What Brazil can teach America about fighting poverty

Published: Wednesday, March 20 2013 8:00 p.m. MDT

But Bolsa Familia doesn’t just reduce short term financial hardship. By tying benefits to school attendance, the monthly stipends also function as an investment in low-income children’s future. “Parents know that sending their kids to school is better in the long run,” said James Riccio, who works for MRDC, an organization that evaluates programs designed to reduce poverty.

In most part of Brazil, school is free, but many families aren't able to send their kids to classes because they depend on the money their children earn during the school day to put food on the table. The cash benefit makes school a viable option for families struggling to get by. The hope is that this helps minimize inter-generational transfer of poverty.

While poverty in Brazil went down roughly around the time Bolsa Familia was introduced, critics suggest it is responsible for only a small amount of the improvement. These critics argue that in fact the improvements are the result of growth in harvesting minerals and fuels. These sales pumped money into the economy at the highest levels that tricked down to the poor.

Before Bolsa Familia, there was no safety net for the poor in Brazil. In fact the only large scale social program was old-age pensions, which were awarded only to formal sector workers, which is not a benefit most of Brazil's poor qualify for because they do not have formal sector jobs. Some observers question the effectiveness of a conditional cash transfer program in a country like the United States where there is a more established safety net.

Experimenting in the United States

To test the possibility of a program like Bosla Familia working in the United States, New York City Mayor Michael Bloomberg, along with the Center for Economic Opportunity, launched an experimental program called Family Rewards, funded entirely by the nonprofit economic development organization Seedco. The first phase of the program started in 2007 and ran until 2010.

Researchers responsible for the creating the Family Rewards project decided to give families many ways to earn benefits because they were not sure what incentives would resonate with American families. The program offered rewards ranging from $20 to $600 for things ranging from perfect school attendance and maintaining health insurance coverage to receiving preventative medical and dental care, and sustaining full-time work.

The average participating family earned an annual $3,000 payment per year from Family Rewards, according to James Riccio who participated in the evaluation of the program. His analysis reveals mixed results. While it reduced immediate material hardship for all participants, its impact on human capital development was unclear. The program only had a measurable impact on high school students who met the minimum academic standards coming into grade nine. Among these, student attendance improved, and they were more likely to pass their state achievement exams and graduate on time.

Riccio also said the participants of the program had increased the rates of health insurance coverage and reduced reliance on emergency rooms for routine care. Participants in Family Rewards were also significantly more likely to receive preventative dental care. Still, “two years is too short a time to see any real health outcomes,” said Riccio.

Some observers called the Family Rewards experiment a failure, but according to Riccio the jury is still out. “In the first generation of the pilot we noticed some promising things and some things that aren’t working,” he said, “Now that we have a bit of information to work from we can revise incentives. Poverty in America and Latin America are different.” What works there might not resonate here — the only way to figure it out is to test and test and test, he said.

Currently, Riccio is evaluating a second generation Family Rewards program that is being administered in Memphis and the Bronx. For this phase they pared down the benefits offered and changed the benefit structure. Instead of an annual lump sum, families receive their benefits once a month. “We think people will be more likely to participate in the program if payments are made every month, reinforcing the positive things they are doing,” he said. They are also experimenting with paying kids for grades — $30 for an A, $20 for a B, $10 for a C — for each subject on every report card.

Political criticism

While many agree that conditional cash transfer programs like Bolsa Familia have reduced poverty, there is opposition from across the political spectrum. According to Riccio, progressives suggest that offering benefits for good behavior “diverts attention from structural causes of poverty like low wages.” Conservative critics argue that it is inappropriate to pay parents for things they have a moral obligation to do, like taking kids to the doctor and making them go to school. Finally, libertarians feel the conditions required to receive payment are paternalistic and demeaning to low-income people.

Riccio acknowledges that these criticisms are valid, but suggests another perspective. “The reward provides families with more resources to accomplish the goals they are most likely to embrace. Giving people rewards now for things that benefit them in the future could be powerful,” he said. Still he cautions that “we can’t adopt it just because we want it to work or it works in other countries. Good poverty reducing policy relies on evidence and honest evaluation. It's not something that can be answered in one or two pilot projects.”

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