Is paying for portrait photos good for the people in the community you're photographing?

TL;DR: Yes.

Here's a spin on your question: let's say you asked somebody in the West (say, a street performer) if you can take their photo, and they asked you for money. You would consider if the amount being asked is reasonable, and then either take the photo and give them the money, or you would not. However, you would presumably not start arguing with them about whether "it's the right thing" for them to ask for money, or for you to give it.

This applies equally anybody you meet in a remote 3rd-world village. Many photogenic tribes (long-neck Karens, Maasai herdsmen, Aboriginal dancers in Australia, etc) are quite well aware of the fact that Westerners consider them photogenic, and not a few make a living off this. So, if they're asking you for money, and the amount they want is reasonable, pay them.

That said, it's tough to separate this from the subjective "should you" discussion: for example, many Karens in Thailand are there as refugees with extremely limited job options outside posing in human zoos for tourists, and the lucrative industry built around this both encourages the status quo and drives young Karens to join it. But if you're concerned about exploitation, the correct response is to not go on organized tours in the first place, so the middlemen don't get their cut.

Yes it is.

On a group safari in Kenya our lorry rolled into a village and stopped to replenish the water tank. Within a few minutes they had dressed up some of the women in their finest clothes and beads (no jewellery - they were desperately poor) for photography. They wanted 5 shillings from each photographer.

I couldn't help but notice that those of us who seemed to be the most well-off were the ones who complained the loudest. Yet it was less than the price of a bottle of soda.

Otherwise, what was in it for them? Nothing, after a group of wealthy tourists help themselves to "their" water and drives away.

Even small amounts a money make a difference in a cashless economy.

There is a cultural issue here too. In parts of the world it's not just that people do not like to be photographed, or photographed for free, but feel that it somehow damages them: that you are not just making a photograph but really are taking something from them. People can be so offended that they might remonstrate in a threatening way, or even get up and move their temporary home somewhere else, because you have violated them and that place.

But by establishing a deal, you know it's ok to photograph them.

Anecdotal: We were in Mumbai a few years back; and while visiting the city, we were told not to give money directly to individual beggars because they probably will be mugged later on (especially if giving American money which we had on us at the time), but to give to organized charities (Which we did)

So, depending on the situation, if you are "surrounded" by beggars while taking pictures, it is probably not a good idea to do it; but if you are in a remote area, engaging a single person, it might be OK to give away little bit of local money.

If using a local guide, you can ask them.

This is the kind of question that could be cross-posted to https://photo.stackexchange.com/ where photographers could have had the same experience.