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Cash Incentives for the Poor

by Besa Luci, Aug 28, 2007
 

For years government has given money to poor people. Usually the payment has been based on need—income, number of children, expenses and so one. Now Mayor Michael Bloomberg has taken a different approach. Hs administration plans to give money to poor people but they have to “earn” it by keeping jobs, sending their children to school and going to the doctor.

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This approach, which has never been tried in this country, is part of Bloomberg’s second-term agenda for reducing poverty and increasing economic opportunity in New York. For now, it is privately funded, but, if it succeeds, the government could pick up all or part of the cost in the future.

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While some hail the payments as a bold new approach, the plan has attracted controversy. Some charge it advances the idea that poor people are poor because of the things they do – or do not do. Others question whether poor people deserve a reward for doing things they should do anyway, such as take their children to the doctor.

The Payment Program

The family-focused pilot program will give money to families in three areas: early education, family health and adults’ workforce skills and job training. To test the idea, it will give money to 2,550 families with incomes below 130 percent of the federal poverty level -- around $22,000 for a family of three -- who have at least one child in public school in either fourth, seventh or ninth grade. The selected neighborhoods include Central and East Harlem in Manhattan, Brownsville and East New York in Brooklyn, and Morris Heights/Mount Hope and East Tremont/Belmont in the Bronx, among the city’s poorest communities

The design was largely based on Mexico’s Oportunidades conditional cash transfer program, which Bloomberg visited in late April. In explaining the idea at the time, Bloomberg said, “For all of us the stress of our daily lives can cause us to make decisions that aren’t always in our best interests. Living in poverty makes it even more difficult and can lead to missing a doctor's visit, for example.…The Opportunity NYC programgives New Yorkers in poverty a financial incentive to look ahead and to make decisions that will improve their prospects for the future.”

Jillynn Stevens, director of policy, advocacy and research for the Federation of Protestant Welfare Agencies, sees merit in at least trying this new approach. “It’s obviously directed at rewarding behavior that helps people improve their life situations,” she said. “And we think this is more productive than a punitive approach, like withholding or sanctions or any other numbers of things.”

The plan has attracted criticism as well. Heather MacDonald of the conservative Manhattan Institute says such payments deprive people of the normal inducements to properly care for their families. “It could destroy the ordinary incentive system that usually motivates people to engage in good" behavior, she has said. "You are going to create in people the expectation that they should do such proper things as take their children to school or study only if they are bribed by the government. I think the potential for unintentional consequences for this program are absolutely enormous."

Others see the payment plan as blaming the poor for being poor. “It just reinforces the impression that if everybody would just work hard enough and change their personal behavior we could solve poverty in this country, and that's not reflected in the facts," said Margy Waller, a domestic policy adviser in the Clinton administration and co-founder of Inclusion, a research and policy group in Washington.

PAYING FOR GOOD GRADES

Most of the criticism has focused on the education part of the program –giving students money for attending school, getting good grades and passing their state Regents exams.

The educational component was designed by Roland Fryer, a Harvard assistant professor of economics, who has taken a leave of absence to serve as the “chief equality officer” for the New York City Department of Education. He will also administer and assess the program.

Critics argue that kids should not be lured into learning by money. Tim Johnson, chairman of the Chancellor’s Parent Advisory Council, has said that the program will foster “ill will.” Other critics, such as Sol Stern, a senior fellow at the Manhattan Institute, expressconcern that instant money undermines the idea of learning for its own sake and that the money should rather be put into college funds.

Others fear cash payments will put even more pressure on already overwrought youngsters. Jane Hirschmann, co-chairwoman of Time Out From Testing, said she met with a group of such fifth graders recently. “I asked them what they thought,” she said, “and they said, ‘You can’t believe the pressure on us right now … My father will be on my back all the time because $300 is a lot to my family.’”

Despite the criticism, Fryer said the program deserves a try. “One can argue philosophically about whether incentives are a good thing,” he has said. “But the fact is that the average black 17-year-old reads at the same level as the average white 13-year-old. This problem is beyond philosophy, and we have to do something.”

Launching the Program

Whatever the criticism, enrollment for the program has already begun. Families receive different amounts of money for different achievements. For example, elementary and middle school students will get $25 per month for 95 percent school attendance and high schools kids will get $50. Money incentives will also be given for attendance at parent-teacher conferences, having a library card, accumulating credits and graduating. Students can get up to $600 for each Regent exam passed.

Under the health incentive, families will receive from $20 to $200 a month for maintaining health insurance and getting preventative health and dental care. The workforce incentives, ranging from $150 to $600, include payments for keeping full-time employment and attending training while employed.

Once a family is enrolled in the program, members are eligible for all of its components. They will learn about the incentives in orientation sessions.

Seedco, a national community development organization, will manage the implementation and operation of the program. Seedco has partnered with six community-based organizations in each of the targeted communities that are leading the outreach, recruitment and enrollment of families.

In Brooklyn, Seedco is working with Groundwork, which provides educational programs and support services to families living there. During the first week of June, Groundwork enrolled 25 families in the program. By mid August, the number reached 221. Erica Ahdoot, director of the family resource center at Groundwork said that a total of 850 families will receive incentives from the organization

To recruit people, Groundwork hired a team to knock on doors and make telephone calls. “Some people are skeptical that this can’t be true, but we are trying to encourage people that this is a long term benefit,” Ahdoot said. “We contact them numerous times to make sure we exhausted out effort to get them to participate, but once they are past the idea that it’s an actual program, for the most part they are excited.”

What Next?

Opportunity NYC is privately funded by the Rockefeller Foundation, the Starr Foundation, the Robin Hood Foundation, the Open Society Institute, the American International Group, the Broad Foundation, Mayor Bloomberg and other sources. Eventually though the project could be publicly funded.

Before that can happen though, the government must determine whether the effort has been successful. To do that, MDRC, a non-for-profit social policy and research firm, will compare families receiving the incentives with those in a control group.

“The pilot …will run for two to three years depending on funding levels,” said Dawn Walker of the mayor’s press office. As the program proceeds and for as many as four years after it ends, she said, a “long-term evaluation will help identify what long-term impacts the incentives have on participant families.”

The results of that study could determine whether this pilot program eventually changes the way we address poverty in New York City and beyond. Â


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