How extra cash changes lives
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Illustration: Brendan Lynch/Axios
Unconditional cash transfers can be transformative in very poor countries. Is the same true for poor Americans? Two recent studies have attempted to find out — with mixed results.
Why it matters: Cash benefits are the relatively affordable first step toward the dream of a universal basic income where every American is given enough to live on. Until now, however, there has been relatively little hard data on how effective they are in the domestic context.
- These two studies are unlikely to change anybody's mind one way or the other.
Driving the news: OpenResearch, a nonprofit research outfit launched by Sam Altman, has released findings from the largest-ever study of cash transfers in this country. It followed 3,000 participants from Illinois and Texas, 1,000 of whom were granted $1,000 per month for three years.
- The Harvard Kennedy School has also published the results of a smaller study of 2,880 residents of Chelsea, Mass. Of them, 1,746 received between $200 and $400 per month for nine months, depending on the size of their family.
Between the lines: Both studies took pains to construct and study control groups — people who didn't receive the cash transfers.
- Some large and meaningful effects among the beneficiaries were also seen in the control groups, suggesting that broader macroeconomic trends can dwarf the effects of cash transfers.
What they found: The OpenResearch recipients saw their non-grant incomes rise 52% after three years of benefits.
- That seems impressive — but incomes in the control group rose by 70%.
- That's in large part because they worked more: cash recipients with jobs worked 1.3 fewer hours per week than the members of the control group.
- These results, suggest the researchers, might show that recipients of strings-free cash might have "increased agency to be more selective in their employment" or might even have felt able to take "a lower paying position they find more meaningful."
Follow the money: Cash recipients ended up with a modest increase in financial assets, relative to the control group — but paradoxically also saw a modest decrease in net worth, thanks to the fact that they were more likely to take out a car loan or a mortgage.
- That suggests most of the cash was spent directly where it was needed most, rather than being saved for a rainy day.
- Pretty much what you'd expect, given that the families started out making less than $30,000 per year, on average.
Zoom in: Both studies found evidence that families receiving cash transfers drank less.
- In the Harvard study, cash benefits led to 87% fewer emergency department visits related to substance use.
- In the OpenResearch study, recipients were 20% less likely to report a level of drinking that interfered with their responsibilities.
Zoom out: The Harvard study found significant health improvements after 9 months — and the OpenResearch study saw significant health improvements in the first year.
- By the end of three years, however, broad health outcomes for the OpenResearch participants were not statistically different from outcomes for the control group.
The bottom line: Evidence from smaller, foreign, and less rigorous trials has suggested that cash grants cause significant improvements in employment, income, wealth, and health.
- These latest results are a bit more ambiguous but hardly dispositive.
