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How Not to Help the Poor

Posted By Jacob Laksin On April 13, 2010 @ 1:20 pm In NewsReal Blog | 6 Comments

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.





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