Tuesday, 1 July 2014

Extending income management for those on welfare – but does it work?

In my little list of stories from around the world that took my interest on Monday was one by Christopher Blattman, an associate professor in the political science department and at the School of International and Public Affairs at Columbia in the USA, entitled Let them eat cash. This extract gives the flavour but the examples from the full piece as published in the New York Times are worth noting:
“The poor do not waste grants. Recently, two World Bank economists looked at 19 cash transfer studies in Latin America, Africa and Asia. Almost all showed alcohol and tobacco spending fell or stayed the same. Only two showed any significant increase, and even there the evidence was mixed. You might worry handouts encourage idleness. But in most experiments, people worked more after they received grants.”
What adds to the relevance of the argument is the movement within Australia towards placing restrictions on how welfare payments are spent. From Mondays’s Sydney Daily Telegraph:
1-07-2014 doleProfessor Blattman understands that those making welfare payments worry that people might spend handouts on drugs or alcohol. “This pessimism (and paternalism) is common and understandable,” he writes.  “But evidence from other countries suggests we should be more optimistic. …
Perhaps our first duty is to do no harm, but I say that’s our second duty. Our first is to be skeptical of stereotypes of those we purport to help.
These stereotypes have consequences: The Family Independence Initiative tried paying poor American families in return for setting and meeting goals. Its demonstration project showed promising results. But the No. 1 obstacle the organization said it faced? Mistrust by donors and other nonprofits who held hard to the view that poor people can’t make good decisions.
Here in New York, the Opportunity NYC Family Rewards program has experimented with cash transfers to poor families. It sent $8,700 over three years to thousands of families. A randomized evaluation showed that self-employment went up and hunger and extreme hardship went down, at least while the cash transfers lasted.

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