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We All Win by Helping Kids Escape Poverty and the Ghetto

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Poverty

A new working paper from the National Bureau of Economic Research (NBER) by three Harvard economists provides conclusive evidence that the Moving to Opportunity experiment worked. Prior research failed to document any significant economic gains for older children and adults who moved into lower poverty neighborhoods, but findings for younger children shows significant improvements. Data are now available to analyze their outcomes as adults.

Children in the program who moved before they were 13 years old (eight years old on average) were more likely to attend college, have substantially higher earnings as adults, and females were less likely to become single parents. They also wound up living in better neighborhoods and paying more taxes. These findings were consistent across race and gender.

The Moving to Opportunity experiment was conducted between 1994 and 1998 in Baltimore, Boston, Chicago, Los Angeles and New York City with a sample of 4,604 families who were randomly assigned to one of three conditions. The experimental voucher group received a subsidized housing voucher and was required to move to a census tract with a poverty rate of less than 10 percent.

A second group received a Section 8 voucher that provided standard subsidized housing, a third group was not offered a housing voucher and remained in public housing. Raj Chetty, Nathaniel Hendren and Lawrence F. Katz, the study’s authors, restricted their analysis to the 8,603 children born in or before 1991 who would be 21 years old in 2012—the latest year that they had tax.

Prior research by Jens Ludwig found little or no impact on the economic outcomes of adults in the MTO experiment although he did find improvements in mental health, physical health, and subjective well-being of adults as well as family safety. His analyses found statistically insignificant differences among older children in the experiment—those 13 to 18 years of age.

In fact, moving to a lower poverty neighborhood had a slightly negative effect on older children in the experimental group which was explained by a disruption effect on social networks and other child development. However, this latest research found younger children in the experimental cohort were expected to increase their lifetime earnings by around $302,000. Researchers did not find a “critical” age a child had to be moved from a high poverty area, but they did find that every extra year living in a low poverty area had benefits.

Their findings complement previous research by Jeanne Brooks-Gunn, Greg Duncan and others that documented significant correlations between exposure to high-poverty neighborhoods and later poor outcomes. Some studies found that exposure to negative environments in the earliest years of childhood produced larger negative outcomes. These results cry out for social engineering. Unfortunately the free market will not sort this out.

While it is obvious that all poor families cannot benefit from such an experiment, perhaps there can be a lottery system that can move as many poor families as possible out of the ghetto into lower poverty neighborhoods. There are never enough vouchers to go around. Back in October 58,000 people signed up for a lottery when the City of Baltimore re-opened its waitlist after more than a decade. Less than half—25,000—would make the waitlist and just 6,000 to 9,000 of them would actually receive a Section 8 voucher. Something is very wrong with this picture.

Similar conditions will continue in many municipalities if no changes are made in the FY2016 Transportation, Housing and Urban Development bill released two weeks ago by the House Appropriations Committee which—according to the National Low-Income Housing Coalition—underfunds tenant-based rental assistance by $665 million denying thousands of young children a chance to escape high-poverty environments.

Perhaps today’s Republican leaders should be reminded of the words of President Dwight D. Eisenhower who said: “Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed. This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children.”

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