Welfare vs Conditional Cash Transfer

Welfare has always been a hot button topic. There is a negative association with welfare participants in the United States because many people believe that individuals/families on welfare are taking advantage of the system and looking for handouts without having to work hard for their money. Of course, this stereotype is not true and many welfare recipients work very hard and are simply not able to make ends meet due to other environmental factors including lack of education, health services, and unemployment. Many ideas have been pushed around and signed into law to try and reform welfare in order to help families get out of poverty instead of simply depending on welfare for their income needs. One example is the policy that many states have adopted to require welfare recipients to search, apply, and participate in employment. Problem is, many jobs that are available for undereducated and skilled workers (which make up most of welfare recipients) are minimum wage and cannot support a family. The result is that families continue to cycle in and out of welfare. Conditional Cash Transfer (CCT) programs can be the solution America has been looking for to break the poverty cycle. We just have to give them a chance.

According to To Beat Back Poverty, Pay the Poor by Tina Roseberg, CCT programs have greatly reduced poverty in third world countries by distributing unrestricted cash on a conditional basis. The conditions are in the categories of education, health, and employment. The result is that families are not just better off financially, but they increase their own human capital, which leads to a better future for the children and help bring families out of poverty permanently.  CCT’s sound like a no-brainer, so why are they not in the United States?

In 2007, New York City’s Mayor Bloomberg initiated a CCT program in select communities and planned on a three-year pilot program with continuous evaluation through MDRC. In 2010, MDRC reported its first results. Results showed that families did receive a short-term benefit of financial relief (not unlike welfare), but there was only marginally improvement in areas of education, health, and employment, which is the whole purpose of a CCT program. At the end of the three years, Mayor Bloomberg decided not to continue the program.

(More information at www.irp.wisc.edu/publications/fastfocus/pdfs/FF5-2010.pdf)

New York is currently the only state to have tried CCT’s. I believe the United States have not given this program a good enough chance. With so much evidence of improvement in undeveloped countries, it is obvious that CCT’s work. It is true that these programs can be more effort (and perhaps money) than traditional welfare, but investing in people now results in future generations having a better chance at a good education, career, family, etc. These human capital changes don’t happen overnight and they need more than three years to develop. The bottom line is both traditional welfare and CCT’s relieve people of immediate financial burdens, but CCT’s can turn welfare participants into contributing members of society. I say we give it another try for a longer time with a bigger population in a variety of geographic locations. We don’t have anything to lose, but a whole lot to gain.