Rising income inequality has led the world to desperately search for poverty reduction. While various solutions have been taken and tested to aid in combating poverty, many countries – especially developing nations – still struggle. A measure that has been widely appreciated throughout the world is cash transfer, which, regardless of its conditionality, has the potential to reduce household poverty by providing financial assistance to those in need. However, the efforts to curb poverty should not perceive this phenomenon as homogenous or affecting everyone equally – people may be struggling to a different extent within the demographic that experiences hardship. Some scholars argue that a differential approach is necessary for the approaches to distributing the benefits of economic growth to be more effective. Specifically, the debate in social protection and policy-making revolves around the choice between conditional (CCTs) and unconditional (UCTs) cash transfers. Three principal areas of consideration are discussed in this work: social, financial, and political. Ultimately, conditional cash transfers are necessary to ensure the long-term orientation of the national socio-economic goals while combating income inequality in the short term, making them more preferable than unconditional transfers.
First, due to the heterogeneous nature of poverty demographics and the variety of related issues, conditional efforts to alleviate poverty may accomplish the set goals more effectively. Two principal aims of CCTs are short-term poverty reduction and the encouragement of “investments in the human capital of the next generation” (Afzal et al., 2019; Freeland, 2007, p. 75). The conditions upon which the CCTs operate are thus actions that would increase the ‘human capital,’ such as “regular school attendance” or “preventive health care services” (Freeland, 2007, p. 75). Many cash transfer programs are criticized for failing to create long-term, sustainable solutions for better living (Afzal et al., 2019). In other words, there is pressure from politicians and researchers to create solutions that are socially and economically transformative. CCTs address this concern by explicitly aiming to create change in society beyond mere financial assistance. For instance, education-focused CCTs alleviate child labor issues and increase the likelihood of these children coming out of poverty (Afzal et al., 2019). Hence, setting more explicit conditions around health, nutrition, education, and well-being allows more effectively direct people’s goal-setting and decision-making toward more productive and beneficial outcomes.
Second, since the process of poverty alleviation is inevitably built around specific socio-economic goals for the nation, methods that are more financially effective and easily monitored should be preferable. Both types of cash transfers have played a key role in reducing the prevalence and the extent of poverty in populations (Afzal et al., 2019). However, Afzal et al. (2019) suggest that the impact of CCTs on human development is more significant than that of UCTs, with one dollar having eight times more impact in the CCT system (p. 3370). Improvements were documented in education, household-related expenditures, and preventive healthcare (Afzal et al., 2019). Therefore, CCTs are more efficient in using the collected capital when evaluating the scope of impact. Moreover, the usage of funds for CCTs is monitored more explicitly, allowing the authorities to track the goals better (Afzal et al., 2019). For instance, the Pakistan government could quantify the progress made on female empowerment in the areas such as labor participation (Afzal et al., 2019). Overall, CCTs are preferable in most situations due to their financial feasibility and more precise tools for measuring outcomes.
Third, CCTs may appeal more to the politicians with more variable views, thereby securing higher overall support. For instance, CCTs prevail in most Latin American nations, which, as Gaarder (2012) speculates, may be related to the fact that CCTs were more “palatable” to the heavily right-leaning ruling classes (p. 131). Often, UCTs are viewed as ‘handouts’ by the people who do not deem human rights and equity values sufficient to justify indiscriminate monetary investments or are concerned about the money going to wrong causes (Gaarder, 2012). Thus, if nothing else, CCTs align better with the views of those who oppose ‘handouts’ since they demonstrate how these programs will incentivize the poorer demographic to multiply social capital. Pruce and Hickey (2019) confirm these conclusions by describing the progress of social protection programs in Zambia, which only gained traction when a supportive government party was elected. Human development commonly leans to either incentive- or rights-based side, but rarely both (Gaarder, 2012). The broader appeal of the CCTs may mean their greater resilience and increased chances of persisting throughout changing governments, regardless of the political views.
Additionally, the phrasing of having ‘conditions’ may be misleading to some. Gaarder (2012) suggests approaching the first ‘C’ in the CCT as “co-responsibility,” placing equal emphasis on the responsibilities of both the sponsors and the beneficiaries (p. 131). There is evidence that having well-designed conditions (or co-responsibilities) empowers the CCT recipients to demand access to quality services, resulting, for instance, in an increase in school enrollment rates or test scores (Gaarder, 2012). Afzal et al. (2019) list several conditions that can help ensure the intervention is effective: transparent funds distribution process, clear and concrete conditions, and meticulous monitoring of the results. Moreover, as Molyneux (2009) argues, having a conditional approach increases the awareness of the groups that should be targeted: for instance, many of the CCTs are exceptionally well-designed in terms of empowering women. Having women and their children as the center point of the policy design fosters the co-responsibility approach and stresses the emphasis on the quality of children’s present and future lives (Molyneux, 2009). Combating poverty is a lasting commitment, and CCTs’ embrace of the family structures allows them to fully explore its short- and long-term dimensions.
Nonetheless, one may argue that the conditions imposed by the CCTs programs do not help increase the effectiveness of the poverty alleviation efforts. As Freeland (2007) notes, there is still debate as to what proportion of CCTs’ success may be attributed to the conditionality of the offer as opposed to the transfer itself. Despite a politically popular image of the UCTs as ‘handouts’ that reduce the population’s incentive to find employment, the research demonstrates that these claims are not supported by research (Afzal et al., 2019). Moreover, any cash transfer programs seem to increase the expenditures on food, health, and education, while not affecting the expenditures on luxuries and substances (Afzal et al., 2019). Furthermore, in some regions, such as Africa, the UCT programs are already prevalent, potentially due to local governments’ limited monitoring capacity (Freeland, 2007). Therefore, it may not be necessary to impose any conditions since UCTs suffice to achieve some of the same changes as CCTs do.
However, the critical advantage of the CCTs is their long-term orientation, which occurs precisely because of the conditionality of cash transfers. While short-term solutions like UCTs may provide political popularity without an explicit orientation toward the future, they may neglect critical long-term infrastructure in education, health, and nutrition (Hall, 2012). Moreover, the regional context of implementation varies greatly: in such regions as Latin America, CCTs, in particular, have been overwhelmingly successful. For instance, the Bolsa Familia program in Brazil contributed to bringing over 36 million people – almost a quarter of the total population – above the poverty line (Pinto, 2018). Another Brazilian CCT, PROGRESA or Oportunidades, which was distributed only to women, successfully reduces children’s malnutrition and child labor rates and increases school enrollment while decreasing dropouts (Molyneux, 2009, p. 69). Lastly, as Afzal et al. (2019) argue, the benefits of CCTs outweigh the expenses that donors and taxpayers incur. The monetary effectiveness relative to UCTs has been mentioned already; nonetheless, even if CCTs did not have a proven advantage in financial investments or social outcomes, they are still much more supported politically, especially in certain regions.
In conclusion, CCTs should be a prioritized mode of socio-economic assistance in combating poverty, although some regional variations may impose certain modifications. Due to the explicitly set goals and a long-term orientation, CCTs can target specific societal problems more precisely and permanently, in addition to being more successful in accomplishing set tasks. Moreover, the requirement of having monitoring systems entails better tracking of resulting achievements, allowing for refining and adjusting policies since research may be done easier. Regarding finances, CCTs are more effective in achieving set goals, with each dollar having a more considerable impact than UCTs. Politically, CCTs are more resilient since they are not as dependent on more liberal and socialist governments by presenting themselves as programs with a more ‘pragmatic’ aim. The notion of co-responsibility simultaneously emphasizes the investment in the future of the children in poverty and empowers their caretakers to obtain higher-quality services. While it may not be clear how much the conditionality adds to the effectiveness of cash transfers, CCTs’ political, financial, and social success proves that they are ultimately a better choice.
References
Afzal, A., Mirza, N., & Arshad, F. (2019). Conditional vs. unconditional cash transfers: A study of poverty demographics in Pakistan. Economic Research-Ekonomska Istraživanja, 32(1), 3366–3383. Web.
Freeland, N. (2007). Superfluous, pernicious, atrocious, and abominable? The case against conditional cash transfers. IDS Bulletin, 38(3), 75–78. Web.
Gaarder, M. (2012). Conditional versus unconditional cash: A commentary. Journal of Development Effectiveness, 4(1), 130–133. Web.
Hall, A. (2012). The last shall be first: Political dimensions of conditional cash transfers in Brazil. Journal of Policy Practice, 11(1–2), 25–41. Web.
Molyneux, M. (2009). Two cheers for CCTs. IDS Bulletin, 38, 69–74. Web.
Pinto, M. (2018). Meanings of poverty: An ethnography of Bolsa Familia beneficiaries in Rio de Janeiro/Brazil. In The Social Life of Economic Inequalities in Contemporary Latin America (pp. 129–150). Web.
Pruce, K., & Hickey, S. (2019). The politics of promoting social cash transfers in Zambia. In The Politics of Social Protection in Eastern and Southern Africa. Oxford University Press. Web.