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Apr. 12 2010 - 2:42 pm | 455 views | 2 recommendations | 6 comments

Paying the poor to do right doesn’t work. Or does it?

Photo Credit: Alex E. Proimos

Big headlines recently as the first research came out about New York’s conditional cash transfer program – a program that paid poor families for good behavior.

And the news was bad. Well, at least the news stories were.

For three years now, New York has been doing a privately-funded study of a program that pays families in poverty for doing certain things – like getting their kids a library card, taking them to the dentists or keeping a job for a length of time.

The program is controversial – that’s for sure. From the right, people say you shouldn’t pay people for good behavior – they should do it because it’s the right thing to do. And on the left, the complaint is that it’s patronizing to the poor to¬† make them jump through hoops to get this money and it assumes they’re not already doing these things.

For me, there’s only one question worth asking: does it work?

The big complaint about our system now is that it pays people to stay where they are. They can’t move forward with a job promotion, or they risk losing the government subsidies that made them stable in the first place. They can’t go to school on welfare, because we want them continually working the same low-wage job to prove to us they’re doing something. They don’t get married because they’ll be punished financially.

Right now, we’re incentivizing negative behavior. If we’re going to help people out, why not at least pay them to do something positive?

After the first round of data was released, news headlines said it didn’t work. “Money for good habits doesn’t change lives,” read the AP.

But after I read the report released by MDRC, the nonprofit that ran the research trial, it made me wonder if the reporters and editors at the AP could read.

Is the conditional cash transfer program a magic wand that eliminates poverty with one nifty flick and an ethereal ringing of bells? No. Memo to all adults: Magic ain’t real, no matter how much we Harry Potter fans wish it were.

Bottom line: the New York CCT program helped families make ends meet, and the money they used to help make ends meet came from behavior that will help them rise out of poverty over the long term.

Here are some of the results:

The families who participated in the program were more likely to be over poverty level or at least in the upper end on the poverty level, rather than the bottom 50%. They were more likely to be able to pay the bills every month and less likely to wonder where the next meal was coming from.

Families who participated were more likely to have a bank account and generally saved more money. This might seem like a tiny thing to middle class readers, but it’s actually huge. HUGE. In most poor communities, there isn’t a bank to be found. Instead, people use those check cashing places, which charge them an arm and a leg to get money they’ve earned. People don’t have checking accounts, debit cards or savings accounts – three things considered common place in upper classes.

Health-wise, families who got the incentives had more regular health care, used the emergency room less, and went to the dentist a lot more.

There wasn’t a huge change in attendance rates or proficiency levels in the kids. Why?

Well, for one, attendance rates, especially for elementary schools, are already pretty high.

And proficiency levels? Well, the kids weren’t sent to new, better schools, given more time in school, given tutors or any other supplements. They were just paid for better scores.

New research released on school-based incentives shows that students only respond to incentives when they have some real control over making it happen. A lot of kids just don’t know how to do better in school and are already so behind it’s difficult to catch up.

But one group in the study did very well with the incentives. Those were 9th grade kids who were already proficient on a basic level – not geniuses, but reading and doing math at grade level. For those kids, the incentives worked. They had better attendance, were more likely to earn all their credits, less likely to repeat a grade and more likely to pass Regents exams.

This confirms what we know about poverty already: when we direct resources at people who are working hard, those resources can significantly impact their rise out of poverty.

Was the conditional cash transfer a simple, easy solution to wiping out poverty in America? Nope. But I’ll let you in on a little secret: there’s no simple solution because poverty is a complex disease. It’s not just a “take two aspirin and call me in the morning,” type of thing.

Take a look at one example, right in the AP story. One mom, a single mother of two that works as an administrative assistant, says she participated in the program and it helped her. But she couldn’t always do what they incentive program wanted her to do.

The program pays parents for attending parent-teacher conferences. But the mom couldn’t get off of work. She was balancing putting food in her kids mouths with being involved with their education. The additional incentive doesn’t do much if she gets fired.

People living in poverty are often asked to choose between their short-term interests and their long-term interests: parent-teacher conferences or a paycheck, teeth cleaning or paying the rent, medicine or food on the table, staying in school or helping to make ends meet. We in the middle-class criticize them for not making the best long-term choices, but most of us have never had to make such difficult decisions.

New York’s CCT was a pilot program – the first time our country has ever tried something like this.

Were the results a silver bullet to fighting poverty? No. But they did show the kind of promise that we should pay attention to, not just brush aside because they are more complex than a soundbite of a headline.


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  1. collapse expand

    We’ve certainly subsidized the wealthy with little to show for it. I agree, any program to reduce poverty will take more than a few years to see results. Those quick to criticize or find fault may want to examine motive.

  2. collapse expand

    Hey…..paying the congress, harry reid, pelosi, and Obama to do right….doesn’t work, either…..

  3. collapse expand

    Great post, Megan. Thanks for doing the legwork and actually reading the MDRC report. I read the AP story a few weeks ago and came away discouraged, especially because I’ve followed the original version of this program in Mexico (where it’s called Oportunidades — http://en.wikipedia.org/wiki/Oportunidades) for years and thought it made much more sense than our country’s current welfare programs. It’s nice to know that the New York pilot did have a positive impact; hopefully NYC and other cities around the country use this report to improve and expand the program.

  4. collapse expand

    Interesting post. I wonder if the education incentives would work better if the parents were rewarded for supervising homework or reading to their younger kids every night. That would be less likely to conflict with work issues. For big, busy households, I wonder if you could reward older siblings for helping the younger ones with their homework.

    • collapse expand

      I think those kind of incentives would work better, as far as actually helping kids succeed. The trouble is, they’re difficult to document. For the program, each time the parents or kids completed something, they had to get a lot of documentation to show they actually did it. It’s more difficult to prove you read to your kid, and more likely that people could try to abuse those kinds of incentives.

      It’s tricky to figure out what will work and what we can actually show is happening. Thanks for reading!

      In response to another comment. See in context »
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    About Me

    I'm a journalist living in Chicago writing about poverty and public housing. I don't come from the streets - I grew up on a farm. But I'm passionate about urban issues and getting to know people who are completely different from me. I'm quirky, funny and friendly.

    I have this idea about journalism - that it should be approachable and less "newsy." I want my stories to make you laugh, cry and draw you in to neighborhoods and situations you don't deal with every day. I hate the broadcaster voice. I hate TV news. I hate the inverted pyramid. I love surprise. I love humor. I love people and telling their stories.

    In addition to being a journalist, I also teach dance for the Chicago Public Schools. I don't just do it for the money. I love children and love arts education. I'm also on the board of a new nonprofit dedicated to helping the underserved find jobs called Employing Hope. I write fiction, keep house, and am generally a renaissance woman.

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