Draft: Do Not Quote
Effects of Public Low-Income Housing Vouchers:
Job Training and Post-Training Earnings*
Paper to be presented at the annual meetings of the
Association for Public Policy Analysis and Management November 2012
Baltimore, MD
Deven Carlson
Robert Haveman
Thomas Kaplan
Barbara Wolfe
Institute for Research on Poverty
University of Wisconsin–Madison
USA
* The research presented in this paper was generously supported by a grant from the John D. and Catherine T. MacArthur Foundation. We gratefully acknowledge that support.We owe a debt of gratitude to Dan Ross for his work in securing, cleaning, and organizing the data, and to Deborah Johnson for help in editing.
Abstract
Using a sample of low-income households from the state of Wisconsin, we first estimate the effect of receiving a low-income housing voucher on enrollment in job training programs available to TANF and Food Stamp participants.Our results indicate that voucher receipt has a statistically significant, but substantively small, effect on enrollment in job training.We next employ two approaches—fixed effects and difference-in-difference—to assess the nature of the relationship between participation in job training programs and earnings outcomes among voucher recipients.We find that, in general, participation in job training programsis associated with better earnings outcomes in the years after training enrollment for persons participating in housing voucher programs.
1
Effects of Public Low-Income Housing Vouchers:
Job Training and Post-Training Earnings
1.Introduction
In recent decades, the U.S. government has expanded the provision of vouchersthat low-income families can use to secure housing in the private market.Currently, the Section 8 housing voucher program serves about 2.2 million families containing approximately 5.1 million family members (U.S. Department of Housing and Urban Development (HUD), 2008). Research has followed implementation of this policy expansion, and a number of studies have examined the effects of receiving voucher-based housing assistance (Jacob and Ludwig, 2008; Mills et al., 2006; Susin, 2005; HUD, 2003).
In this study, we present evidence on how being awarded a voucher affects families’ response in terms of taking advantage ofjobtrainingenrollment opportunities open to them; we also study the effect on their earnings of the training they receive. Our estimates of the effects of voucher receipt on enrollment in available training opportunities reflects a counterfactual world in which comparison cases receive no housing assistance and occupy housing in the private market.In a second stage of the analysis we employ two approaches to assess the nature of the relationship between enrollment in job training programs and earnings outcomes among voucher recipients.In the first approach we estimate models containing a case fixed effect to assess whether job training enrollment is associated with better earnings outcomes. In the second approach we estimate—over the sample of voucher recipients—difference-in-differencemodels to assess whether voucher recipients who enroll in training exhibit better earnings outcomes than those who do not.In each of these analyses we are addressing the question:“Do those voucher recipients who enter training, gain?”
In this work, we use an original dataset comprising a sample of low-income families—one that is larger, more diverse, and more representative of voucher recipients nationwide than samples used in most previous studies. We constructed the dataset from administrative records contained in two databases maintained by the State of Wisconsin combined with information from the U.S. Census Bureau. This dataset contains information on up to six years of post-voucher-receipt labor market patterns—and several additional years of pre-voucher receipt information. The data set includes information for more than 350,000 households from all parts of a medium-sized, diverse state.
2.The Section 8 Voucher Program
The U.S. Department of Housing and Urban Development (HUD) currently provides tenant-based housing assistance to low-income households primarily throughthe Section 8 program (officially known as the Housing Choice Voucher Program since 1999).[1]Section 8, operated by HUD in conjunction with over 3,000 local public housing authorities (PHAs), currently serves about 2.2 million families nationally, including more than one million families with minor children (HUD, 2008). The primary objective of the program is to enable “very low-income families, the elderly, and the disabled to afford decent, safe, and sanitary housing in the private market.”[2] A secondary objective of the program involves facilitating the relocation of recipients to better neighborhoods.[3]
The process of securing a Section 8 voucher begins with the submission of an application to a PHA at a time when the waiting list is open and the PHA is accepting applications; upon submission, applicants are assigned a position on the waiting list.[4] Each PHA has the autonomy to establish preferences for individuals or households with particular characteristics.[5] When the applicant’s name rises to the top of the waiting list, the household meets with housing authority staff who outline the rules and requirements of the Section 8 program and provide recipients with instructions for seeking housing compliant with the program. Voucher recipients are responsible for locating housing in the private market that meets a minimum standard of health and safety. This housing can take the form of a single-family home, a townhouse, or an apartment, but any unit a recipient locates must be owned by a landlord who is willing to rent under the terms of the program. If a voucher recipient—whose income must, in general, be below 50 percent of the median income of the county or metropolitan area in which they live—is able to locate suitable housing, then the recipient household generally contributes 30 percent of its income toward rent.[6] The Section 8 program subsidizes the difference between the tenant contribution and actual rent, up to a locally defined “fair market rent” payment standard.[7]
3.Conceptual Issues in Understanding the Behavioral Effects of Voucher Receipt
The complex nature of the Section 8 program generates a diverse set of opportunities and incentives that may influence the behavior of voucher recipients in many different ways. As a result, it is difficult to make clear, unambiguous predictions regarding expected effects of the program (Jacob and Ludwig, 2008; Shroder, 2002). This theoretical ambiguity gives greater significance to the empirical relationshipsthat have been studied by researchers in recent years. In this section, we explore some of the conceptual issues that arise when considering the effects of voucher receipt on job training enrollment, and the effects on earnings of those voucher recipients who take training.
3.1The Take-Up of Job Training Services
Given the incentives implicit in housing voucher programs, standard economic theory is not able to provide unambiguous predictions regarding expected program impacts on the take-up of job training and other public benefits (Shroder, 2002). On the one hand, voucher recipients could use the security of the housing voucher to see this as an excellent time to enroll in training. In effect, the voucher reduces the opportunity cost of the training, thereby raising returns to training. On the other hand, if training leads to an increase in earnings, the implied tax of the housing voucher decreases the long-term gains to training by “taxing” increased earnings at 30 percent.In the longer run, any increased earnings from training could even lead to a loss of eligibility for the voucher. These dynamics may also influence the behavior of housing authority personnel. They have a strong incentive to encourage training if they believe that the training will increase the income of voucher recipients, since housing vouchers could then be allocated to more families.
Another possible way that gaining a voucher could influence the probability of take-up of training is through location changes: voucher recipients could use the opportunity provided by their voucher to find housing closertoareaswithmore availablepublic training and other programs. Alternatively, the difficulties and disruptions associated with preparation for and execution of a move to a different neighborhood may lead a voucher recipient to forego available job training opportunities. A move to a new neighborhood may also disrupt previous social and support arrangements from friends and neighbors, such as child-care arrangements (Ross, Reynolds, and Geis, 2000; Swartz and Miller, 2002). These factors could lead to a lower probability of participating in available training opportunities.
Finally, the increased counseling available to new housing-voucher recipients could affect the likelihood of enrolling in job training. At the time of voucher receipt, housing subsidy personnel interview and counsel new recipients; these caseworkers are likely to convey information on the availability of job training (and other public programs) opportunities for voucher recipientsandencourage new voucher recipients to participate in these opportunities. This information and counseling would not be as readily available to families that did not receive a voucher.
Finally, evidence of increased job training enrollmentfor housing voucher recipients relative to nonrecipients could reflect the fact thatfamilies obtaining a voucher are more skillful in navigating complex bureaucracies, or thatthey are more persistent, or have other attributes that explain both their securinga housing voucher and their job training choices.In short, securing a housingvoucher and demanding more job training services likely requiresmany of the same personalcharacteristics,makinganycausaleffect of vouchers on the participation in training difficult to identify.
3.2The Earnings Impact on Voucher Recipients who Enroll in Job Training Services
The effects on earnings of enrollment in jobtraining programs are less theoretically ambiguous. Enrollment in training would likely positively affect the earnings of voucher recipients who take training relative to voucher recipients who do not take training.[8]
4.Prior Relevant Research
We have been unable to identify any prior research that explicitly studies the effects of Section 8 voucher receipt on enrollment in job training.There is of course extensive research on the labor market (earnings and employment) effects of job trainingmore generally, butthis literature is only somewhat relevant to our study. While that literature presents estimates of the effect of job training on earnings, often for the low-income population, our study estimates the effect of training for those who receive ahousing voucher and who, eithercontemporaneously or subsequently, participate in training relative to those who do not participate. As such, we are studying a more specific population than the general studies on the earnings effects of job training. For several reasons, the effects of training on this select population may well be different than the more general effects reviewed in the literature. For one thing, the job training participants among the population of voucher recipients may possess higher levels of motivation and drive than is the case for other low-income job training participants. That they took initiative to work through the application process for housing subsidies, and then persisted until their name came to the top of a long waiting list, suggests persistence and a high level of motivation to succeed.[9]
Research on the labor market (earnings and employment) effects of job training programs for disadvantaged participants studies many types of activities, including pre-employment assessments, instruction in and assistance with job-seeking, sessions to bolster motivation and self-confidence, classroom training, and on-the-job training. Evidence on the effect of these programs is mixed, although sufficiently negative to have contributed to sharp declines in federal government funding for such programs. Holzer (2009) reports that inflation-adjusted spending on Department of Labor programs for the disadvantaged fell by nearly 70 percent between 1979 and 2008. Federal funding for work training through the Departments of Education and Health and Human Services have compensated for some, but by no means all, of the Labor Department reductions, according to Holzer.
At least a portion of the reduction in federal funding for work training for the disadvantaged probably stems from evaluation literature on the effects of the Department of Labor’s Comprehensive Employment and Training Act (CETA) and Job Training Partnership Act (JTPA) programs, the major Department of Labor training programs through much of the 1980s and 1990s. Grubb (1995) summarized a series of studies showing the earnings effects of participation in the CETA program as positive but modest for adult women ($500-$1,000 annually), uncertain for adult men, and probably negative for youth.
The termination of CETA and its replacement with JTPA did not generate significant improvement. Grubb summarizes research on JTPA based on random assignment evaluations as showing that JTPA participation increased the annual earnings of adult women by $1,176 (9.6 percent) and the annual earnings of adult men by $978 (5.3 percent). JTPA programs for youth, says Grubb, led to negative earnings, because participation in the training program reduced time at work, and the lower earnings during training were not offset by higher earnings after training.Grubb describes the results from well-designed evaluations of JTPA as “sobering”: the earnings increases for adults were positive and statistically significant “but not significant in any practical sense—they are too small to change the life condition of those who have enrolled in job training programs, to enable them to leave the welfare rolls, or to escape poverty.”
The Labor Department’s JTPA program was terminated in 1998 and replaced with the Workforce Investment Act (WIA). Little is yet known about the impact of that program on labor market outcomes. The Department of Labor began a project to experimentally evaluate WIA, but the results will not be known until at least 2015. There has been, however, some positive nonexperimental evidence (Mueser, Troske, and Gorislavsky, 2007).
In addition to evaluations of the Department of Labor programs, researchers have conducted a series of evaluations on mandatory welfare-to-work programs conducted under the Department of Health and Human Services’ AFDC and TANF programs. The programs used a wide variety of treatments, some with more job training than others, and the results were mixed. For example, the Greater Avenues for Independence (GAIN) program for welfare participants in California received considerable evaluation attention. The Riverside County GAIN program, which involved mostly job search assistance and limited training, resulted in large gains in employment (Riccio, Friedlander, and Freeman, 1994). But other GAIN sites that were more training-intensive also showed positive returns (Hotz, Imbens, and Klerman, 2000). In contrast, the National Evaluation of Welfare-to-Work Strategies (NEWWS), designed to test the relative effectiveness of labor market attachment and lengthy job training strategies, found that training programs were less effective than efforts aimed at immediate labor market attachment (Hamilton et al., 2001).
In summary, the JTPA and CETA training programs led to modest earnings gains for women, slightly lower gains for men, and no gains for youth. The effects of WIA remain unknown, and experimental evidence on work training programs for welfare recipients often showed positive returns.
5.Our Research Approach
We first analyze the effect of housing voucher receipt on the enrollment of the case (or casehead) in available public job training programs among a broad sample of recipient households in Wisconsin.The voucher participants in Wisconsin can be thought of as broadly representative of voucher recipients nationwide.[10]In our analysis we define job training participation as enrollment in one or more of the following 12 programs offered or approved by the State of Wisconsin: Adult Basic Education, English as a Second Language, General Education Development, High School Equivalency, Jobs Skills Training, Job Readiness/Motivation, Non-Required Education and Training, On-the-Job Training, Regular School, Vocational Adult Basic Education, Vocational English as a Second Language, and Vocational Literacy Skills.We selected these 12 programs from a set of 63 potential training programs offered/approved by the State of Wisconsin (See Appendix B). We selected those programs that (a) applied to both TANF and Food Stamp participants, since enrollment in either program was a basic feature of our sample; (b) were not universal among TANF and Food Stamp participants (orientation to program requirements is an example of a work program that is required of all participants and so was excluded from the work programs that we selected); and (c) represent investments that could improve job market prospects. Our analysis estimates the effect of a marginal expansion of the Section 8 program on the jobtraining take-up behavior of new voucher recipients, relative to a comparison group that receives no housing assistance.[11]
Following our analysis of the relationship between voucher receipt and job training participation, we turn to studying the relationship between job training participation and earnings patternsamong voucher recipients.We employ two approaches to analyze this relationship.First, we estimate models containing a case fixed effect to assess whether cases exhibit better earnings profiles in years after they received job training than they did in the years prior to job training receipt.Second, we estimate—over the sample of voucher recipients—difference-in-difference models to assess whether voucher recipients who participate in training exhibit better earnings outcomes than those who do not. The large sample size enables us to separately analyze the effects of job training participation for some policy-relevant socioeconomic subgroups.