Cities experiment with paying poor students for good grades

High-school students don’t usually see cash rewards for school success until their education helps them secure a job. But New York City and Memphis, Tenn., are experimenting with immediate incentives, paying low-income students for wins such as good grades and attendance. The program, called Family Rewards, aims to alleviate immediate needs and break multi-generational poverty by rewarding low-income families for good education, health care, and employment practices—choices some people argue they should be making anyway.

In 2007, New York City’s Center for Economic Opportunity launched a privately funded, three-year pilot with about 2,400 families receiving rewards and an equal number serving as a control group. The effects of the program “were more modest than had been hoped,” according to a 2013 report by MDRC, a nonprofit research organization studying the initiative. Still, New York and Memphis started revised three-year programs in 2011, funded by public-private partnerships.

Coasy Hale, senior manager at Urban Strategies Memphis HOPE—one of the two program providers in Memphis—explained students can earn $40 for each month they miss only one day of class. When their report card comes out every nine weeks, they can cash in on the number of A’s ($30 each), B’s ($20 each), and C’s ($10 each), and they can receive $50 if they score 19 or above on the ACT.

Many criticize the program for paying the poor to perform tasks with intrinsic, though delayed, rewards. “The United States still ranks as the world’s primary land of opportunity,” said Manhattan Institute fellow Heather Mac Donald in her 2010 article “Bribery Strikes Out.” “The problem is that the poor don’t respond to incentives that are already abundantly present.”

Memphis mayor A C Wharton told PBS, “in an ideal world” he would be the first to say we shouldn’t pay people for choices they ought to make anyway. “But it is not an ideal world,” he said.

Program designers based the idea on Mexico’s conditional cash transfer (CCT) program Oportunidades. CCTs in many developing countries aim to ease hardship and break the cycle of poverty by giving cash rewards only to those who adopt certain poverty-preventing behaviors. In 2009, the World Bank reported that through Oportunidades, the probability of rural Mexican students entering secondary school increased by 33 percent and the dropout rate for urban Mexican students ages 16-19 decreased by 20 percent.

“Although this approach has proven to work around the world, no one knows whether it will work in New York City,” said Gordon Berlin, president of MDRC.

New York’s first CCT had lackluster results. Families received an average of $8,700 over the three years, alleviating immediate housing and food needs. But the program seemed to have no effect on elementary or middle school achievement, and it saw few improved outcomes for high school students, except those who began high school with proficient reading levels. It did see an increase in the number of families seeking dental care, but did not increase preventative medical care or parent employment and earnings.

Family Rewards 2.0, implemented in Memphis and New York, includes changes designed to bring better outcomes. “These are still works in progress,” said James Riccio, director of the Family Rewards studies at MDRC. He said the new program gives more frequent payments, making rewards more immediate, and targets only families with high school students. It also includes advisors who help families attain goals and remind them to reach for rewards.

The Memphis program will end December 31, and Riccio said it is still too early to tell the long-term results.

“We’ve had many families be able to reach goals,” said Hale, who works directly with families in Memphis. But further study of Family Rewards 2.0 will need to show more positive outcomes than the original, Riccio said, to “demonstrate it’s worth scaling up.”