Cash incentives for the poor

Marketplace Staff Sep 21, 2006

KAI RYSSDAL: Every country has them. Those social welfare payments that Eleanor was talking about. Often they’re discounts or subsidies. Designed to encourage or discourage some general policy agenda. New York Mayor Michael Bloomberg has a related idea. He wants to experiment with paying poor New Yorkers who make good social choices. Straight cash on the barrelhead. Commentator Newt Gingrich says it’s an idea worth considering to fight a larger problem.

NEWT GINGRICH: The best way to help the poor is to help them help themselves. That was the essence of welfare reform.

Americans backed reform that emphasized personal responsibility. People couldn’t stay on welfare endlessly. We required them to go to school or find jobs, but they couldn’t just wait for the check.

As a result, welfare caseloads have decreased by 60 percent.

But we didn’t end poverty in America. Now the question is how to help those still left out of the American Dream.

We do know a lot about what works. Graduating from high school gives people a better chance at lifting themselves out of poverty. So does getting married before having children.

It’s time for the next step. Providing incentives to the poor so they acquire the same habits that get successful people ahead is a great idea.

And one of the best incentives is cash.

This isn’t a new idea. In Mexico and Brazil, the World Bank has supported what they call conditional cash payments. They pay parents who successfully keep their children in school and who see the doctor regularly.

The results are promising. Here, we can do the same by experimenting with private money to reward good behavior, as Mayor Bloomberg of New York proposes.

Conditional cash payments create a direct relationship. And that creates a contract between those who give and those who receive.

Simply put, we pay for good habits and don’t pay for bad ones.

For example, we’d pay people whose kids stay in school, pay pregnant women who get prenatal care, pay parents who immunize their kids.

But beyond the money, the right habits offer the best chance of getting ahead.

We can help transform poverty into productivity. Together, we can turn every city in America, and not just New York, into a city of hope.

RYSSDAL: Newt Gingrich was the Speaker of the House from 1995 to 1999.

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