Saturday, June 7, 2014

The CCT Dilemma: Is it worth it?

The Philippines CCT, known locally as the 4Ps, is by far the most expensive social development program the government has ever embarked on. Implemented by the Social Welfare department (DWSD), it invests in human capital to break intergenerational poverty by providing, for a maximum of 5 years, cash transfers to poor families (around US$7/child per month for up to 3 children, aged 6 to 14, per family for education; US$12/family for health component) in exchange for school attendance and health visits.

From its inception in 2008 to 2013, 4Ps has already reached 3.9 million households and has spent around PhP120 billion (US$ 3 billion). Eighty percent represents the cash transfers; the remaining goes to other costs (see Table 1). This program is funded by loan money from the World Bank and ADB.

How big is this budget? PhP120 billion is equivalent to over twice the 2013 health budget or 41% that of the education department (DepEd). In fact, it is more than twice what is needed to close the education sector’s resource gap as of 2013. Also, the DSWD, which has not handled a program this big before, has spent quite a sum in training. In fact, 5 to 6 years into the program, it was still incurring PhP500 million in training. The investment may be worth it if the program goes on for a long time. But had this investment been made on teachers instead, I wonder what could have been the impact?

So how do we know that the government is not wasting money? What if these children would go to school anyway? After all, there is a public elementary school in every Philippine village. But there are not as many secondary schools; there is a high dropout rate among older children. Yet the 4Ps has been designed to include poor families with primary school-aged children without considering the likelihood of school attendance.

In an attempt to address the high dropout rate in secondary level, President Aquino announced in 2013 the extension of 4Ps to include high school goers following a recommendation from PIDS. But the proposal was to use the budget supposedly earmarked for expansion for extension, so that children of those already covered can finish at least high school. Instead of full expansion where the effects are rather disperse and smaller on a per family basis, deepening the assistance is expected to yield larger impact. But the government opted for both expansion and extension causing more pressure on resources. Indeed, the 2014 budget is programmed at PhP63 billion, up by 43% from 2013.

How such adjustment in the budget is financed is an important policy question. How the assistance to older children is designed is another. There are efficiency gains in providing larger transfer to older children. Indeed, the government is giving $12 each for older children instead of $7. But boys should receive larger amount than girls because in the Philippines boys are disadvantaged compared to girls in terms of school participation. How likely that those children out of school will attend with the $12 cash assistance is unclear. Unfortunately, DSWD has not been good at providing concrete bases for the amounts of its subsidy.

There’s also the issue of sustainability. If a significant portion of the budget is funded by loans, how will it be sustained in the future? Future revenues are likely to expand, thanks to a much better economic performance recently, but so is the population. Continuing to finance through loans is certainly unsustainable, both economically and politically. There remains huge opposition against CCT; it is unlikely that the political support it currently enjoys will continue until after the next Presidential election. Therefore the exit strategy is very important. How to ensure that families will continue their human capital investment after they graduate from the program should form a concrete element of the design. But apart from a small livelihood component of the 4Ps, it remains unclear how the beneficiaries will get by after graduation.

So what constitutes success? It appears that it is measured only in terms of enrolment and health outcomes. A WB impact evaluation in 2013 shows that there are 5%-points more children aged 6-11 years in CCT villages who are enrolled compared to non-CCT villages. But such result is hardly linked to long-term outcomes like employability. It is quite a short-sighted way of assessing returns on investment that has to be repaid decades after the implementation.

The sad truth is that, in the Philippines, investment in education hardly translates to employability since the more educated have lower employment rates than the less educated indicating lack of quality of education and significant job-worker mismatch in certain fields. For quality, the DepEd budget has recently been boosted remarkably by 41% from 2012 to 2014. But even with improved quality, worker-job mismatch has to be addressed. The education sector needs to be more equipped to meet the needs of the industry, or workers will venture abroad. Whether the latter fits into the “success” of the program is another story.

Apparently, for the CCT to succeed in improving human capital, it requires more than just additional investment in the education sector, both demand and supply sides. It has to be linked with economic policies, labour policies, industrial policies, and even labour migration policies. In the recently approved K+12 program, where the pre-university requirement has been upgraded from 10 to 12 years, which is by the way a good justification for the increased budget in education, one of its objectives is the production of able workers to meet the growing demands of the international labour market. If this remains to be a dominant policy, the job-worker mismatch in the domestic economy is likely to persist. The only way to attract investment on education to meet the demands of the domestic economy is for the government to provide the necessary incentives so that local industries prosper, hire more workers, and provide decent pay.
(Photo credits here).


Chaudhury, N., J. Friedman, and J. Onishi. 2013. Philippines Conditional Cash Transfer Program Impact Evaluation 2012. Retrieved March 2, 2014 from the DSWD at,%20Impact%20Evaluation%202012.pdf

De Janvry, A. and E. Sadoulet. 2004. Conditional Cash Transfer Programs: Are They Really Magic Bullets? University of California at Berkeley

Reyes, C., A. Tabuga, C. Mina, and R. Asis. Promoting Inclusive Growth through the 4Ps. PIDS Discussion Paper No. 2013-09

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