Cash transfer refers to payments of money made directly to eligible poor people, by state or federal government. This is done with an aim of reducing poverty through introduction of conditions towards the receiver. Only people who meet certain criteria benefit from the government money transfer and this ensures that ineligible people do not get the money. Cash transfer has significant benefit to people who might be enrolling children into public schools, receiving vaccinations, as well as undergoing regular medical check-ups.
Social contracts play a major role of transferring money from the government directly to poor families (Paglin & Wood, 147). This provides the extremely poor families with cash to deal with emergencies, promoting long-term investments in human capital from paying the poor families to making good decisions.
This means that the families ranking the poorest of the poor receive the cash and in return they send their children to school as well as exercising medical check-ups in clinics. In addition, through the Conditional Cash Transfer, there is enhancement of efficient human capita development within the family structure through discouragement of misguided beliefs which lead to inefficient decisions, such as sending only the boy-child to school.
However, provision of cash transfer to improve school attendance has been criticized that it does not ensure higher academic performance and on the other hand, in terms of overall public health, mixed results are the major outcomes. This is a demonstration of lack a clear focus on the main target because bringing children to schools and clinics only provides a half solution as there is no guarantee for effective performance of these institutions (Paglin & Wood, 147).
On the other hand, in-kind transfer entails transfer of payments made by governments and institutions to individuals in kind aimed at promoting their well-being. This is aimed at improving people’s living standards through provision of their necessities such as food and providing poor people with public housing, providing education through offering free schools, improving employment chances and free health services among others.
Unlike cash transfer, in-kind transfer ensures that the aim of the government is achieved through provision of the goals rather than a mean of attaining those goals. The argument is that, where free services- for example education- are provided, more effective outcomes are achieved as mishandling of the money is avoided. In addition, in-kind transfer provides open field for expansion to needy people, such as employment chances which might be difficult to realize even with appropriate qualifications (Mankiw, 53).
However, restrictions and lack of personal decisions accompanies this kind of transfer. Provision of free education restricts people in choosing the school they would like or would prefer to attend. According to critics against in-kind transfer, provision of tuition vouchers or sums of money equivalent to the education, health or housing offered would give people an opportunity to choose their best (Mankiw, 53).
In a case study of food and money transfer in Bangladesh, wheat and rice transfer, (both to poor household and for education), and cash transfer were provided to the people. Food transfer showed much more consumption of the food than in cases where cash transfer was employed.
To those groups that participated in money transfer, only fifty percent was recorded to have been used in food consumption, unlike total food consumption on the groups where food transfer was exercised. However on the second period of transfer, the house holds that received food transfer on the previous exercise was on average poorer that the others, with 95 per cent of consumption and per capital expenditure while the other households had 85 per cent of the same ((Paglin & Wood, 211).
Though the consumption is evidently higher in in-kind transfer, providing of cash transfer in my country can be more appropriate. In-kind transfer increases consumption due to unavailable of multiple choices but cash transfer will give people opportunity to not only decide on what to chose but also on how to use.
In conclusion, cash and in-kind transfer are welfare systems that have benefited persons in countries where they are practiced, such as the United State. Both have contributed to improvement of people’s welfare as well as human capital. However some constrain within their operation do hinder their maximum effectiveness in meeting their goals.
This is so because when they focus on perfecting one side of people’s life, other systems affects their efficiency on the other side. The cash transfer offers people an opportunity of choosing as they determine what school, clinic and food to use. On the other side, maximum consumption of transfer is realized where in-kind transfer is employed though people’s choice is limited.
Works Cited
Mankiw, Gregory N. Principles of microeconomics. Neerijnen, Elsevier, 1998. Print.
Paglin, Morton & Wood Gerald. Poverty and transfers in-kind: a re-evaluation of poverty in the United States. NY, Hoover Press, 1980. Print.