Marginal Utility

by Anonymous

From Friday's WSJ:

Poverty Program Gives Points to Do The Right Thing

Consumers earn rewards for flying, for using credit cards and for staying at hotels. For the past year, residents in a low-income neighborhood [in Chicago] have been earning rewards for paying their rent, getting their children to school every day and seeking work.

At one rewards banquet, more than 150 people gathered in a church basement to celebrate and cash in points for prizes. Devant-e and Ireyonna Brown, 10 and 7 years old, rode off on new bicycles with points earned for school attendance and volunteer work. Their mother, Marilyn, walked away with a DVD player, thanks to points earned mostly for attending PTA meetings...

The story then goes on to talk about how incentive programs are politically more palatable than traditional welfare programs. This seems self-evident: using material incentives to induce behavioral change is entirely consistent with the assumption that poverty is caused solely by poor peoples' bad decisions and self-destructive behaviors and values; and hence that all we need to do to eliminate poverty is provide the right incentives. (Besides, how better to guarantee consumers of DVDs and Nike footwear than to hand out DVD players and coupons to the local Sportmart?)

I have to wonder, though, if the proponents of the points-for-performance strategy adopt inventive-based strategies for inducing "the right" behaviors in their own families. I guess I thought that bribery was an unfashionable way of getting kids to do their homework, even in the most free-market of thinkers' households.

At any rate, the goal of the points program is to provide a "carrot" for those for whom the "stick" of time-limits on benefits hasn't been effective. Granted, proponents are quick to admit that points programs are not a panacea. Even with this caveat, points programs strike me as highly inefficient, at least for the goal of getting the last of the long-term welfare recipients into the labor force. My understanding from the research on poverty post-welfare reform is that time limits on benefits were relatively effective at getting recipients who had the basic skills to work into the paid labor force (albeit at sub-poverty level wages). The majority of those left behind are unemployed not so much because they lack the incentive to "do the right thing" (i.e., work) but because they lack the basic life skills to find and keep paid employment. In this sense, incentive programs are about 7 years too late.

Not that I don't wish the points programs the best of luck. In this political climate, it seems like any effort to help the poor is to be celebrated.