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Sometimes, Cash Incentives Can Hurt

Thursday, July 19, 2007

A new program to reward New York City’s poor for looking after themselves is actually likely to make them more dependent.

cash moneyUnder the direction of Mayor Michael Bloomberg, the city of New York is trying something truly new. Under the rubric of Opportunity NYC, a sizable sample of “children, adults, and families living in poverty” will be paid cash for making “decisions that will improve their prospects for the future.”

Some of the rewards focus on education: $25 per month for attending school regularly, $25 for going to a parent-teacher conference, $600 for accumulating 11 high school credits per year, $50 for acquiring a library card. Others are health-driven: $20 a month for staying in subsidized insurance, $100 for getting preventive dental care. There are also workforce incentives—$150 per month for working full-time, or $200 for taking an approved training course. 

Opportunity NYC is privately funded by large foundations, including the Rockefeller Foundation, as well as by Michael Bloomberg himself. If the pilot is deemed successful there are plans to roll it out as a tax-supported government program.

While Opportunity NYC has its fans, some observers regard it as abhorrent. Heather Mac Donald wrote that cash for behavior “will further shorten the poor’s time horizon, rather than lengthen it.” She regards the rewarded activities as things that parents and students should do on their own because they understand the value of behaving properly—not as a response to government intervention. Furthermore, she envisions that low-income families not enrolled in the program will resent that they are not being paid and will be less motivated to do the right things.

But if anything, Mac Donald’s critique is too lenient. Consider the intellectual roots of Opportunity NYC. The architects of the program are either deliberately following the prescriptions of B. F. Skinner’s Beyond Freedom and Dignity, or else they have rediscovered his brand of behaviorism. The gist of this dogma is that human autonomy is an illusion, behavior is controlled by external consequences, and policy-makers should shape behavior by reinforcing actions that are desirable. Providing frequent small cash rewards, contingent on compliance with the trainer’s directives, is the classic Skinnerian method.

Note that the goal of the behaviorist approach is not to promote self-reliance. It is to maximize obedience to the trainer’s goals. Success consists in those getting the reinforcements doing what they are told. Bloomberg explains the rationale for the program by saying that “stress in our daily lives can cause us to make decisions that are not always in our best interests.” Apparently, he doesn’t think that autonomy and independence are among those interests, at least when it comes to low-income families.

What would be the expected outcome for those in the program? To the extent that it works as intended, recipients will have another reason to see the government as an omnipresent, beneficent force in their lives. Setting your own goals and making your own plans are irrelevant. Receiving prizes is dependant on compliance, and the prizes are designed to be habit forming. Once you get used to cash payments, the threat of losing them becomes irritating, just as it has with regard to existing entitlement programs. Why continue to go to school, to visit a dentist, to work full-time if you are no longer paid to do so?

Opportunity NYC will shape character development by either encouraging participants to be docile or tempting them to game the system, finding short-cuts to getting the cash prizes. After all, the prizes will work only if they are truly contingent on participant compliance. Did you really get a library card, meet with a teacher, work full-time for six weeks? New surveillance procedures will be put in place to verify claims—which means more jobs for social workers.

The people who will gain most from Opportunity NYC are those who have a penchant for political mischief. In the pilot study, rewarded behaviors are deliberately selected that are unobjectionable—actions that people are always supposed to do. But later, when Opportunity NYC is government-run, partisans will likely scheme to give prizes for more controversial actions. Low-income families could, for example, be paid to vote in elections. What would that do to a candidate who wanted to trim the cash payment system itself?

It is easy to imagine abuse across the political spectrum. Left-leaning political bosses might use conditional cash transfers to encourage low-income families to join community groups that work for “social justice.” Later, when conservatives get into office, the same families could be paid for volunteering in “faith-based” organizations.

The Opportunity NYC experiment will begin this year, and the outcome most conducive to helping low-income people would be its failure. Social engineering isn’t the right way to build a better society.

Barry A. Liebling is the president of Liebling Associates Corporation in New York—a boutique management consulting firm specializing in marketing, marketing research, and organizational analysis.

Image Credit: Photo by Flickr user Refracted Moments™.

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