Conditional Cash Transfers: The Global Key to Closing the Income Inequality Gap

RM 216

Addressing income inequality has become the forefront topic in the race to determine the Democratic Party’s 2020 presidential candidate. Candidates Kamala Harris and Corey Booker have each proposed massive new programs aimed at reducing income inequality. This paper argues that, rather than invent a new policy or improve upon existing welfare programs, the most effective policy for reducing inequality should be imported from, of all places, Latin America. The first part of this paper compares the effectiveness of the largest anti-poverty program in the United States, Temporary Assistance for Needy Families (TANF, commonly known as welfare) with the conditional cash transfer (CCT) programs pioneered by Mexico and Brazil in the early 2000s. CCTs raise children’s human capital and reduce poverty by paying poor families regular cash stipends conditional on regular school attendance and doctor visits. TANF, by contrast, does not hold children accountable for academic performance or demand the parents have direct involvement in their child’s future success. This reduces the likelihood that children will acquire the tools needed to escape poverty. The second part of the paper second analyzes Family Rewards Program, an early attempt to import CCTs to New York City, which, despite significant potential, met with mixed results. These disappointing results are attributed to changes to the program’s design that departed from the proven Latin American formula. Instead of creating a new program from scratch or creating a new type of CCT for the United States, presidential candidates should examine and embrace Mexico and Brazil’s established programs.