Free exchange | Conditional cash transfers and child labour

A little extra cash, a lot of extra schooling

By C.W. | LONDON

IN 2012 there were over 168 million child labourers. That's a big decline from a few years ago (see chart), but still a huge number. How best to get it down? Outlawing it is one option. Most countries have had child-labour laws for years; but given that one in ten children worldwide are labourers, the legal system is no silver bullet.

Children aged 7-14 in employment, %. <a href=
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Another way of reducing child labour is to tackle its root causes. Poverty is one. Cash transfers, which can reduce poverty, may be able to help. Governments give poor households small amounts of money. Some cash transfers are "conditional": the recipient has to meet certain conditions to receive the dosh, like ensuring their children go to school or visit a doctor regularly.

Economic theorists disagree over the potential impact of cash transfers on child labour. Some say that cash transfers are a sure-fire way to reduce it. By making households richer, families are less impoverished. They can more easily afford to send their children to school (or forego the income that their children could bring).

Nonsense, say others. When very poor families receive money, they will invest it in productive assets—say, by purchasing some livestock. Investment may boost the returns to child labour and thus encourage the child to work even more than before.

It’s an empirical question. A new paper from the World Bank reviews a mass of literature—thirty different studies—on the subject. The conclusions are pretty clear. Cash transfers tend to reduce child labour. Boys tend to experience larger reductions in participation in wage-labour than do girls. That may be because discrimination against educating girls is ingrained; a little extra money makes little difference. (Girls do experience relatively big falls in involvement in household chores, but it is difficult to know whether chores should be classed as child labour.) The authors do not find a single conditional cash transfer (CCT) programme that significantly increased child labour.

Reductions in child labor are most pronounced for the poorest beneficiaries. And only small amounts of cash may be needed. One Cambodian programme resulted in the second-largest decrease in child labour of all CCTs, even though it offered quite modest transfers (about 2% of the total expenditures of the average recipient household). Relatively small costs—the price of a school uniform, say—may be enough to keep children out of school.

A crucial question for economists is whether conditional cash transfers do better than unconditional ones. The results for CCTs do seem more promising—but it is not clear if the changes in time allocation were driven by the increase in income due to the cash transfer, or due to the requirements of the programme. The authors cautiously conclude—as we have done—that conditionality does not seem much better than unconditionality. All that may be needed is a little extra cash.

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