How Not to Help the Poor

A few years back, New York’s billionaire mayor Michael Bloomberg came up with an anti-poverty program that could sound practical only to those accustomed to buying their way out of trouble. Instead of, say, encouraging economic independence and fostering self-sufficiency among New York’s underclass, the administration offered to bribe them. The phenomenally patronizing idea was that if you paid the poor they would do the right thing and stop being poor. Payments ranged from $25 for attending a parent-teacher meeting to $50 for getting your child a library card to $100 for visiting the dentist. Parents and children split a $400 payout if the child graduated from high school, while students who passed a state Regents exam could make a cool $600.

Three years and bout $40 million in private donations later, the results are in: With one small exception, the program is a demonstrable failure. It turns out that adding the incentive of a cash payment had no effect on school attendance or educational performance for children in primary or middle school and only made a difference in high school for pupils who were already above average – that is, who had initiative and understood the benefits of academic success as a long-term investment in their future, not as a short-term monetary gain. But having seen the program fail in practice, its architects are now defending it in theory. It was, supposedly, a valiant effort on which the jury is out. If you want a more sober assessment, you could do no better than to read Heather MacDonald’s devastating report card on the program in City Journal. As MacDonald shows, the program was indeed a failure – and was doomed to be one from the start.

One reason was the flaw in the underlying theory of incentives:

Poor parents would act responsibly toward their children’s schooling and health not because they understood their obligations as parents, but because certain actions netted an immediate payoff. Any hope that the poor would develop the ability to defer gratification would be destroyed; their already short-term horizons for effort would be shortened further. Society would become divided between a caste that acted responsibly because it understood that it was the right thing to do and another caste that got paid by the responsible caste to follow social norms.

Which is pretty much what happened. In fact, as the program continued, the problems it was intended to cure persisted:

Participants’ efforts to earn rewards declined from year one to year two—even though they presumably understood the mechanics of the program better. Attendance rates dropped for elementary, middle school, and high school students from year one to year two—sometimes sharply—by the same margins as for students in the control group. Fewer high school students tried to take 11 credits or pass a Regents exam from year one to year two.

To be sure, there was one highlight:

One subgroup of students did show positive differences from similar students in the control group: ninth-graders who started the year at an academically proficient level (as measured by the eighth-grade standardized math test). Fifty-one percent of academically proficient ninth-graders who were offered $50 a month to maintain a 95 percent attendance rate did so, compared with 36.2 percent of academically proficient ninth-graders in the control group… This pattern—more proficient individuals making greater use of the rewards—was repeated throughout the program. The families that earned the most money were the most functional: the parents had higher rates of marriage, full-time work, and education, and lower rates of welfare receipt.

In other words, the most stable and successful families were the only ones to benefit from the additional handout. So what do we learn about New York’s experiment in social engineering? Mostly, that you can’t buy success; it is the product of certain cultural patterns and habits of mind that cannot simply be created with a government check. Perhaps the only positive coda to this failed program is that taxpayers did not have to pay for it. Thanks to the underwhelming results, it’s unlikely that they will be asked to do so any time soon.

  • happy infidel

    The Australian federal Govt tried something very similar here in sunny Australia to get more kids back to school and reduce the truancy rate of low to poverty level income households. Except in this instance they decided to tie the social security payments to it. ie: no kid in school = no money, then they decided to hold back 50% of the payments and issue vouchers to ensure parents bought their kids food instead of grog.

  • happy infidel

    Sorry for a longish post but I thought you guys needed to see your not the only ones being screwed to the wall by loonatic polititions

  • happy infidel

    It has failed in a massive and spectacular fashion. Not only has it failed, it has actualy in some instances increased truancy rates in some areas, people are keeping their kids out of school purely as protest at the govts interferance in their lives, dictating to them how they will scratch their bums almost.

    Where you guys are kind of lucky to have a left and a right, here in Aus we have the left and the so far left you cant see them for dust.

  • happy infidel

    Our current PM = your pres, is trying to take over health and hospitals as we speak, threatening state govts to hand over the system to him. and if past deeds are anything to go by we are screwed big time.

    example: home insulation, 10% need to be replaced immediatly due to electification of roof space + 4 dead, 100+ homes burnt to the groud thanks to shoddy instilation of pink bats. cost 40 billion dollars. although this may seem to be small fry to you guys in the US remember we have a country the same size as the US – alaska, we have a poltry 23 million people ie: almost 1/10th your tax base so that 40 billion works out to an equivilant of 4 trillion buckaroonies.

    Then there is schools program = buildings that are useless and un wanted by schools, solar panels for homes = fear many may cause house fires and electricution due to shoddy installation, computers for every school kid in Aust = 1 per 10 students thus far and the list goes on.

    So you guys will find Aussies sympathise with you greatly cause we are in the same boat, just at a smaller price tag. can someone say "get the snorkle cause the poo is getting deeper

  • SayBlade

    The prime reason for failure of a program of this sort is the expectation that people don't like to be told what to do with their money. In the Mincome experiment in the 1970s in Dauphin MB, residents were guaranteed a minimum annual income for several years. Families (not individuals) decided how to spend the money and no one lived in poverty. The recent opening of the archived material generated from the experiment confirms statistics gathered that the children stayed in school longer, families were healthier, the local economy grew.

    Administering a program of guaranteed annual income would be done through the taxation system in the form of a negative income tax. This would eliminate the need for the most social assistance programs and the costly bureaucracy that goes with it and eliminate poverty at the same time.

  • R Schloemer

    Anyone who has read any real sociological study on poverty is going to be able to tell you that there are two kinds of poverty that can be observed; generational and situational. Situational is a matter of circumstances that a culturally "middle-class" (ie: values work, sets and pursues long term goals, values education, is careful with money) persons end up as poor for whatever reason for however many generations, but usually this is few. They are often immigrants, your occasional enlightened poor person or just those who have fallen on hard times. They probably took advantage of incentives in this study.

    Generational poverty, the VAST majority of the modern poor in the US, are poor because their culture encourages a way of life that leads to more poverty (ie: refusing to adopt middle-class norms to "stick it to the man," high value on entertainment, low value on work and education, limited and short term planning). Trying to change this kind of think is akin to outlawing alcohol, speaking Spanish or men wearing pants.

    The real question here is what should a democratic society do to those who stay in poverty by their own volition?