Conditional Cash Transfers and School Dropout Rates

While the United States has been fussing about paying students (see here for starters), the Brits have turned it into national program. Their Education Maintenance Allowance or EMA
pays low-income students between the ages of 16-19 up to £30 ($48) a
week for a max of three years to stay in school past the requirements of
compulsory education (a.k.a. Year 11); with extra bonuses for good
attendance and meeting academic “goals” of their education contract
(think IEP), the weekly payout can be much higher. The money goes
directly into the student’s bank account and students enrolled in a wide
variety of education options (some of which don’t look much like
“school”) are eligible. The point is simply to make continuing in some
sort of training/education program after the age of sixteen a viable (if
not attractive) financial reality for young people from low-income families.

This well-executed study reports on a pilot version of the program
(before it was rolled out nationally in 2004). It says full-time
education participation rates increased by non-trivial amounts and those
receiving the largest payments had the largest increases. The median
payout during this pilot phase amounted to a whopping £100 weekly. Of
late, however, the program has come under fire for not tracking what
happens to the money, for calculating eligibility based on parents’ earnings the previous year (a boon to parents who lost their jobs during the economic downturn), and for technological bungles that resulted in late or missed payments. According to the BBC,
89 percent of students stayed in school after age 16 in 2005-06--and 82
percent of teachers thought the program a success. There’s nothing
wrong with teaching poor kids the value of an education and certainly
much to be said for keeping more of them in school. But £4,000 ($6,387) a
year per kid seems a mite dear. You can find the study (for a fee) here.

Lorraine Dearden, Carl Emmerson, Christine Frayne, and Costas Meghir
Journal of Human Resources
Fall 2009

Amber M. Northern, Ph.D.
Amber M. Northern, Ph.D. is the Senior Vice President for Research at the Thomas B. Fordham Institute.