BY ADAM GUARNERI
Adam Guarneri is a first-year International Development student and an Editor for SAIS Perspectives. The following article is adapted from his research on the impact of conditional cash transfers on labor markets for Professor Jacqueline Mazza’s Labor Market Policies in Developing Countries course.
Conditional cash transfers (CCTs) function as an important policy mechanism to alleviate poverty in developing countries, having reached over 780 million beneficiaries globally.[1] While their primary goal is improving the quality of life for those living in poverty, secondary effects of CCTs include enabling marginalized communities to gain access to better education, health, and employment opportunities. The growing role of CCTs in reducing global poverty had already occasioned a torrent of research on the specific mechanisms at work before COVID-19. Additionally, their utilization during the pandemic has in many cases corroborated both the scalability and the effectiveness of cash transfers in insulating developing countries from major social recessions due to global shocks.
Overview of CCTs
In an effort to provide social safety nets and social protections for low-income citizens, policymakers in Latin America and the Caribbean introduced CCT programs in the late 1990s. The initial programs, located in Brazil and Mexico, utilized CCTs in order to break the intergenerational transmission of poverty through conditional mechanisms tied to the development of children’s human capital.[2] Pivoting away from the methods of social assistance programs dictating how citizens should utilize cash, CCTs aimed to empower households to accumulate human capital while ensuring basic needs were met by tying the receipt of payments to conditions such as school attendance, routine child vaccinations, or perinatal maternal care. By doing so, children of CCT recipients would in theory be healthier, more educated, and eventually more likely to break out of poverty.
Another innovative aspect of CCT programs has been the strength of their monitoring and evaluation (M&E) mechanisms, which help track both poverty reduction and upticks in demand for health and educational services.[3] By providing data-driven results, CCT programs are able to withstand the reality of ever-shifting local, regional, and national government priorities to ensure assistance is uninterrupted and resilient to shifts in local or national governance. While the role that individual CCT programs fill varies by geographic location, population, and the needs of citizens, the general concept of CCT programs is uniform: They require, at minimum, benchmarks to establish the eligibility of recipients to enroll them in the program as well as a structured payment mechanism.[4] The frequency of payment can vary, from semi-monthly to semi-annually, as can the conditionality for receiving payment. However, most CCT programs’ conditionalities center on a combination of education or health benchmarks, such as maternal health outcomes and rates of primary school attendance for children or adolescents.[5]
Most CCTs utilize geographic and household targeting to deliver benefits to specific clusters of the population.[6] The dominant method of collecting these data is through proxy means testing, and while methodology varies by program, most are built out from statistical analysis of household survey data and led by a central agency.[7] While this precise targeting and M&E to execute CCTs can require considerable financial resources, these aspects are a significant factor in their success and sustained credibility in practice.[8] Additionally, countries have utilized these CCT-established household targeting systems for other government programs, such as broader social pensions or housing subsidies.[9] Colombia, for instance, employs its CCT-established proxy means testing system to establish eligibility for subsidized health insurance, a youth training program, and a social pension.[10]
CCTs Impacts
The positive contribution of CCT programs to the global efforts to end poverty is evident. A World Bank study, utilizing data from almost 80 countries, found that CCT programs have reduced absolute poverty by 36 percent and relative poverty (the poorest 20 percent in each country surveyed) by 8 percent.[11] The overall impacts on health and education improvements are harder to distinguish, but the evidence suggests that CCTs have improved health outcomes slightly more than education outcomes.[12] CCTs may disappoint on these metrics when the sector to which their conditionalities are tied, for instance health care or education, lack quality infrastructure and service-delivery. For example, a conditionality tied to regular doctor visits assumes that the quality and availability of that service in a given area will be adequate. However, researchers attest to the fact that defining what ‘quality’ means from project to project, region to region, is difficult.[13]
Other critiques facing the implementation of CCTs is their overall costs and the issue of ‘leakage’. While both the upfront and maintenance costs of a CCT program can be steep, the resulting information gathered can help in developing other social policies in-country. As alluded to before, many countries utilize CCT program mechanisms in building or maintaining broader social safety net mechanisms. Leakage, defined as the percentage of beneficiaries of CCTs that are not poor, in a given CCT will depend on both the choice of poverty line and targeting method. However, as stated by author Romulo Paes-Sousa, “although the combination of various targeting methods can improve the accuracy of beneficiary selection, errors of […] inclusion cannot be completely eliminated.”[14] Additionally, the overall trend of CCTs is that their recipients are mostly poor, with low levels of education and lacking basic human capital, and the impacts of CCTs on poverty reduction are substantial.
CCTs have been most impactful where they originated, across Latin America and the Caribbean (LAC). Two of the first programs, La Bolsa Familia (BFP) in Brazil and Mexico’s Programa de Educacion, Salud u Alimentacion (Progresa), remain important pillars in keeping citizens out of poverty. Brazil’s BFP is the world’s largest CCT program, serving over 13 million families annually and achieving large impacts in terms of reducing rates of both poverty and child and maternal mortality rates.[15] Initially started in 1995 as a municipal program in the capital Brasilia, BFP has expanded and become a nationally-run social assistance program as of 2003.[16] BFP utilizes monthly payments of around $37 per family or household earning less than $34 per month.[17] Progresa, also known by the name Oportunidades, was founded in 1997 and became the first nationwide CCT program in LAC. As Progresa covers over 30 million individuals, BFP and Progresa each impact almost 25 percent of their respective populations and by 2016, over 20 percent of the entire LAC region was utilizing CCTs in some fashion.[18]
COVID-19 and Role of CCTs
The concept of CCTs has shown remarkable resilience as a development policy over the years, particularly during the COVID-19 pandemic. As of May 2020, 246 cash transfer programs in 124 countries had adapted or expanded to respond to the emergency.[19] Many CCTs have been altering both their objectives, by targeting the CCTs towards those citizens whose job loss was directly correlated with COVID-19, like in Jordan and Pakistan, and mechanisms, by deferring conditionalities, such as in Brazil, Guatemala, and the Philippines.[20] In LAC, most programs have either vertically, through increasing funds, or horizontally, by expanding coverage or eligibility, increased cash transfers. In Brazil, the National Congress approved an emergency aid cash transfer program that utilizes the same database BFP established on family and household data to ensure beneficiaries are eligible to both continue receiving BFP benefits and emergency aid cash transfers.[21] Additionally, to offset the temporary nature of the emergency fund program, the World Bank and Government of Brazil funded the scaling-up of BFP to cover an additional 3 million individuals, with 90 percent of the direct recipients being women.[22] While some conditionalities have been temporarily lifted during the pandemic, providers hope that by increasing benefits, beneficiaries will continue with health and educational practices. The Colombian government has established a social safety net to consolidate, and increase payments to, existing CCT programs such as Familias en Accion, and ensure those not registered in national databases receive payments.[23] As the International Labor Organization has estimated that over 1.6 billion workers in the informal economy are in danger of losing their livelihoods due to COVID-19, it is important to recognize the dual-purpose of CCTs as both a long-term social policy and a temporary labor market policy.
Long-Term Impacts
The current literature on CCTs’ impacts on poverty reduction as well as health and education outcomes seem encouraging, yet their longer-term impacts, particularly on labor markets, is harder to determine. In an ideal scenario, the conditionalities of a CCT allow youths to attain higher educational achievements, which will eventually lead to better employment outcomes. However, evaluations of CCTs have mostly focused on short-term goals, such as school attendance and poverty reduction, while others have engaged with the proposition that CCTs disincentivize direct recipients of the funds, usually the mother in the household, from seeking employment. All of these attempts to capture the incentives created by and impacts of CCTs are complicated by the differences in labor markets of areas in which they have been tried.[24] Additionally, in measuring long-term impacts of CCTs, it is important to remember that most recipients will soon be ‘graduating’ to an age in which long-term effects may be more traceable. The large majority of global CCT programs began in the early 2000s, and thus, full impacts on beneficiaries, and their communities, may not even be fully realized. It is important to keep in mind the ‘generational’ wave of CCT recipients when considering the relative lack of thorough empirical evidence on the programs’ long-term effects.
Most CCTs are targeted at assisting those in poverty, specifically mothers-to-be or families with young children and the broad evidence show their power in building strong mechanisms to combat potential ebbs and flows that many developing countries’ lower-income communities face. In conclusion, it is important to look towards programs such as CCTs, and other social safety net policies, to combat the potential rise in global poverty rates following the COVID-19 pandemic. CCTs and other social programs can assist in strengthening local, regional, and national policies to ensure both sustainability and resiliency in development.
PHOTO CREDIT: Free use image from Canva Pro.
References
[1] World Bank. 2015. “The State of Social Safety Nets 2015.” Washington, DC: World Bank. doi:10.1596/978-1-4648-0543-1. License: Creative Commons Attribution CC BY 3.0 IGO
[2] Stampini, Marco and Tornarolli, Leopoldo. The Growth of Conditional Cash Transfers in Latin American and the Caribbean: Did They Go Too Far? Inter-American Development Bank, 2012. https://publications.iadb.org/en/growth-conditional-cash-transfers-latin-america-and-caribbean-did-they-go-too-far
[3] Ibid.
[4] Fiszbein, A., Shady, N., Ferriera, FHG., Grosh, M., Keleher, N., Olinto, P., Skoufias, E., 2009. Conditional Cash Transfers: Reducing Past and Present Poverty. World Bank Policy Research Report. Washington, DC: The World Bank.
[5] Paes-Sousa, R., Regalia, F. and Stampini, M. 2013. Conditions for Success in Implementing CCT Programs: Lessons for Asia from Latin America and the Caribbean. Inter-American Development Bank Social Protection Health Division Policy Brief IDB-PB-192.
[6] Ibid., 7.
[7] Fiszbein, A., Shady, N., Ferriera, FHG., Grosh, M., Keleher, N., Olinto, P., Skoufias, E., 2009.
[8] Paes-Sousa, R., Regalia, F. and Stampini, M. 2013, 71.
[9] Fiszbein, A., Shady, N., Ferriera, FHG., Grosh, M., Keleher, N., Olinto, P., Skoufias, E., 2009.
[10] Ibid., 70-71
[11] World Bank. 2018. The State of Social Safety Nets 2018. Washington, DC: World Bank. doi:10.1596/978-1-4648-1254-5. License: Creative Commons Attribution CC BY 3.0 IGO
[12] Paes-Souza, Regalia, Stampini, 2013.
[13] Jones, Hayley. “More Education, Better Jobs? A Critical Review of CCTs and Brazils Bolsa Família Programme for Long-Term Poverty Reduction.” Social Policy and Society 15, no. 3 (2016). https://doi.org/10.1017/s1474746416000087.
[14] Paes-Souza, Regalia, Stampini, 2013, 71.
[15] Pescarini JM, Craig P, Allik M, et al. Evaluating the impact of the Bolsa Familia conditional cash transfer program on premature cardiovascular and all-cause mortality using the 100 million Brazilian cohort: a natural experiment study protocol. BMJ Open 2020;10 :e039658. doi:10.1136/bmjopen-2020-039658
[16] Stampini and Tornarolli, 2012, 12.
[17] World Bank Brazil, 2020. “COVID-19 G2P Cash-Transfer Delivery Country Brief: Brazil.”. Washington DC: World Bank. http://pubdocs.worldbank.org/en/758401593464558927/World-Bank-G2Px-COVID19-Brazil-Brief.pdf
[18] World Bank, 2018.
[19] Walk Free. “Exploring Cash Transfers in the Time of COVID-19.” Walk Free, 9 Feb. 2021, www.walkfree.org/news/2020/cash-transfers-in-the-time-of-covid-19.
[20] Gentilini, Ugo; Khosla, Saksham; Almenfi, Mohamed. 2021. “Cash in the City : Emerging Lessons from Implementing Cash Transfers in Urban Africa.” World Bank, Washington, DC. © World Bank. https://openknowledge.worldbank.org/handle/10986/35003 License: CC BY 3.0 IGO.
[21] World Bank Brazil, 2020.
[22] World Bank October 2020. World Bank approves loan supporting the expansion of the Bolsa Familia Program. (2020, October 29). World Bank. https://www.worldbank.org/en/news/press-release/2020/10/29/world-bank-approves-loan-supporting-expansion-of-bolsa-familia-program
[23] World Bank Colombia, 2020. “COVID-19 G2P Cash-Transfer Delivery Country Brief: Colombia.”. Washington DC: World Bank. http://pubdocs.worldbank.org/en/863501593464582316/World-Bank-G2Px-COVID19-Colombia-Brief.pdf
[24] Molina Millán, Teresa, Barham, Tania, Macours, Karen, Maluccio, John A., Stampini, Marco. “Long-Term Impacts of Conditional Cash Transfers: Review of the Evidence”, The World Bank Research Observer, Volume 34, Issue 1, February 2019, Pages 119–159, https://doi.org/10.1093/wbro/lky005