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January 14, 2010
Pathways to Prosperity: More examples to consider
The following are more examples of policy design that the Pathways to Prosperity committee is considering.
Asset Building through Individual Development Accounts
Introduced in the 1990s, Individual Development Accounts (IDAs) are matched saving programs with specific purposes -- home purchase, renovation, post-secondary education and microenterprise -- for low-income individuals. A report, IDAs, Saving Taste, and Household Wealth, tracked the effectiveness of IDAs from 1997 to 2000 and found that participants of the program saved approximately $1,600 on average in their IDAs. The study attempted to answer whether or not the program encouraged people to save more or increase their household wealth.
The first finding was that whether or not you included the specific money in the IDA accounts, the average household financial assets grew for those on the plan. The second finding determined that the lower-wealth participants in the study responded faster to the saving incentives than others. This finding confirmed previous results showing that those with the lower incomes actually saved more. The third finding suggest that the IDA program can facilitate a culture of saving and shape desired saving behavior by providing access to institutional saving.
Complementary Currencies
Sometimes called secondary currencies or community currencies, the purpose is typically to rebuild local economies in areas suffering from a shortage of cash where untapped capacity is accompanied by unmet needs. It acts as a complementary medium of exchange to be used alongside national currency, but unlike conventional money it cannot leave the area, therefore ensuring there is always enough currency to allow people to trade amongst each other, even with a shortage of actual money.
Complementary currencies have been identified as a tool for alleviating the worst impacts of recession, for strengthening the local economy, and for developing skills and employability among the unemployed, perhaps providing a stepping stone into formal employment.
Program Examples
We are looking at a variety of program examples. Communities of HOPE in Detroit was founded on the belief that affordable and government-subsidized apartment communities can be transformed into positive, supportive and healthy places to live, grow and raise families if the residents, key stakeholders, and partnering organizations come together with the intent of creating value, reducing waste, and developing "social capital" that enhances lives. Initially, Communities of HOPE is working with about 25 apartment communities in metro Detroit that are managed by Premier Property Management, LLC. Communities of HOPE is planning to expand to other cities, starting with Minneapolis, in the coming months.
Communities of HOPE also increases their impact by bringing together multiple programs in ways that cause their impact to multiply. A good example is the innovative co-op food purchasing program being deployed by Communities of HOPE that enables healthy diets which enhance learning, social functioning and reduced health problems. That same co-op food purchasing system -- which would be hard to do without the strong support of the property management firm -- can also create some valuable infrastructure to support local food economy micro-entrepreneurship that allows residents to ramp up healthy food-related businesses that keep Food Stamp dollars re-circulating within the local economy.
Wage subsidies
We are exploring whether wage subsidies could be used more broadly as a substitute for "navigating the lines" to access the prosperity continuum. Are there ways to use wage subsidies more broadly and make them more portable to the individual? Our work with a Macalester economist also suggests that current income supports depress economic activity, while using the same funds as a wage subsidy would add to economic productivity. Could these subsidies act as a net increase in economic activity and a benefit to Minnesota employers as well as the individuals who use them?
Posted by Annie Levenson-Falk at January 14, 2010 10:08 AM