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"Strengthening families by providing a variety of educational tools and workforce development services that will enable families to enhance their assets, economically, socially and educationally." |
In the years just prior to and following welfare reform in 1996, unprecedented numbers of low-income parents – including welfare recipients – moved into the workforce, though the majority secured employment in low-wage jobs that often do not pay enough to lift families out of poverty. Federal and state governments, public agencies, and private organizations responded to the need for programs that support low-income working families by developing services that promote job retention and advancement, and by expanding “work support” programs such as the Earned Income Tax Credit, food stamps, and subsidized healthcare. Both approaches show promise for raising family income and improving family well-being. Indeed, recently published, compelling research shows that earnings supplements can reduce poverty and have a range of other positive impacts on families and children. However, other studies have shown that take-up rates for both job retention and advancement programs, and work supports are low, and that even fewer families who are eligible for multiple programs receive the “full package” of employment services and work supports that are available to them.
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Within this context, low-income families also find themselves the target of predatory lenders and practices that serve to dramatically increase the cost of financial transactions and erode their family income. For example, many low-income workers who use commercial tax preparation services to file their income taxes and apply for the EITC lose out on a big part of the credit. That is because these workers are often persuaded to opt for the “rapid refund”, where the tax preparer advances the anticipated refund amount for a fee. The rapid refund is in fact, a predatory high-interest, short-term loan. If you calculated the fees on an annualized basis, it would equate to a three-digit lending rate. In New Haven, about 22% of all filers claim the EITC, which returns approximately $10 million to the local economy, and then circulates in the form of consumer purchases, savings accounts, new investments, etc. However, it appears that well over one million dollars went directly to commercial tax preparers. This type of “leakage” seriously erodes the positive impact the EITC is intended to have on children and low-income working families. Faced with factors such as predatory lending practices, higher costs for auto insurance, higher costs paid for food due to lack of urban supermarkets, and being shut-off from mainstream financial institutions, poor people tend to pay higher transaction costs for comparable services – especially financial services – than people in higher income levels. The goal of New Life Corporation is to implement a comprehensive strategy aimed at increasing the income levels of low-income working families by linking them to better-paying employment and reducing their dependence on predatory financial services. |
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