet its target. On the other hand, among the imprisoned youth who went through the ethics program, some really appreciated the attention and began to change their ways.

So in the end, social-impact investing comes down to a cost-benefit analysis: how much will a government pay to save one life?

Times columnist Eduardp Porter adds, “Last October the Corporation for National and Community Service put up $12 million in grants to advance and evaluate emerging models that align payment for social services with verified outcomes.

“This carries enormous promise. To the extent that governments could buy results, instead of covering the expense of services rendered, policy could be made more efficient regardless of where the money came from. If voters could be provided evidence of a government success, they might be more willing to support it.

“And yet the push to evaluate all must be tempered as well. The Moral Reconation Therapy at Rikers [Island prison] may not have reduced recidivism as hoped. But the many services offered around the therapeutic interventions achieved other useful things, not least keeping potentially violent youths busy on productive activities for much of the day.

“ ‘All they were testing is whether M.R.T. by itself would make a difference, not whether something you could do in a jail would make a difference,’ [Elizabeth Gaynes, chief executive of Osborne Association, which carried out the therapy]. said. ‘Even if we could have raised money to do other stuff, we were not allowed to because we were testing M.R.T. alone.’

“To the hard-nosed evaluators of the new landscape of social services, this sort of argument may sound like a cop-out. But it carries a truth: Social policy probably cannot be limited exclusively to the things one can readily measure.” More here.

[I will be on vacation for a few days. Look for a post from one of my colleagues.]

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Black and Latino Retail Workers Struggle

A colleague passed along this disturbing story from CNN Money. It’s about the experiences of black and Latino retail workers.

“While the retail industry is known for its paltry pay across the board, skin color has an alarming influence on how many raises and promotions a worker receives. White retail workers earn $15.32 an hour, on average, while African American and Latino retail workers average less than $11.75, according to a recent analysis of government data by NAACP and Demos, a left-leaning think tank.

“The reason is simple: white workers are more likely to be promoted to manager roles, while minority workers are overrepresented among the lower-paid cashier positions. Even among cashier jobs — about as vanilla as you can get in the retail industry — white cashiers are paid nearly $1 more an hour, on average. …

“Retail is the second largest employer of black workers in the United States. The study found that 17% of African American and 13% of Hispanic retail workers live below the poverty line despite being employed. Among white retail workers, only 9% are in poverty.

“One of the biggest issues for retail workers is getting enough hours. A 40-hour work week is just a fantasy for many.

” ‘You say “I want full-time but I’ll take part-time” when you need a job. And they never want to hire full time,’ said Sonsira Espinal, who is part-Venezuelan, part-Dominican. …

” ‘During training, they give your hours, and then it starts decreasing from there,’ the 25-year-old told CNNMoney. [The company] declined to comment for this story. …

“Espinal heard managers talking about openings for better positions, but they never discussed them with her.” More here.

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Efforts to Nurture “Localism”

I thought this article by Tim Faulkner at ecoRI was interesting. It’s about the benefits to a region of fostering localism — supporting local businesses.

“The benefits of independently owned businesses are nothing new,” Faulkner writes, “but a growing movement called ‘localism’ is showing that they not only create positive economic benefits but also can drive positive social and environmental change. …

“Localism, which is closely connected with social enterprise initiatives, also has a deeper connection with well-being and nature. And often these businesses focus on food.

“Judy Wicks is one of the pioneers of the modern localism movement. Back in 1983, she helped save her Philadelphia neighborhood from demolition, to make way for a new shopping mall. She opened a café on first floor of the brownstone where she lived and started a business that matched her beliefs in community-focused economics and sustainability.

“She paid employees a living wage, bought local, sustainably grown produce and local, humanely raised meat. She hosted community events, became the first business in Pennsylvania to run on renewable energy and started a regional food network. …

“Wicks promotes localism through BALLE, which she co-founded, and numerous speaking engagements, often held in urban areas that are trying to promote community-driven businesses.

“Dan Levinson, one of the SEEED Summit organizers, said the Providence area has the right elements to foster businesses with the dual mission of making a profit and doing good for the neighborhood. He noted that the city is small with a vibrant and motivated population that is eager to foster change. It has high unemployment, but many livable neighborhoods, good institutions and a mix of wealth and opportunity, he added.

“ ‘What I like about Providence, it’s a great economic petri dish,’ Levinson said.

“Organizations such as Farm Fresh Rhode Island have already made a big difference through the virtues of localism. The Pawtucket-based food distribution center of locally made, grown and raised food has provided much of the infrastructure for Rhode Island’s local food movement. Through farmers markets, food distribution and culinary processing, Farm Fresh sustains local farms, food trucks and restaurants. …

“Wicks and Levinson both agree that rural areas can also thrive by embracing the local agricultural movement and ancillary revenue streams from sources such as renewable energy. Wicks said she envisions an emptying of suburbs and shopping malls as the reverse migration to urban centers grows and energy becomes more expensive.” More here.

And read about Rhode Island’s first food-business incubator, Hope & Main, here.

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Something Cool in Central Falls

A nonprofit called Opportunity Space identifies buyers for surplus government land. As a result of the connections it makes, communities may receive multiple benefits: construction jobs or new public spaces on formerly unused lots.

Central Falls, Rhode Island, is an example. Read about its new park, here, at Opportunity Space.

And check out the Valley Breeze for other recent improvements in Central Falls, which is coming back from the low point it hit when it filed for bankruptcy a few years ago.

Dan Klotz writes, “Riverfront Park boasts new recycling bins, courtesy of a corporate sponsor. The Square Mile City was awarded an energy conservation certification and there’s a sign for that as well.

“Over the past few years we’ve seen infrastructure improvements to Jenks Park: customized recycling and trash containers produced by The Steel Yard. Coutu Memorial Park on Hunt Street turned a vacant lot into a vibrant tribute to two late longtime fire chiefs, father and son. Both of these projects were completed in a timely fashion without a dime of taxpayer money. …

“Largely funded by a major grant from the Bill and Melinda Gates Foundation, construction is underway on a student and community center opposite the high school. The project, affiliated with Rhode Island College, will cost over $1 million.

“Schools including The Learning Community and the Segue Institute, among others, have achieved remarkably high test score improvement, placing among the highest in the state in multiple categories. Both schools are public charter schools. …

“A popular summer program providing food and recreation has expanded. …

“Collectively taken as a whole, [the changes] are reflective of the resilient spirit of this tiny community with so many nicknames — including one frequently used by Mayor James Diossa, ‘Comeback City.’ Diossa, the state’s youngest mayor, is not yet 30, and the only Colombian-American mayor in the history of the Ocean State.”

More at the Valley Breeze.

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More on the Earned Income Tax Credit

The Boston Fed’s Communities & Banking magazine will have an article in the fall issue on the psychological benefits to the working poor of the earned income tax credit. Watch for it September 1.

Meanwhile, at Vox, Dylan Matthews reports on other recent research into the tax credit.

“The Earned Income Tax Credit isn’t super well-known, but it’s one of the best tools the federal government has for fighting poverty. It functions as a wage subsidy for the working poor, providing an average of $2,982 a year to families with children come tax season. The results are impressive. According to the Census Bureau, refundable tax credits like the EITC and the similarly structured Child Tax Credit cut the poverty rate (correctly measured) by 3 percentage points in 2013 — that’s 9.4 million people kept out of poverty.

“But a new study suggests that even that is an underestimate. UC Berkeley economist Hilary Hoynes and the Treasury Department’s Ankur Patel find that the EITC might be twice as effective at fighting poverty as the census estimate suggests.

“Hoynes and Patel focus on the credit’s effect on single women with children, the single biggest group of recipients. It’s well-known that the EITC encourages nonworking single moms and dads to enter the workforce; an analysis by the Center on Budget and Policy Priorities found that EITC brought more single mothers into the workforce in the 1990s than welfare reform did. That means that it boosts income not just by giving people money, but by getting people to work more and bring in more in wages. These increased wages can reduce income in other ways, such as by making people ineligible for programs like food stamps, but on the whole it boosts pay.

“Hoynes and Patel find that bringing this effect into the analysis doubles the number of people lifted out of poverty by the EITC. The expansion of the EITC included in Bill Clinton’s 1993 budget reduced the share of people under the poverty line by 7.9 percent. That’s much more than you’d find in an analysis that doesn’t take the EITC’s effect on employment into account.

“The analysis comes with a caveat, however. Hoynes and Patel pinpoint one big weakness of EITC: It doesn’t really do much for the poorest of the poor. ‘The EITC has an estimated zero effect on the share above poverty for those with income below 50% of the poverty threshold,’ they write. ‘This may reflect that the very lowest income groups have little attachment to the labor market.’ That suggests you need things like robust Social Security Disability Insurance and Supplemental Security Income and food stamps, which don’t require recipients to work on top of EITC. It’s an important program, but not the only one that matters.”

Read more at Vox, here.

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Praise for Lawrence, Mass., Approach

 

In case you missed it, the work in Lawrence, Mass., to improve a failing school district got some positive attention in the NY Times recently.

The Times editorial board wrote, “The Massachusetts public schools consistently rank at or near the top in the nation for performance on the rigorous, federally backed math and reading exams known as the National Assessment of Educational Progress. The state has nonetheless struggled with how to improve chronically low-performing districts like the one in the impoverished former mill town of Lawrence.

“That district ranked in the bottom 1 percent in the state based on math and English test scores when it was placed in receivership by the state education commissioner in fall 2011. There has been evident improvement in just two years, with high school graduation rates raising to 67 percent in 2014, up from 52 percent in 2011. If skillfully applied, this Massachusetts strategy could become a powerful school reform tool elsewhere as well. …

“The Legislature gave the receivers extraordinary powers, including the ability to extend the school day, change collective-bargaining agreements or even require all staff to reapply for their positions. While state lawmakers were willing to sweep the system clean in the worst districts if that’s what it took to end the cycle of failure, that did not happen in Lawrence.

“Instead, the receiver, a well-known Boston educator named Jeffrey Riley, understood that the turnaround mission required a scalpel, not a bludgeon, and that even sound plans are likely to fail if parents and community leaders, principals and teachers were not convinced to buy into them.

“One of the first things Mr. Riley found was that local parents were eager to help with the schools but had been alienated by school officials who essentially told them to stay away from their buildings. Worse, many school officials had come to believe that dismal results were the best that they could do. …

“He created leadership roles and awards of recognition for excellent teachers and devised a system for continuously moving poor performers out of the district.

“Meanwhile, he lengthened the school day in grades K through 8; created programs to provide still more instruction time for struggling students; and developed a dropout prevention effort that actively seeks out at-risk students before they cut their ties to school. Most interesting, the system brought in charter school operators to take charge of some the lowest-performing schools on the condition that they accept students from the neighborhood instead of filling seats through a lottery. And he did this with the teachers in the Lawrence system remaining unionized.

“A study covering the first two years of the Lawrence turnaround, by Education Resource Strategies, a nonprofit education consulting group, shows promising results. Along with higher graduation rates, math and English scores have both shown growth.”

More here.

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