Earn Cash: Stay Healthy and Stay in School

March 31, 2007 — -- Do cash incentives make better parents? That's what New York intends to find out with a privately funded program focused on some of the city's poorest residents.

Mayor Michael Bloomberg said the program will make cash payments of up to $5,000 to parents who attend parent-teacher conferences, make sure their children attend school every day and for higher test scores. It will also pay incentives when parents and children receive regular medical checkups, including prenatal care.

"If you're serious about tackling poverty, an entrenched problem that has proved resistant to conventional government programs," Bloomberg said, "you have to be serious about trying new things."

The program will operate in some of the city's poorest neighborhoods in the boroughs of Manhattan, Brooklyn and the Bronx, in areas plagued by high classroom absentee rates and low test scores where the general population has more health problems than in New York City as a whole.

Bloomberg said that to qualify, families had to fall below the poverty line and have at least one child entering fourth, seventh or ninth grade. For example, a single-parent family with two children and an income under $20,000 a year would qualify.

The way it will work is that a payment of $25 could be made for exemplary attendance in elementary school. A payment of $300 could be made for a strong test score on an important high school exam. And there would be other payments.

The mayor's office said that unlike traditional approaches to poverty, a strategy that is based on incentives -- such as cash payments -- will increase participation in things that have been targeted, like health care and education. And the city's theory is that that will decrease poverty and long-term dependency on government help. What the mayor's office does not point out is that it may be cheaper for the city, because fewer social workers and truant officers will be required.

From foundations and individuals -- like the billionaire mayor himself -- the city has already raised $42 million of the $50 million needed. Five thousand families will be involved. Half of them will be paid the incentives, and the other half will not to see whether the money produces results.

"In the private sector, financial incentives encourage actions that are good for the company -- working harder, hitting sales targets or landing more clients," said the mayor, who started one of the world's most successful financial media companies.

"In the public sector," he said, "We believe that financial incentives will encourage actions that are good for the city and its families, such as higher attendance in schools, more parental involvement and greater career skills."

But some advocates for the poor believe the program is patronizing and do not support it. Others are taking a wait-and-see attitude.

Walter Fields, spokesman for Community Service Society, said, "We support the initiative. This has never been tried in New York City. … We need to give them time to see what the outcomes will be."

While it is new to New York, such a cash incentive program, particularly for education, has been tried in emerging nations, such as Mexico and in third world countries such as Bangladesh There, young people are often kept out of school to work and add to a family's income.

When Bloomberg first discussed a New York program in September 2006, the publication City Journal pointed out the goals in Mexico and Bangladesh were much simpler -- enrolling a child in school or keeping that child enrolled.

City Journal lauded the program in Mexico, "where it's economically rational, at least in the short term, for a parent to send a child to work in a field or a factory. But there's just no applicability to poor New York families."

The payments in Mexico average $62, and by many accounts the program there has been a success.

New York City's program will begin in September and run, initially, for two years. The mayor hopes that it will be successful and become permanent.

City officials did not say when the results would be known.

ABC News' Erica Lopez contributed to this report.