Cash Incentives for Work: Evidence from NYC Work Rewards

Would an extra $300 every two months incentivize full-time work among households with rental assistance? Would low-income individuals be more likely to complete a class if they received $300 to $600 at the end? New York City’s Work Rewards demonstration is one of three programs, collectively known as Opportunity NYC, implemented in 2007 to test the effectiveness of cash rewards for staying on course to exit poverty. In the Work Rewards program, cash incentives were tested as incentives for full-time work or completion of education and training by families receiving Housing Choice Vouchers through the New York City Housing Authority (NYCHA) or the Department of Housing Preservation and Development (HPD). The demonstration was a randomized controlled trial with evaluation of results over a five year period. Cash incentives, which lasted for the first two years of the demonstration, were distributed for every two month period of full-time employment and for every approved course completed.

For NYCHA households, the demonstration exclusively tested the effectiveness of cash rewards. Participating households were assigned to a cash reward program or control group, and did not receive any case management, coaching, or supportive services through the demonstration.

For HPD households, the demonstration tested the effectiveness of adding interim cash rewards to the Family Self-Sufficiency program (FSS) and of offering FSS alone, compared with a control group. FSS is a self-sufficiency program offered by HUD for administration by housing authorities. The program involves case management to support a five-year employment and education plan and an escrowed savings account, which is distributed upon successful completion of goals. Funds in the escrow account reflect the additional rent that families pay as their earned incomes increase.

Interim findings for the first four years of Work Rewards are shown below. The full five-year results are scheduled for release later in 2016.

Major findings:

• For those already employed, none of the Work Rewards approaches led to economic progress. Participants with vouchers from HPD were also asked about educational progress, and none had attained new licensing, certification, or a degree.
• Cash rewards alone did not yield employment gains.
• FSS, with and without additional incentives, increased educational enrollment, but participants were not more likely to have received a certificate or degree compared with the control.
• Both FSS approaches increased the number of households reporting the use of mainstream banking and reduced the use of check cashing services. FSS with a cash incentive also increased the number of households reporting savings.
• Neither FSS program had appreciable impacts on poverty or material hardship.
• For those not working at the start of the program, FSS with a cash incentive increased employment by 32.6 percent and earnings by 47 percent compared with the control.
• For both FSS groups, approximately half of the households increased their income by the end of year four, leading to an accumulation of savings in escrow. The average balance (among those with an escrow balance) was around $4,400 for the FSS plus cash incentives group and $3,900 for the FSS-only group.

The administration of FSS and intensity of case management varies between housing authorities, therefore the results here should not be generalized beyond HPD’s FSS program. An ongoing national FSS study will place the Work Rewards findings in a broader context.