Tuesday, September 10, 2013

Breaking The Poverty Trap

From my point of view, one of the biggest problems with the whole ideological debate about equal outcomes (“affirmative action”) versus equal opportunity (“meritocracy”) is that it’s really a false dichotomy.

In many ways, you can’t have one without the other. A meritocracy that truly rewards merit only works if you assume everyone starts off equally. If you want to be wonkish about it, it’s a one-generation, equal-endowment model of lifetime income.

But parents since time immemorial have worked to put their own children ahead of the pack, and higher income parents can afford higher quality and quantity of investment in their children – as a result, nobody starts off equal, and meritocracy only perpetuates inherited inequality.

A race of purported equals is thus rigged right from the start, with some handicapped at the start line, and others beginning well ahead. Real life is better approximated by a multi-generational, unequal-endowment model.

A truly comprehensive education system can compensate for such weaknesses, but even here many would fall through the cracks because human capital is not built just through acquiring knowledge and cognitive skills, but also through non-cognitive skills and psychosocial skills which primarily come through interaction with peers and more importantly with parents, and are generally embedded in a child’s psyche well before formal education begins.

That’s why kids from higher income families tend to have higher lifetime incomes – it’s not just the greater amount of education they receive, it’s also the habits of thought and attitudes that they pick up. A practical and effective application of equal opportunity thus requires, ironically, some measure of affirmative action.

Here’s the result of one such intervention (abstract):

Labor market returns to early childhood stimulation : a 20-year followup to an experimental intervention in Jamaica
Gertler, Paul; Heckman, James; Pinto, Rodrigo; Zanolini, Arianna; Vermeerch, Christel; Walker, Susan; Chang-Lopez, Susan; Grantham-McGregor, Sally;

Summary: This paper finds large effects on the earnings of participants from a randomized intervention that gave psychosocial stimulation to stunted Jamaican toddlers living in poverty. The intervention consisted of one-hour weekly visits from community Jamaican health workers over a 2-year period that taught parenting skills and encouraged mothers to interact and play with their children in ways that would develop their children's cognitive and personality skills. The authors re-interviewed the study participants 20 years after the intervention. Stimulation increased the average earnings of participants by 42 percent. Treatment group earnings caught up to the earnings of a matched non-stunted comparison group. These findings show that psychosocial stimulation early in childhood in disadvantaged settings can have substantial effects on labor market outcomes and reduce later life inequality.

Retraining and reskilling programs costing billions of Ringgit? Expensive subsidies? Income transfers aka cash handouts? When people start off on unequal footing and begat an unequal society, these may be the only solutions for the present generation.

But for future generations, how about just one hour a week for two years – about 100 hours in total – which would be enough to change a child’s entire life. Now isn’t that an investment worth thinking about?

Technical Notes

Gertler, Paul; Heckman, James; Pinto, Rodrigo; Zanolini, Arianna; Vermeerch, Christel; Walker, Susan; Chang-Lopez, Susan; Grantham-McGregor, Sally, "Labor market returns to early childhood stimulation : a 20-year followup to an experimental intervention in Jamaica", World Bank, Policy Research working paper no. WPS 6529, July 2013


  1. Our government only does the 'senang' things like change the price of things and issue money. To them that is 'governing'. Can't blame them. They were brought up in rent-seeking families.

    1. Same like you senang just blame the gomen........

  2. seems like Red Bean has been assigned to this blog.

  3. Reminds me of the row going on between Perkasa and shopping mall owners - Perkasa claiming shopping mall owners discriminating against Bumi but the mall owners claiming that they are 'business-oriented'.

    Problem is, very few bumi entrepreneurs have the capital, networks, skill and education to run complex retail businesses. Therefore very few bumi businessmen act as agents and distributors for leading international retail brands. The Chief Minister of Melaka recognized that when he mentioned that most bumis are involved in small-scale businesses

  4. ^its about capital or modal.Most bumis and Malays are transitioning from poor to middle income and building their asset base.However, the entrepreneurshio gap between bumis and non bumis can be gapped by embracing the internet for business.the entrepreneurship drive is there(example the burger bakar businesses cropping up), only need the personal courage to dare try and encouragement.

    Back to escaping poverty

    My grandparents were fortunate and were trained by the British to become teachers, my uncle became a specialist IT engineer, my parents are lecturers and accountant with modest middle incoe lifestyle, and im engineer with siblings on way to become somebody in society. Each generation becomes more educated and have better jobs than the previous. This trend is important IMO.

    I believe education is key to break the cycle of poverty while the govt must encourage stability to create jobs growth. IMO, te strength of the Malaysian workers is job stability that encourage consumerism and wealth growth, its a reason why Malaysians change cars once the loan finish coz they can bet that they have a job that can pay off their car loans for the next 7 years.