Paying the Poor to Improve their School Performance-Becker

In the mid-1990's Mexico started an anti-poverty program, called Progressa, that revolutionized the way low income countries try to reduce child labor and the school dropout rate. This new approach typically pays poor parents to keep their children in school and to take them for regular health check-ups. The reasoning motivating this approach is that while poor parents may love their children as much as rich parents do, the need for greater income induces poor parents to take their children out of school, so that they can go to work and add to the family's income. Offering monthly cash payments if the children remain in school and performs well instead of going to work helps compensate these families for the loss in their children's earnings. The results of Progressa are publicly available so that they can be objectively analyzed, and compared with a control group of similar families who were not invited into the program. Studies by economists in the United States and elsewhere clearly show that Progressa has succeeded in inducing the mainly rural parents in the program to keep their children in school longer than they would have. The budgetary cost of that achievement has been sizable; although the cost would have been much less if Progressa had offered the subsidies mainly to parents with children at the ages-usually when children were in the 6-8 grades-when poor rural Mexican parents typically took their children out of school. For many years I have enthusiastic about using incentives to encourage greater school attendance by children from poorer families. I first wrote about Progressa, and similar programs in Brazil and elsewhere, in a Business Week article entitled " 'Bribe' Third World Parents to Keep Their Kids in School", Nov. 22, 1999. Such programs seem to be the most effective way to induce poor families in developing countries to reduce child labor by keeping their children in school much longer. Prior to the introduction of these programs, poor parents simply ignored laws against child labor, and those requiring children to stay in school until they either reached a certain age or attained a minimum grade level. Until recently, programs similar to Progressa had spread to many countries, but all of them were low to moderate income countries. However, within the past year, New York City and a few other American cities have started experimental programs to adapt the incentive concepts behind Progress to the situation of poor families in the United States. The New York experiment is fully funded by private foundations and individuals, including Mayor Bloomberg- I will concentrate my discussion on this city's program. Since the children involved are older than those in Progressa, they rather than their parents are paid for good attendance and for raising their test scores. Their parents are also paid to improve the choices they are more directly responsible for, such as working longer hours, and taking their children more frequently for health checkups. It is obviously too early to evaluate the benefits and costs of the New York experiment, but I am confident that it will raise the performance of the students participating. The reason is simply that boys and girls as well as adults respond to incentives, as every parent realizes time after time. Rewarding these poor students for better performance is similar to the tuition scholarships and stipends that colleges award to students with good grades. To earn the "pay" offered, students involved will skip school less often. They will also pay closer attention to their teachers during classes and do more homework, so that they can do better on the standardized tests that are being used to judge their performance. Whether this particular experiment has the most effective link between rewards and increase in performance on these test will only be clear with further experimentation, but a pioneering program of this kind has to start somewhere. The New York program is not without many critics, which perhaps explains why it has been funded privately rather than by public resources from tax revenue. Some critics believe it is wrong to pay children and parents to do what they should want to do anyway in their own self-interest since doing better in school will be valuable in getting good jobs when they are young adults and enter the labor force. Most high school students do in fact recognize the importance of doing finishing high school and doing reasonably well, but the New York program is directed precisely to those who are performing badly, perhaps because they heavily discount the future, or are in dysfunctional families. Other critics content that change has to start with these dysfunctional families that are responsible for their children skipping school and their poor school performance. The family is surely important to the achievements of children, but children from these families and their mothers can still do much better now if they are given strong financial incentives to do so. Another set of criticisms does not deny the importance of incentives to poor families and their children in rich countries like the United States. However, it argues that the existence of incentive programs, such as in the New York experiment, will encourage some children who have been doing well to lower their school performance, so that they can qualify for the program. All incentive-based programs with income or other cutoff points induce some families to change their performance to better qualify for the programs. One has to be mindful of this effect in designing a program for poor parents and their children to make sure that that it is not so generous as to attract many more families to qualify by worsening their performance. I believe that this is a greater problem with the payment system to parents than that to children, but further experience will inform us about that. Yet such possible risks are no reason to delay incentive-based programs until families become less dysfunctional, or their children become more aware of the future benefits of better school performance. Too many children, especially of African-American and Hispanic backgrounds, are doing so badly in school, and they are dropping out of school in such large numbers, that we should be willing to try an approach that has been successful in developing countries. I commend New York for being willing to take initial steps in the direction of offering financial incentives to badly performing students that encourage them to work harder to get more out of their education .

Comments

[Andrew]

Two points:

1) Clearly our current method for keeping disadvantadged children in school is not working. Therefore, in many areas with abysmal graduation rates, there is a very low cost of experimenting with ideas like this. I say "go for it." What's to lose?

2) Another idea I like is this one espoused by NY Times columist Thomas Friedman. It's worth reading:

http://www.nytimes.com/2008/05/25/opinion/25friedman.html

(In it he describes sending children to boarding schools so they are physcially removed from the toxic environment of the ghetto.)

[David Heigham]

Some 30 years ago - I do not know if it still continues on the same lines - Farnce had a system which was never advertised as paying children to attend school, but worked precisely on those lines. Generous cash allowances to parents were only collectable if the parents could produce school attendance books for the child duly stamped. My poorer neighbors were very clear that it gave them an effective incentive to see that their children attended. An interesting aspect was that it changed their behaviour in a way that they applauded. I interpreted that as probably implying that they felt that the system compensated for an externality imposed upon them by the pressures of their life; an externality that was distorting their choices as consumers.

[Gulzar]

These cash transfer programs can be more effective in promoting education in socio-economic contexts like in many Indian states, without stoking off incentive distortions. In many parts of the country, especially among specific communities, girl children drop out from schools very early. Further, during the harvest season, the parents have an incentive to take their children out of school so as to work in the fields. It is also true that many of these practices and trends cover the major portion of children in such areas that it may not be worth the transaction costs to target and exclude the small minority who attend school.

In such circumstances, it is important that the incentives be structured appropriately to meet the objectives. There are many different ways in which the cash transfers can be structured. The amount of cash transferred can increase with every class, and can culminate as a scholarship to attend professional courses. The cash transfer can be graded into a few categories, so as to incentivize children to perform well. Therefore while the best performers get the maximum cash transefr, the worst get the least. It may also be worth increasing the cash incentives for the worst performers in each class, so as to incentivize them to perform better in the next higher class. Further, in many backward areas of certain states, the enrollment rates are so low that merely keeping children at school is itself a challenge.

The transaction costs associated with such programs can be minimized by involving the women Self Help Groups (SHGs). Apart from the child attending school and performing well, such cash transfer can also be made conditional to the mother being a member of an active SHG. The cash transfer can then be made to the bank account of the SHG. This transfer can be made quarterly, based on the attendance and test results of the child. In order to avoid incentive distortions like grade inflation, there should be relative grading of the performance of children.

Such policies will have to be formulated by carefully analyzing the statistics available and tailoring programs to suit the specific local requirements. For example, the cash transfer can kick in at those classes where girl children normally drop out or for those months when children drop out for harvest. But given the different social context, unlike the New York program, all the cash transfers should be made to the parents.

[Matt]

The problem with poor schools is what surrounds poor schools. When you grow up seeing doctors, lawyers, teachers and economists in your neighborhood it doesn't take a stretch to imagine doing the same. Furthermore it takes quite a fall to actually end up in the same position children in some neighborhoods are born into. If you see a neighborhood full of people who make no more than minimum wage and the only "success" you see are the drug dealers making big money it's easy to see why everyone wants to emulate that lifestyle. It's also going to take more than will power to escape that situation.

Test are standardized but learning conditions and supplies are not. A high school 5-miles from a $300 million football stadium is lacking maps in its history classrooms. Not that the football team is somehow obligated to fund a school, but a high school in the very same district has a $100,000 photography lab. Again, those who donated to that school wanted to contribute to their child's school.

The problem as that we're all affected by poor parenting and children lacking education. Everyone benefits from an educated community. That's why this whole story came full circle when a child from the poor school shot the son from the rich school over a scuffle at a party. Parents can separate children only so much, but ultimately we all must prepare children to produce in society. If we overdo as a society, it should be education.

[David]

Raising attendance and improving performance in public schools is laudable no doubt, but you are missing the key point. When government enacts laws that pay people to do something that already benefits them, where does it stop? Should we then pay people to not commit murder? A decision that should be made out of a person's moral foundation (like not killing another person) turns into a cost-benefit analysis.

I do not believe that the public good externality is a fair argument. As Murray Rothbard from the Mises Institute points out, this argument could be used to justify government intervention into almost every aspect of our lives. Attractive individuals wearing attractive clothing are easy on the eyes. Well then shouldn't government subsidize cosmetic surgery or pay beautiful people to show their beauty off? (so long as people are gaining utility from looking at them without paying for the extra benefit) Obviously there is utility gained, but not paid for...

With the public good externality argument disposed of, the program loses all justification. No longer is the government taking tax money away from me (by force) and spending it on my behalf because I benefit from the externality of another's education. Now the government is simply subsidizing the underachievers (or in the case of paying for better test scores, the overachievers) with no benefit to myself.

There is something perverse about government thinking it knows what's best for people in their private lives. It is truly amazing that in the original post (and all the comments) the ethical question of whether it is the role of the government to decide that education is good for an individual, is never addressed. I know to many this sounds like a tautology, but understand that making other people's decisions for them is unethical and immoral. Government does it all the time (smoking ban, seatbelt laws, etc.), but it should stop. Using government money in New York City to encourage the truants or underachievers to improve will have deleterious effects. Just like the failures of No Child Left Behind, this program will doubtless increase the burden of government of the people of New York City. Why not allow for educational tax credits or vouchers so that school competition, and in turn quality, are improved. Make the high school system in America more like the college system...then kids will want to go to school.

[neilehat]

Interesting - How counter intuitive! Paying someone to do what they ought to be doing in the first place. "Greenback Behaivorism"? This seems to fit into B.F. Skinner's educational plan. Of which, one of the major points, is the more frequent use of positive reinforcement of students. I commend the individuals and entities that are putting up the money from private funds to allow NYC to implement this noble endeavor and experiment. Hopefully, it will work and become a model for the rest of the Nation.

But and this is a big but, there are major obstacles, as I see them, blocking the success of the program. These are the myriad dysfunctional elements that exist in American society. To put it simply, those elements are:

1. dysfunctional individual responsibility
2. dysfunctional parental or gusrdian influence and control
3. dysfunctional family units
4. dysfunctional communities
5. dysfunctional society

All of these lead to the creation of, once again, dysfunctional norms, mores and behaivors that stand in the way of education and the development of youth. So I'm afraid to say, that in the end, we'll stand back and say, "Well now, wasn't that a noble gesture. Too bad it didn't work". And all the dysfunction will continue on as before.

[hutch]

The most important factor for me would be that it stay privately funded until a degree of success can be determined. And then I would prefer public funds to remain a fraction of the money available from private sources. If the program is truly a success, they should have no problem expanding it by raising money from other individuals, foundations, etc.

[Diego Isasi]

Professor Becker,
Could you elaborate on whether other factor that you have considered in other occasions conflict or not with your view in this topic? I am particularly concerned with the possibility that many of the drop out are deciding to leave school because that is the best option for them. They know the consequence of their decisions and they care about their self. In the case of very young children, what make us think that the government will care more about these children’s future than their parents? There are probably some bad parents but I do not think they are the majority.
Currently it appears to me that the outcome of the program is estimated as more children going to school. But shouldn't the evaluation of the program be if these children that only go to school because they receive the incentive will be better off than if they do whatever they would have decided to do without the incentive and also receiving the money?
Thank you very much for your comments,
Diego Isasi

[neilehat]

Diego, your comment reflects and shadows the argument put forth by the U.S. Supreme Court when it shot down the "Child Labor Act". That argument was based on a "child's right to "Free contract" in the market place". Needless too say, the excess's and evils of child labor (to the mutual benefit of the corporate world I might add) continued until the Great Depression. Work became so scarce and wages so depressed, until adults were willing to take any job. Even at the depressed wage scale that was being offered children.

Never again!

[Rand]

A general rule, highly attested to by educational psychology studies, is that paying for school performance reduces inherent motivation for school performance, even though it does increase the school performance itself. That should be kept in mind with this project.

Ed. Psych. studies usually show that a token economy system, such as rewarding with gold stars or erasers is usually more effective in upping results. However, this not be a lab study, it must be admitted that rewarding attendance with cash or studying with cash may work because it counteracts the fact that the students may be pressured by poverty to drop out so as to work due to need or perceived need (after all there are families or situations where the sense that cash is needed is greater than the cash needed despite good intentions all around).

A good compromise position may be something that the Economist (in this article I believe http://www.economist.com/world/na/displaystory.cfm?story_id=11326407 ) noted, which is to reward children with "cool" gifts. These gifts might be things which they may feel pressure to drop out of school to afford and moreover it can provide a counter-pressure to any other pressures to drop out.

However, it doesn't help in the case of drastic poverty-based need, but if that was the prime problem, then school breakfasts and lunches would have already solved truancy.

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