Opinion Sur
Conditional Cash Transfer Programs (CCTPs) have become widely known and arouse enthusiasm. They must be analyzed, however, to assess their achievements and limitations, and determine whether those hopes are well-founded or they are being expected to deliver more than what they are actually prepared to offer, given their generally scarce resources and the hardships faced by Latin America’s education and health care services, the pillars on which CCTPs are based. In memory of Ernesto Cohen
CCTPs: An Overview
The focus of these programs is the household, defined, for instance in Mexico’s Oportunidades program, as “a group of individuals living together in the same housing unit, sharing living expenses, and preparing their food in one same kitchen stove, regardless of whether those individuals are related by blood or not”. Recipient families are selected through “means testing” mechanisms, as well as according to the characteristics of their housing unit, which makes it possible to identify lowest-income households.
The purpose sought by this program is to enable extremely poor children and youngsters to access education and health care services, so that they may enhance their human capital and, hence, be better qualified to enter the labor market. Then, the first assumption is that there is enough supply of education and health care providers, whose use has to be incentivized through complementary programs (CCTPs), under which families receive cash transfers, on the condition that the children and youngsters in the household attend school and undergo health examinations and checkups. Some reject the conditionality component and applaud the fact that poverty may be reduced via cash transfers. They forget that these are conditional transfers, intended to achieve a long-term outcome, and use the monetary incentive to encourage families to provide their children and youngsters with education. Transfers are the means, not the aim, of the program.
Advantages of Cash Transfers. It is worth noting that, in other times, social policies were designed to provide recipients with goods and services, or applied general subsidies on food, electricity and transportation. Today, however, cash transfers are the prevailing approach, allowing beneficiaries to decide how those resources are to be used. This is considered to reinforce their autonomy and self-confidence. Besides, cash availability enables them to obtain better prices when purchasing the goods they need. In addition, this procedure is less costly for the program than, for instance, the distribution of food baskets, as these have to be prepared differently according to the household composition (number of family members and their ages), and no storage and distribution costs have to be incurred. Besides, transfers do not affect prices in the local market, which they indeed stimulate through this injection of purchase power.
Calculation of Transfer Amounts. Amounts vary from program to program, and may also vary depending on the geographical area where the beneficiary resides or the type of benefit provided. Ideally, the calculation should: (i) establish a break-even point between the appeal the transfer has for the non-poor and the effect on the family welfare of the poor; (ii) consider the peculiarities of the type of benefit-conditionality; (iii) not inhibit job searching by the adult members of the family; (iv) not encourage excessive family growth, as this would result in the provision of uncapped subsidies for each new child born. For the calculation of transfer amounts, the criteria used are the labor opportunity cost or the transaction costs that families are to incur in order to actually receive the benefit (transportation and out-of-pocket expenses, use of time, etc.). Transfers are often staged: they increase with the student’s age, as students are believed to be more likely to drop out of school, and go to work instead, as they grow older; or, conversely, the longer the beneficiary stays in the program, the lower the transfer, so as to avoid program dependency. The risk here is that the transfer value may be hardly attractive for the family and render child or youth labor more profitable. A balance has to be struck between family dependency and persistence in the building of a new generation’s human capital.
CCT Payment Modality: Payments are made through deposits at the payees’ bank accounts, from where the cash may be withdrawn, even with debit cards. This system secures the timely payment of exact transfer amounts, avoiding fraud and payment cuts. In the absence of banking connections, transfers are delivered in cash by payers.
Exit Strategy. Originally, programs were meant to be temporary, although it was not clear how discontinuation (graduation) was to occur. In practice, however, not all programs have maximum program stay periods, and those which have one in place, do not enforce it. Duration variability across programs leads to infer that they are not based on theoretical criteria but, instead, on the amount of resources made available for the program
If the program is aimed to ensure the buildup of human capital of children and youngsters, it is recommended that the goal should be the attainment of the schooling threshold, which, in Latin America is 12 years of formal schooling; therefore these programs should be maintained until such level is reached, unless the family in question makes progress in terms of its self-sufficiency to the extent that there is certainty that no premature dropout will occur.
II. REMAINING CHALLENGES
Are the presumptions for these programs being met? There are no few concerns regarding the transition from being a program beneficiary to employment. For instance, analysts of the Puente-Chile Solidario program report inconsistencies between demand requirements and little supply adaptability, and program participants´ lack of flexibility to fill occupations that do not match their trades.
Is There Adequate Supply of Public Services? The programs studied contribute to securing the enrollment of children who are not attending school, and the permanence of those who are dropout-prone. Yet, they do not have any bearing on the quality of the education provided, nor do they contribute to ensuring opportunity equalization; hence, it is necessary to offset non-school-related differences. The solution to these problems is beyond the scope of the CCTPs, and should be tackled by the competent ministries.
Are Programs Adequately Targeted? Institutional and program design factors may affect beneficiary selection. Thus, initially, programs are implemented in the wealthiest districts, as these have more efficient administrative capabilities, or the poorest districts are excluded because they lack the required infrastructure. As a result of this, bias is introduced in the selection of eligible recipients, which most probably will affect the poorest ones.
Recipient Lists and Single Register. When no unified, single beneficiary register exists, there is a risk that similar programs targeted to the same population segments overlap, creating the conditions for increased red tape and satisfaction of individual interests. As it was said about the Brazilian experience, “ministers [want to] have their own program, their own public (their poor)… who cannot do without their income transfer program. The Single Register avoids task duplication, simplifies beneficiaries’ submissions, as they will not be required to fill in questionnaires for different services, and allows information to be cross-checked and evaluations to be performed.
Effects on Poverty and Distribution. Some authors argue that these programs alleviate poverty, and its intensity, in the short run. Yet, a study based on a panel survey of Mexico’s Oportunidades program beneficiaries shows that only 18.5% of eligible households in 1997-1998 have overcome poverty after 8 or 9 years in such program. No more than one out of 20 households shows sustained welfare improvement. It may be thus concluded that the potential of this program for helping families out of poverty in the short to medium term may be considered mild to low.
Do CCTPs Alter Income Distribution? In the short run, transfers impact on overall distribution depending on the amount of resources delivered (i.e., subtracting the administration costs from the total budget of the relevant program). Overall, this is a small amount relative to the domestic GDP. Hence, the redistribution impact will be modest. In the long term, the outcome will depend on the changes attributable to the program in the factors determining income distribution (wealth, demographics, education, and occupation), and the wage differential across occupations. If CCTPs succeed in enhancing the human capital of the next generation, and it is able to access the labor market, distribution will have been improved, which will have to be assessed on a case-by-case basis.
Patronage and corruption risks. Gruenberg and Pereyra Iraola understand patronage to be a particular tie, based on personalized criteria, established between someone having more power, higher status, or greater resources (the patron) who provides protection, assets, services or favors to other individuals (the clients), in exchange for the latter’s assistance, personal services, recognition or political and electoral support. In many countries, there is concern over patronage-oriented deviation of resources, for proselytist purposes, of social programs. Surveys show that interviewees have few doubts about this, although there are few empirical studies on this matter, which is certainly hard to approach. One exception is the paper by the above-mentioned authors about claims filed before the Social Security Violations Agency of the Attorney General’s Office (UFISES, for its Spanish acronym) of Argentina. This study identifies critical corruption moments, characteristics of claimants and respondents, and elaborates on the poor role played by competent enforcement institutions. Another corruption-prone area is that of conditionality compliance certification. Teachers and health care staff usually charge beneficiaries for such certification, an extortion recipients cannot avoid because, if they refuse to pay, they will not receive the transfers.
CONCLUSIONS
CCTPs may play a significant role in alleviating long-term poverty, as long as the “improvement needed” tasks are overcome. Cash transfers allow families to improve their existing material living conditions. The cannot, however, solve all the problems families are faced with because such programs have not been designed to address all the problems affecting them, and because their resources are very limited. They play a complementary and driving role seeking to secure public investment in education and health that may prove effective for the poorest.
It is worth noting that social policy may not undertake per se the poverty eradication effort, as it that far transcends its scope of action. It it did aspire to do that, it would be doomed. This goal may only be attained in conjunction with an economic policy capable of ensuring high, good quality growth that may generate dignified employment. Social policy would do its part by enhancing the human capital of new generations so that these may successfully enter the labor market and by creating a social protection system that would cover the population from diverse risks.
In this context, CCTPs have to fulfill a limited task, which should be monitored on an ongoing basis so that they may conform to the heterogeneity of its beneficiaries and account for poverty’s multidimensionality.
