Payoffs from helping the poor

Designing programs that help households that are struggling economically have always been challenging, but a new experimental program in England appears, at least initially, to be a win-win for everyone. N.C. State University economist Mike Walden explains how it works.

“And, in fact …, you might say it’s a win-win-win. It’s a win for investors. It’s a win for the government, and it’s a win for the individuals who are being helped.

“Here’s how it works: Let’s say you’ve got a bunch of people who are looking to invest their money. They want (a) to get a rate of return that’s much higher than the very low rate of return you can get, say, on government bonds. And what they’ve done in England is a group of folks have approached those investors and (said), ‘Hey, look, if you help fund us, and we are going to use that money to reach out to poor people, say homeless people.  We are going to counsel them. We are going to work with them. We’re going to try to help them, get themselves up on their feet. But by doing so, they’re actually going to reduce the cost that they impose on the government.’ So social service spending will go down, these people are saying, if we are able to help the poor.

“The investors say fine. Therefore, what the government can do (for those who experience) these lower costs (is) then take at least some of those savings and pay the investors. The investors are making money on their investments in terms of helping the poor. The people (who) are helping the poor feel good because they’re trying to uplift people. And the government’s saving money.

“And they’ve actually experimented with such a program in London, and they’ve actually gotten great reviews on it. So this could actually be a model used in our country and around the world where everyone wins – private investors, the government and obviously those people who are being helped.”