Report: Paying for Good Habits Doesn't Change Lives

March 31, 2010 - 8:25 AM
An experimental anti-poverty program that pays the poor for maintaining good health and living habits has not been life-changing.
New York (AP) - An experimental anti-poverty program that pays the poor for maintaining good habits -- $25 to $150 for things such as going to the dentist, staying on the job or opening a bank account -- has not been life-changing.
 
The cash incentives funded with private donations have helped some New Yorkers make better choices, but it has not encouraged young people to do better in school or adults to keep a job. And Mayor Michael Bloomberg said the incentives are not the answer to eradicating poverty.
 
The program, which will end as scheduled in August, "doesn't work in every case," Bloomberg said. "You always hope that you've come across a magic silver bullet and you never do. You make progress incrementally, particularly when you're trying to focus on some of society's biggest problems."
 
The first analysis of New York's effort was released Tuesday by a nonprofit social policy research group called MDRC that also helped design the program. Researchers are also tracking a control group of another 2,400 families that do not receive payments.
 
New York City's program began in 2007 and has bestowed total of $14 million on 2,400 participating families. The average award per family was $3,000.
 
The payments, also known as conditional cash transfers, were modeled after successful similar programs in other countries, including Mexico and Brazil. The theory is that the cash rewards reduce immediate hardship for poor people while reinforcing small but significant actions they can take to improve their long-term stability.
 
Before the city took up the idea, it had never been attempted in the United States.
 
Participants were offered 22 different incentives to earn money, ranging in value from $20 to $600. Ninety-eight percent of all families earned at least one reward, but just 65 percent achieved payments in every period they were available.
 
When compared with the control group, 10 percent more families in the reward group had two dental visits per year, 1 percent more had health insurance, 20 percent more had bank accounts and 3 percent fewer used costly services like check cashing.
 
But fewer people in the reward group held jobs in the first year, and cash rewards had no effect on school performance or attendance for young children.
 
The rewards also had no effect on test scores or attendance for low-performing high school students, and made only modest differences for higher-achieving students.
 
Antonia Campbell, a 51-year-old mother of three who works as an administrative assistant, estimated she has earned between $5,000 and $6,000 in rewards, and said she believed cash incentive programs could inspire many others in tough financial situations.
 
"We still have so many people out there who have no incentive whatsoever, and maybe this would push them to do more for their kids, if not for themselves," Campbell said. "And in the midst of getting the money, they find out these are things they want to do."
 
Campbell earned some of her payments by taking her family to the doctor regularly and making sure her children did well in school.
 
She said it was difficult to earn the payments for attending parent-teacher conferences because she has two teenagers and a 7-year-old, so she had to split her time.
 
All participating families have household incomes at or below 130 percent of the federal poverty level. In 2007, when they began receiving payments, that equaled $22,301 for a family of three.
 
More than 80 percent of those enrolled are single-parent families, 47 percent are Hispanic and 51 percent are black. About half of the parents have not completed high school or earned a GED certificate.
 
The biggest winners were generally parents who were more educated, more likely to be working full-time already and more likely to be married.
 
Lawrence Mead, professor of politics and public policy at New York University, said the study shows that the incentive approach is "not a home run. People claim rewards for things they were already doing."
 
Bureaucratic hassles created by too many forms, and deadlines may have prevented some participants from taking full advantage of the program, officials said.
 
The program was always intended to have an expiration date, and payments will conclude as scheduled in August. The study will continue for several more years to evaluate the lasting results for participants.
 
Some of the reward categories were discontinued after the first or second year, either because so many families already participated in the activity, like having health insurance, or because they were one-time incentives, like the $50 payment for every child who got a library card.
 
Mexico's program, Oportunidades, began in rural areas and was later expanded to cities. It provides direct cash payments to extremely poor families. The program focuses on incentives for staying in school, preventive health care and good child nutrition.
 
Brazil's cash rewards have helped lift more than 19 million Brazilians out of poverty since the program was created in 2003, according to the private Getulio Vargas Foundation economic think tank. The government invested $10.3 billion in the effort last year.
 
One of the differences between cash incentives in those countries and in New York City, Bloomberg said, is that those nations tend to concentrate the effort on people in extreme poverty.
 
To qualify for Brazil's program, a family's income cannot be more than $78 a month.