The Shriver Report – Cash Incentives: A Way to Reform the Safety Net?

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Cash Incentives: A Way to Reform the Safety Net?

Ever since the social safety net was first conceived as a response to the Great Depression, American policymakers have attempted to balance two goals: reducing poverty while at the same time limiting dependence on government benefits.

Since 2007 MDRC, a nonprofit, nonpartisan social policy research organization, has been studying Opportunity NYC: Family Rewards. This is New York City’s bold, privately funded, and controversial demonstration of a conditional cash transfer, or CCT, program to help families break the cycle of poverty. Sponsored by the New York City Center for Economic Opportunity, or CEO, and building on Mexico’s successful Oportunidades program, Family Rewards offers cash incentives to poor families in order to reduce immediate hardship and poverty.1

The payments are conditional upon families meeting very specific benchmarks in very specific areas: children’s school performance, family preventive health care, and parents’ work and training. The hope is that the cash incentives will not only provide immediate economic relief, but also that they will encourage the behavior changes that could reduce poverty over the long term. MDRC has evaluated the program by looking at approximately 4,800 of the families and 11,000 of the children enrolled in a half dozen of New York City’s poorest neighborhoods.2

More than 100 million of us live on or over the brink of poverty or churn in and out of it – and nearly 70% of them are women and the children who depend on them.
A Woman's Nation Pushes Back From The Brink

So far, results from the New York City project show that CCTs can make an immediate difference in the lives of poor families by increasing family income by 22 percent on average.3 Nearly all families were able to qualify for at least some rewards, mostly in the education and health domains—meaning that, even in a depressed labor market, poor families could make productive efforts that would bring needed income from the rewards. This income reduced measures of economic hardship as well, which are notoriously hard to move. It is important to emphasize that lessening poverty did not lead to major unintended consequences such as substantial reductions in work effort. This indicates that conditional cash transfers can be a viable means of reducing child and family poverty in the short run.

Family Rewards also had modest effects on some behavioral outcomes in each of the target areas, including increasing savings and lowering debt, increasing preventive dental care, and improving graduation rates for more proficient high school students.4 While this meant that many families were rewarded for efforts they most likely would have undertaken without the program, these positive effects demonstrate that the program did lead to more of these behaviors, suggesting that it might be possible to design a conditional cash transfer program that could also have important effects on longer-term and even intergenerational poverty.

MDRC and New York’s CEO are now testing a next-generation version of Family Rewards in the Bronx and Memphis. Built to improve on the original New York City demonstration, “Family Rewards 2.0” targets low-income families with high school students in grades 9 and 10 who are recipients of TANF or the Supplemental Nutrition Assistance Program, or SNAP, formerly known as food stamps.5 It includes a streamlined set of financial rewards, more frequent payments, and a new family guidance component to try to help more parents and students meet the conditions that enable them to earn rewards. It is hoped that these refinements to the model will make it a more effective intervention. Early results from a randomized controlled trial are expected in 2014.

In the meantime, the nation continues to look for ways to strike a better balance between fighting poverty and fighting dependence on the government. The goal is to use safety net programs to meet short-term needs while investing in better long-term outcomes, and to do so in a way that is more responsive to economic downturns and poor labor markets. Lessons from Opportunity NYC-Family Rewards will tell us whether cash transfers with reasonable conditions attached are one way to boost the income of some low-income families, lifting them out of poverty, while maintaining the ethos of reciprocity and responsibility that is valued by American society—and certainly by its elected representatives.

This essay was written exclusively for The Shriver Report: A Woman’s Nation Pushes Back from the Brink, in partnership with the Center for American Progress. Download the full report here for FREE from January 12th – January 15th.

1. James A. Riccio and others, “Conditional Cash Transfers in New York City: The Continuing Story of the Opportunity NYC-Family Rewards Demonstration” (New York: MDRC, 2013), available at

2. Ibid.

3. Ibid.

4. Ibid.

5. Ibid.

Gordon Berlin is a Reporter for The Shriver Report.
Gordon Berlin is president of MDRC, a nonprofit and nonpartisan education and social policy research organization.
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