When dole-outs can do good

In developed economies, the most common form of dole-out is unemployment insurance, given to people who have lost their jobs and can’t find new work at once. They are usually time-bound, to discourage undue dependency and spur recipients to exert efforts to quickly find new employment. Governments often complement the dole with placement assistance to facilitate this process.

These systems have long been institutionalized in countries that can afford the budgetary resources to sustain them. But they have also been long questioned because they could distort people’s behavior on work effort (i.e., seriousness or determination in maintaining a job), or job-seeking.

Perhaps because of the above concerns, it has not been common practice in the past to give outright cash dole-outs in the Philippines. Much of the direct assistance extended to poor or displaced families have taken the form of livelihood assistance featuring small loans for starting a small enterprise (e.g., the defunct Tulong sa Tao program of the DTI; the current Promotion of Rural Employment through Self-Employment and Entrepreneurship Development or Preseed program of NAPC).

Another favored form is emergency employment, as in the food-for-work programs for the Mt. Pinatubo-stricken areas in the 1990s; the Community Employment Development Program, a remake of the Emergency Employment Agency initiative of the current President’s father during his own presidency in the 1960s; and currently, the Comprehensive Livelihood and Emergency Employment Program.

Cash transfers

Lately, the government has had a greater propensity to hand out outright cash. Albay Gov. Joey Salceda has argued, and apparently convinced the President, that government owes it (back) to the poor who increased in both numbers and percentage since 2003 due to moves of the government in recent years that effectively took money out of their pockets—billions of pesos of it. Examples of such moves were raising the VAT and Napocor rates, and other measures that improved government finances, but at the expense of the poor.

Thus, the government reportedly spent P3.2 billion on the Pantawid Kuryente: Katas ng VAT program, wherein some 6.3 million electricity users nationwide consuming less than 100 kilowatt hours a month got a P500 one-time subsidy from the VAT collection. It is not clear, and many doubt, if the cash dole-out really helped those in need (nor even helped the administration buy more popular approval, for that matter).

Since last year, the government has been handing out cash, up to P800 per household per month, in the DSWD’s Pantawid Pamilyang Pilipino Program or 4Ps. Covered last year, according to the DSWD’s annual report, were 337,416 poorest households in 27 provinces and 12 cities, at a cost of P2.1 billion. Some P5 billion is budgeted per year to sustain the monthly cash transfers, dispensed through Land Bank ATMs, for the next five years.

DSWD estimates that it will spend P80,000 per household during the five-year period. This means spending additional 67 centavos for every peso given to a household. Is it worth it? If the World Bank’s experience in other countries is any indication, it could be.

The CCT wave

There is a twist to the 4Ps cash dole-out program, which is its redeeming feature. 4Ps is the Philippines’ version of the increasingly popular Conditional Cash Transfer (CCT) mode of delivering assistance to the poor worldwide. The World Bank defines CCTs as programs that transfer cash to poor households on the condition that they make prespecified investments in the family’s human capital. They have already found large-scale application in Latin America, Asia, Eastern Europe and Africa; some countries have adopted it as their primary social assistance program. Brazil and Mexico now cover about one-fifth of their populations with their Bolsa Familia and Oportunidades programs, respectively. International experience point to positive results.

In our case, 4Ps gives cash grants to households with children below 14 years of age for a period of five years provided they send their children to school or day-care centers, obtain vaccination/checkups for up to three children per household, access maternal care through trained professionals and/or attend responsible parenthood seminars.

It is, in effect, a reward for improving their own lives and investing in their futures. To ensure that 4Ps helps the right people, the DSWD expects to complete this year a National Household Targeting Survey for Poverty Reduction, which promises to avoid past problems of massive leakage and undercoverage.

It personally comforts me that the program lies in the hands of an agency known to be run by dedicated professionals, and who earned top approval ratings last year to show for it. And if accompanied by other government initiatives to provide effective complementary support and facilities for their communities in health, education and agricultural development, DSWD can yet demonstrate that dole-outs can, in fact, do long-term good for the poor.–Cielito Habito, Philippine Daily Inquirer

Comments welcome at chabito@ateneo.edu