Conditional cash transfers: A program that works

The most stubborn kind of poverty is that passed down from generation to generation. The poorest Filipino households are those whose heads have the barest formal education—or none at all. And they transmit their poverty, as a kind of negative inheritance, to their children and grandchildren.

Education is the single most important factor explaining differences in family incomes. People with low-quality skills because of their lack of education are typically bypassed by economic growth.

Already our biggest problem is how to employ 2.8 million undereducated young people unable to fill the jobs the modern economy generates. And the rapid pace of technological change is widening the knowledge—and income—gap between the relative few who are skilled and the many who are not.

Last June, Metro Manila employers reported they were having difficulty expanding their operations, because of the lack of skilled workers.

A fourth of all our children

How widespread among us is generational poverty? ‘Pulse Asia’ classifies 26 percent of all Filipinos as hard-core poor. These are people with no more than an elementary education or no formal schooling at all. Yet, this early, the National Economic and Development Authority affirms there is no way we could meet our goal of universal primary education by 2015. Right now, from 10 to 12 of every 100 children of the right age are not even enrolled in Grade One.

To break generational poverty, the state must ensure the children of very poor families attend classes until they finish their basic education. (In our country, this is six years of elementary and four of secondary school). But these families typically pull their children out of school (if they bother to enrol them at all) once they are old enough to help around the house, the shop or the farm.

How do you induce parents to forgo their children’s labor until they can learn enough to find better jobs as adults?

Latin America—which suffers from the same kind of generational poverty as we do—has lighted on a simple and elegant solution: Pay the poorest parents to keep their children in school.

Paying parents to keep kids in class

Under Mexico’s Oportunidades program, one family in four receives an average $150 monthly stipend— provided it keeps its children in school and presents them for regular health checks. In Brazil, a similar ‘conditional-cash-transfer’ (CCT) scheme—called Bolsa Familia— benefits 11 million poor families.

The idea behind Oportunidades (originally Progresa), initiated in 1997 by President Ernesto Zedillo, is to give the poor money that will allow them to be less poor. But, unlike traditional welfare programs, Oportunidades conditions the grant of that cash on family behavior that will prevent it from transmitting its culture of poverty to its children.

In sum, Mexico is using Opor-tunidades as the vehicle for teaching its poorest people basic health, livelihood and communal practices that will enable them— and their posterity—to adapt to their changing world.

Its CCT program costs Mexico $3.8 billion yearly—but it has had a tremendous impact on school attendance and on poverty incidence as a whole. Program managers claim that as much as 97 percent of all Oportunidades funds go directly to beneficiaries. By comparison, the World Bank estimates the leakage from our own ‘Food-for-School’ program at 40 percent. (The latter program pays a kilo of rice for every day that a pupil shows up.)

Children developing ambitions

After a decade, the Mexican CCT program raised elementary school-attendance rates by as much as 42 percent and high-school enrolment by as much as 85 percent in some places. Poverty incidence in the country as a whole has declined from 37.4 percent in 1996 to 13.8 percent in 2006.

The program has been particularly successful in keeping girls in high school. Like poor Filipinos, poor Mexican families traditionally begrudge spending for their daughters’ education, since “they would only get married.”

The New York Times notes that ten years of Mexico’s “deceptively simple program is rewriting poverty-fighting strategies throughout Latin America and in the world.” The children of Mexico’s poorest rural communities are finishing high school and developing their own modest ambitions (teaching and nursing being the most common for girls.)

Spreading the Mexican model

So far, some 30 countries have adopted aspects of Oportunidades, among them Turkey, Cambodia, Bangladesh and Indonesia. So has the State of New York, which is testing the applicability of the conditional cash transfers on its poorest black and Hispanic slums. Meanwhile, the Melinda and Bill Gates Foundation is trying the concept out on American college dropouts.

Our own Department of Social Welfare and Development (DSWD) last year initiated a “Pantawid Pamilyang Pilipino Program,” or the 4Ps. The program offers a cash grant of P1,400 a month under the same conditions as the Mexican CCT program. In 2008, the 4Ps program claimed to have covered 320,000 families. This year, the DSWD is apparently getting P10 billion to double its coverage.

By bringing other subsidy programs and anti-poverty projects under the CCT umbrella, the Arroyo government could conceivably multiply CCT beneficiaries into a populist bloc large enough to preserve support for what promises to be a workable anti-poverty program even beyond any change in administration. –Juan T. Gatbonton, Manila Times