One of the most insidious effects of living in high-poverty, chronically disadvantaged neighborhoods is the severe strain these areas have on residents’ mental and emotional health. New research shows that poverty imposes a psychological burden so great that the poor are left with little mental “bandwidth” with which to perform everyday tasks.
The constant anxiety and stress resulting from witnessing and experiencing trauma and violence in distressed neighborhoods, negotiating the sacrifices and trade-offs caused by food insecurity, living in unstable housing conditions, struggling to pay bills, and dealing with numerous other worries burn up cognitive capacity that could otherwise be used for productive activities like navigating public assistance systems, providing for an entire family on a limited budget, and helping children with schoolwork.
For children, the long-term mental health effects of poverty are even more alarming. In addition to occupying cognitive resources needed for education (arguably the clearest path out of poverty), poverty is toxic to children. Persistent stress and exposure to trauma trigger harmful stress hormones that permanently affect children’s brain development and even their genes. The damage to childhood development is so severe that medical professionals now describe the early effects of poverty as a childhood disease.
Bringing mental health services to poor communities
What the findings from the HOST baseline survey and the research on the cognitive effects of poverty make plain is that mental health services are desperately needed in poor communities. Addressing trauma and mental health problems is critical to facilitating healthy brain development in poor children, freeing psychological bandwidth for schoolwork, and preparing children to overcome the challenges associated with extreme poverty. Similarly, adults need help coping with the mental taxation, stress, and anxiety of poverty so they can focus on becoming self-sufficient.
HOST families are offered mental health services designed to address the multiple chronic stressors that exist in their communities. As worry and anxiety decreases, we hope to see greater education and employment outcomes among adults, and, among children, increased academic achievement, and fewer incidences of risky behavior. Lessons learned from HOST will help inform policymakers who are interested in lessening the mental toll poverty exacts from the most disadvantaged.
Last Tuesday, voters in several states approved modest tax hikes. Increasingly, states are using ballot measures to determine whether to support new taxes. Some of these referenda are binding, others just advisory. But in 2013, voters in several states seem to be hungering for more revenue—though sometimes from unusual sources and decidedly not by raising income taxes (at least in one state).
Here is a rundown of the results:
Colorado: Voters approved a 25 percent state-wide tax on marijuana, on top of some additional county dope taxes. But they soundly rejected adding a new top rate to their income tax. While some of the new state marijuana tax revenue is designated for school construction, the public education system missed out on $1 billion in new aid when voters rejected the income tax hike.
New Jersey: The Garden state overwhelmingly reelected Governor Chris Christie and also voted to increase the minimum wage to $8.25 per hour with increases for inflation. Currently, the New Jersey minimum wage is the same as the federal, $7.25 per hour. New Jersey’s neighbors follow the federal minimum wage for state minimum wage.
New York: Let the games begin. New York State voters expanded gaming to allow seven new casinos including three in New York City after seven years. Until now, legal betting has been restricted to “racinos” (horse racing tracks with slot machines and video gaming), charitable gambling such as bingo, and state approved lotteries. The recession stopped the growth nationally in state gaming revenue, but several states have expanded their gaming venues to try and keep some of this money at home.
Texas: Lone Star State voters decided to tap the state’s rainy day fund for…water. Texas managed to keep a sizable reserve fund through most of the recession. This measure authorizes the transfer of $2 billion from the Economic Stabilization Fund, which has a balance of about $8 billion, to two funds that will be used for water infrastructure projects.Under the heading “Tax Law That Probably Didn’t Need a Citizen Referendum,” Texas voters also increased the number of days that property imported for the manufacture of airplanes could remain in the state as exempt personal property. Since the exemption is in the Texas constitution, amending it had to go to the voters. Texas, according to Ballotpedia.org, has the longest constitution and every other year there are about 16 more amendments to vote on.
Washington State: Voters in the Evergreen State get to pass judgment on laws that have already been enacted. On August 1, 2013, the state imposed the same levy on landline phones faced by wireless users. On November 5, voters called in their response: They didn’t like it. Voters barely endorsed an increase in the estate tax and a switch from a personal property tax on commuter airlines to an airplane excise tax--both of which have also been enacted already. All these votes were purely advisory, however, and the legislature is not bound by the results.
Even when they are non-binding, these ballot measures are a useful look at voter moods, especially in off-year elections. They are one of the few opportunities for the voters to be heard on specific issues. Coloradans are ok with a new tax on pot but they like their flat income tax just as it is; meanwhile, Texans are willing to spend a little of their savings for something as important as water.
If you’re a regular reader of MetroTrends, then you probably know that our bloggers have a lot to say about what it’s like to be poor in America. In advance of the release of the 2012 annual poverty numbers, Urban Institute researchers opined on welfare myths, long-term unemployment, and safety net programs like SNAP.
The good news, if you can call it that: There hasn’t been a significant increase in the number of Americans living in poverty. From 2011 to 2012, the rate held steady at 15 percent.
The bad news: That means 46.5 million Americans are still struggling to pay their bills and feed their families.
So, does that mean America is losing its well-publicized “war on poverty”? We asked a panel of experts, including Brookings Institution’s Elizabeth Kneebone, Manhattan Institute’s Scott Winship, The Nation’s Greg Kaufmann, Center on Budget and Policy Priorities’ Jared Bernstein, Center for American Progress and Half in Ten’s Melissa Boteach, Pennsylvania State Representative Dave Reed, MDRC, and a handful of Urban Institute researchers to share their thoughts on research, policy, and poverty.
Can nonprofits play Moneyball? The goal is laudable and long overdue, but the burgeoning movement faces significant obstacles.
For those unfamiliar with the Moneyball phenomenon: Beginning in the 1970s, a cadre of enterprising statisticians, frustrated by the shortcomings of the traditional approach to talent evaluation in professional baseball, aimed to develop a series of better tools to measure player performance. The 2002 Oakland A’s put these tools into practice with considerable success, and complex statistics such as Wins Above Replacement are now standard measures of player value.
In a recent article in The Atlantic, veteran government administrators John Bridgeland and Peter Orszag asked an intriguing and timely question: “Can Government Play Moneyball?” They lamented that “less than $1 out of every $100 of government spending is backed by even the most basic evidence that the money is being spent wisely.”
A similar theme is bubbling up in the nonprofit sector. Not long before Bridgeland and Orszag’s article was published, executives from three of the largest information sources about charitable organizations released an open letter to “the donors of America,” calling for a move beyond reliance on overhead costs as a proxy for effectiveness:
The percent of charity expenses that go to administrative and fundraising costs—commonly referred to as “overhead”—is a poor measure of a charity’s performance… We ask you to pay attention to other factors of nonprofit performance: transparency, governance, leadership, and results.
Granted, overhead ratios can be useful tools when examined at the extremes—clearly, an organization spending a mere sliver of its budget on its stated cause is a poor candidate for scarce donation dollars. But focusing too heavily on administrative expenses is worse than ineffective— it can be counterproductive. A plethora of activities considered useful or even necessary fall under what could reasonably be characterized as administrative costs, including:
Outreach to ensure an organization’s services are reaching target constituencies
Evaluation to determine and improve the effectiveness of the organization in achieving its mission
Strategic planning to acknowledge and adapt to changing circumstances
Conducting financial audits and preparing reports required by institutional and government funders and the IRS
Furthermore, there is far from a consensus on what even constitutes administrative costs. A paper published last year by my colleagues Erwin DeLeon, Sarah Pettijohn, and Carol DeVita identified at least four different definitions of administrative expenses required by the federal government for Community Services Block Grant grantees.
In addition to proposing a more nuanced standard for administrative expense levels that varies by organizational size, the report calls for “government agencies that issue guidelines…to clarify the distinction between administrative and program expenses. Expert review of guidelines across issuing authorities is needed to reduce or eliminate ambiguous and conflicting guidelines and improve the quality of reporting.”
Better performance measures more closely aligned to whether an organization is achieving its stated outcomes would be ideal. But getting to measures that can be applied uniformly across the whole sector is a challenging endeavor, at best. When it comes to measurement, the charitable sector is different from baseball in two major ways.
There is no obvious and universal outcome for nonprofit organizations—no equivalent of wins and losses. Should a soup kitchen, a symphony orchestra, and a cancer research center be expected to have the same measures of success?
As well, data collection is a simple matter in Major League Baseball. The games are highly publicized and take place at no more than 15 locations at any given time, and all necessary data has been religiously collected for decades. Most charities have none of those advantages—their tight budgets often leave little room to conduct the types of data collection necessary to effectively manage their performance, and their outcomes are often difficult to measure and/or cannot be isolated from external influences.
It is fantastic that large nonprofit information organizations such as Guidestar and Charity Navigator have committed themselves to collect the data necessary to generate more effective performance measures, but that process is Herculean. It will likely take many years to make significant progress.
In the meantime, there is no replacement for due diligence on the part of organizations and their donors. Prospective donors should take the time to research the details of organizations they are considering supporting, and ideally speak with organizational stakeholders before making a commitment. Meanwhile, organizations should do everything they can to identify, track, and publicly report progress toward concrete performance goals. Existing resources such as the PerformWell website can help in this regard.
Random assignment studies are the gold standard for judging whether an intervention works, but that doesn’t mean they’re always the best tool for the job. When it comes to evaluating place-based programs—those that aim for comprehensive community-wide changes—random assignment is typically the wrong approach to take.
In random assignment studies, people are randomly divided into two groups. One group receives the intervention being tested—whether it’s a new drug or a job training program—and the other group does not. Then researchers study how each group’s outcome differs. Whether in clinical studies or social science research, an experiment that randomly assigns treatment is the preferred approach because it is unbiased, given a few assumptions: it gets the answer right on average. Without random assignment, the drug being given to the healthiest patients or the job training given to those with the lowest current earnings can bias us in favor of finding large effects where, in truth, the effects are small or none. But the assumptions are not always justified.
We could randomly assign communities to get a program or not, but place-based programs are not a simple prescription formulated the same way everywhere. These programs are grown organically in the communities where they are implemented and draw different interventions from a broad menu of services. Each intervention is tailored to conditions on the ground. They are also continually improved using data in an ongoing development effort, as described by Sue Popkin. Treatments may also adapt to individual circumstances, with constant feedback from outcome data. Another common element is a form of case management where services are coordinated across domains, so that individuals do not fall through the cracks.
How should we evaluate place-based programs?
Spillover effects on people not receiving services, plus continual improvement of services and place-specific designs, make a simple random assignment design the wrong choice. But there are methods that can credibly evaluate place-based interventions. The crucial part is defining exactly what intervention is being examined, and then using data from other communities to estimate the counterfactual outcome: What would have happened without that intervention?
It is hard to define what treatments might happen in the absence of an intervention. A neighborhood that does not receive federal dollars to implement a specific place-based program can choose to enact its own intervention. Is the right alternative no intervention at all, or whatever intervention grows in the absence of the specific treatment? There are no sugar pills given out in social experiments to prevent individuals or communities from designing their own treatment regimen. The absence of a placebo is even trickier in the absence of random assignment, but that just means we need to collect very good data on what is being done everywhere we look.
Student loan debt has surpassed credit card debt and is second only to mortgage debt among those age 29-37. This ballooning student loan debt is a contributor to the “lost generation” of 20- and 30-somethings, whose average wealth is lower than the average wealth of those in their 20s and 30s three decades ago.
We published a new brief on school-related debt, using the FINRA Investor Educational Foundation’s 2012 National Financial Capability Survey. One in five adults age 20 and older has school-related debt and concern about the ability to repay is pervasive. The majority of student debt holders (57 percent) is worried that they may be unable to repay that debt.
Beyond the short-term burden of repaying loan balances and interest, this early debt can have ripple effects and hinder borrowers’ ability to get on a secure wealth-building path. It can delay building a rainy day fund, homeownership, and saving for retirement.
Some of our findings may not be shocking to those who write monthly checks to Sallie Mae, yet they illustrate the magnitude and pervasiveness of the issue:
Student loan debt affects people at all levels of educational attainment. Nine percent of those with just high school diplomas have school-related debt, possibly incurred for non-degree training or to fund a child’s education. Twenty-five percent of those with some college education but no degree have student loans.
Student loan debt disproportionately affects African Americans and Hispanics. African Americans and Hispanics are twice as likely to have student loan debt as compared with whites. The large racial wealth gap and lower wealth among families of color likely lead these students to more often turn to student loans to finance their education.
Student loan debt affects people at nearly all income levels. Twenty percent of those in households with annual incomes under $25,000 have student loans—that’s only 2 percent more than those earning $100,000 and up.
Concern about repaying student loan debt also cuts across economic and demographic groups (see figure below). Nearly three-fourths of those with incomes less than $25,000 are concerned about their ability to repay—and so is a still-substantial 36 percent of those earning above $100,000.
College is a good investment for those able to complete the degree, but roughly half of people do not. Out of the starting gate, students should consider the cost and completion rate at the institution they plan to attend, earnings in their field of study, and type of student loan (public or private). Helping young people take advantage of student loans to get their degrees—but avoid burying themselves in debt—is a step in the right direction toward economic stability and wealth accumulation.
Illustration by Daniel Wolfe / The Urban Institute.
Over the past 30 years, wealth disparities in the United States have worsened. While high-wealth families—those in the top 20 percent—saw their average wealth more than double, low-wealth families (those in the bottom 20 percent) saw their average wealth fall well below zero. As for those in the middle, their average wealth inched up only 13 percent.
A striking dimension of this wealth inequality—disparities by race and ethnicity—is highlighted in our new brief, coauthored with Eugene Steuerle and Sisi Zhang, and in the video above. On average, white families have six times the wealth of black and Hispanic families. So for every $6.00 a white family has in wealth, black and Hispanic families have only $1.00 (e.g., $632,000 vs. $103,000). The income gap, by comparison, is much smaller, although still substantial. On average, white families have twice the annual income of black and Hispanic families. For every $2.00 of income white families earn, black and Hispanic families earn $1.00.
While these ratios have not changed much over time, the real dollar value of the gap has grown. The average wealth of white families was $230,000 higher than the average wealth of black and Hispanic families in 1983. This grew to over $500,000 by 2010 (figure 1).
Are there other time dimensions to this disparity? Yes. The racial wealth gap grows sharply with age (figure 2). In 1983, whites in their thirties had an average net worth of $184,000. Today, these whites, who are in their early sixties, have accumulated $1.1 million in wealth, on average. In contrast, black families have seen their wealth go from $54,000 to $161,000 and Hispanic families from $46,000 to$226,000. White families started with about 3.5 to 4 times more wealth than families of color in their 30s, but had 7 times more wealth in their 60s. In other words, these initial racial differences grow over the life cycle both absolutely and relatively.
Though the United States is one of the wealthiest countries, this prosperity remains out of reach for many Americans. Blacks and Hispanics, who strive to make a better life for themselves and their families, are not on the same wealth-building paths as whites. They are less likely to own homes and retirement accounts, so they miss out on these traditionally powerful wealth-building tools. Families of color also lost a greater share of their wealth in the aftermath of the Great Recession.
A common misconception is that poor or even low-income families cannot save. Evidence from savings programs and research shows they can.
Wealth is where the economic opportunity lies. Social safety net programs emphasize consumption, and many even discourage saving by making families ineligible if they have a few thousand dollars in savings in some states. Wealth-building policies, on the other hand, are delivered as tax subsidies for homeownership and retirement. Families of color are less likely to be able to use these tax subsidies, so benefit little or not at all. Without fair policies, paths to building wealth can vanish. Reforming policies like the mortgage interest tax deduction so it benefits all families, and helping families enroll in automatic savings vehicles, will help improve wealth inequality and promote saving opportunities for all Americans.
The prime ministers of Kosovo and of Serbia initialed an agreement Friday to normalize relations between their two countries. This accomplishment—at the last hour and under the careful and forceful leadership of the EU’s Catherine Ashton—does not, by itself, reconcile the long-standing enmity between neighbors in Kosovo, a territory now recognized by 90 countries as a nation. The devil is in the implementation details yet to be worked out.
Hashim Thaci of Kosovo and Ivica Dacic of Serbia have each made a calculation that balances domestic political pressures from radical elements against the need to secure the economic and political benefits of more open trade with the EU and others, greater investor confidence, and wider opportunities for citizens. The frozen conflict left behind by the Athisaari Plan of 2006 has thawed a little as a special level of autonomy from Pristina has been agreed for the Serb-majority area of Kosovo, but most pointedly for the area north of the Ibar River. Until now, this territory has been outside the effective control of the Kosovo government, and only loosely policed by NATO-KFOR troops.
Reports of the agreement are that the laws of Kosovo will apply in the North. There is successful precedent for this. Six other Serb-majority municipalities in Kosovo already have been working under the laws of Kosovo since 2008 and have formed effective and democratic local governments. They cooperate with their neighboring Albanian-majority municipalities in areas such as water distribution and solid waste management. They deliver most services to their citizens. Unlike the isolated communities in the North, they have been “getting on with getting on.”
The fifteen points of agreement reached on Friday just scratch the surface of needed implementation details, but two aspects are especially important: elections to be held ion 2013 in the communities north of the Ibar River, and the integration of police in northern Kosovo into the Kosovo Police Service.
The existing Serb-majority municipalities in southern Kosovo have already made these transitions. Serbs there voted and elected local governments in 2009, under Kosovo laws. The governing coalition in the current Kosovo government includes an ethnic Serb party. Also, Kosovo police operate in these communities, providing security that is increasingly professional. The same can be true in northern Kosovo, given both time and patience.
The Challenges to “Normalizing” Society
For all that the weekend’s news is worth celebrating, the road ahead will be challenging. Plenty of people have benefited from the lawlessness and conflict in northern Kosovo. Criminals who are smuggling fuel (or weapons) have found northern Kosovo’s lightly governed regions a safe place to do business. These criminals represent interests unlikely to welcome a return to order.
Separately, some officials have been drawing two salaries: one from the government of Kosovo and one from the government in Belgrade, both governments staking claims to the region. Though these officials represent a more orderly aspect of life in the North, they are not likely to think well of “normalization,” with its attendant pay cuts.
To date, key public services such as health care, water, and education have been provided in northern Kosovo (however poorly) by parallel structures elected outside Kosovo laws and oversight and funded by Belgrade. This structure evolved under the umbrella of the aging UN Resolution from which Kosovo emerged from war. This mishmash of authorities has fostered isolation and exclusion from the progress made in the Serb-majority areas of the rest of Kosovo.
Indeed, isolation, exclusion, and a weak governing structure have made room for criminal behavior. Serb firms based in the North routinely use violence to intimidate competitors and these “business practices” are often reported (incorrectly) as incidents of Albanian-Serb tension. Smugglers bring goods across the poorly controlled border with Serbia, avoiding customs duties and costing taxpayers in both nations hundreds of thousands of Euros each year.
The agreement represents an important step forward in relations in the Balkans, but it will not overnight solve critical issues of governance and rule of law. It is not simply that Serbs in the North have to learn to trust new institutions governed by Kosovo laws. They must also be protected from continued predatory or rent-seeking institutions that have filled the governing and commercial gaps left open by the status quo.
This agreement opens the path for Serbia—and eventually Kosovo—to begin discussions about joining the European Union. This process ought to be accompanied by close attention to, and measurement of, their cooperation in restoring law and order in the North, creating space for modern state institutions to supplant solely ethnic or criminal social bonds.
The Urban Institute has been working with local governments in Kosovo since 2009 and with the recently established Mitrovica North Administrative Office since 2012, under contract with USAID. However, the views here do not reflect the views of the Urban Institute or of USAID.
In 2000 all 193 UN member states agreed to eight Millennium Development Goals (MDGs) for improving social and economic conditions in the world’s poorest countries. The target to reach these MDGs was set for 2015. While progress over the past 15 years is notable, much remains to be done to alleviate the plight of the poor around the world.
Discussions to establish a post-2015 global development agenda are well advanced, even if there is no clear consensus on how to reshape the global development goals and to achieve “the world we want.” Many thematic areas being discussed are already addressed by the current MDGs, including food security, access to basic education, basic health services, and clean drinking water. Some new thematic areas emerging in the post-2015 discussions include the need to improve governance, reduce inequality, and address conflict and fragility.
To a large extent, the discussions have been a debate between international development organizations based in New York, Washington, D.C., and the capitals of Europe and central government officials in the developing nations that are the most direct beneficiaries of development assistance. The debate so far has failed to look at global development from the bottom up and ask a fundamental question: how much (or how little) of the world’s official development assistance actually reaches the men, women, and children whose poverty is supposed to be reduced? Today the short answer to this question is too little. A more complete answer is that development experts pay too much attention to central governments and not enough to whether (and how) these efforts trickle down locally, to the people who should ultimately receive development assistance—and regular government services.
If the global development community is serious about achieving real, sustainable, and inclusive social and economic transformation over the next 15 years, it needs to have a much more serious debate about the nature of development and the public sector’s role in it. Four observations may help spark this discussion:
1. All development is local. Most development—and most pro-poor public services that people rely on day to day—takes place at the local level, whether it is schools for children, health care for mothers and children, seeds and fertilizer for farmers, or access to clean water and sanitation.
2. As such, subnational governance and the local public sector are critical to sustainable development. While good governance, equality, and inclusiveness are important development objectives in their own right, these themes are central to achieving development goals across the full range of proposed post -2015 targets. For instance, whether ensuring education for all or achieving universal access to clean drinking water, succeeding sustainably requires achieving good local governance, securing a strong role for the local public sector, and considering the notions of equity and inclusiveness. Without an effective local public sector, sustainable development will remain a pipe dream.
Achieving equitable and inclusive development requires us to think carefully about the (1) the structure of the public sector and (2) the importance of achieving a degree of equity in delivering public services across the national territory.
3. In order to be inclusive, the public sector has to be close to the people. One measure of inclusiveness is the efficiency of public expenditures—how much is spent on actual services people use. However, the public sector is “closer to the people” in some countries than other countries. For instance, in South Africa over half of public-sector spending takes place below the national level (the blue shaded areas in the graph below). This includes spending by provincial and local governments, as well as national government spending on services that are delivered locally. In contrast, in Bangladesh less than a fifth of public resources reach the front line for service delivery. Indeed, initial evidence suggests that the “vertical allocation” of public-sector resources varies considerably across countries. As such, an important target for the post-2015 development agenda should be to increase the share of resources used for frontline services, and to ensure that public resources are governed and managed close to the people.
4. In order to be equitable, the public sector has to distribute resources fairly across the national territory. Donors also need to target the territorial allocation of services. Government resources and development assistance should be spent where needs are greatest. The graph below illustrates a common situation in many countries: some local jurisdictions receive much greater allocations per person or per capita than other places—often up to 5–10 times more. While an equitable allocation of resources would mean the local jurisdictions with greater needs would receive more resources, the opposite is often true: often the politically well-connected places receive the greater per person allocations, while poor, rural communities are left to fend for themselves.
To the degree that development is about empowering people over their own lives, the discussions surrounding “the world we want” need to question the top-down development approach that has guided the implementation of the MDGs. People in the villages and towns and cities in Bangladesh and Tanzania, in Nepal and Peru don’t care about donor programs that mostly benefit those who run them, nor about abstract development indicators discussed in New York or Washington, D.C. They care that they have a school in their village to send their kids to; they care that the streets in their town are free from trash; they care that the water they drink won’t make them sick; and they care that they don’t have to bribe the doctor at the local health clinic in order to receive basic health services when they are sick or pregnant. In order to achieve real, transformative and sustainable development in a way that realizes the ambitions of the global development community, we cannot ignore the inclusiveness of the public sector, we cannot ignore good local governance, and we cannot ignore the equity with which government resources are distributed across each country’s national territory.