Legal Commentary

Paying the Poor to Improve their School Performance-Becker

By 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 .

Full post as published by Becker-Posner Blog on May 25, 2008 (boomark / email).