South SFV Today

A recent study on a guaranteed-income program in Compton, California, has revealed that regular government cash payments to low-income households during the COVID-19 pandemic improved perceptions of housing security and reduced household spending. The research indicates that recipients may have used the funds to pay down debt.

The two-year study, published by the National Bureau of Economic Research (NBER) on December 10, began in December 2020 with the Compton Pledge. This initiative was led by then-mayor Aja Brown and the nonprofit Fund for Guaranteed Income to mitigate economic hardships caused by the pandemic. The program provided an average of $500 per month to 698 randomly selected low-income households over two years—a roughly 20% increase in monthly household income. A control group of 1,402 households did not receive any transfers.

Guaranteed income programs differ from universal basic income programs as they provide unrestricted recurring payments specifically to those most in need. Some researchers suggest such programs could help achieve environmental goals by reducing community reliance on activities like deforestation or cattle grazing for income.

In the U.S., low-income communities are among those most vulnerable to climate change and pandemics. Sara Constantino, an assistant professor at Stanford Doerr School of Sustainability and author of the NBER study, stated: “Providing cash transfers, which can be flexibly spent as needs arise, could be one strategy for increasing the resilience of individuals and households to a range of stressors.”

Constantino highlighted the limited evidence base for unconditional cash transfers' effects in the U.S., despite robust evidence from middle- and low-income countries showing positive impacts on consumption, income, food security, psychological well-being, and child outcomes.

In 2023, about 18 million U.S. households were food insecure.

Half of the participants in the guaranteed income group received payments twice a month; others received them once per quarter. After eighteen months into the program, researchers interviewed 1,074 recipients and control group members about various economic and social factors including income levels, expenditures, asset accumulation, debt levels, workforce participation rates as well as psychological financial food security indicators.

“This is the first U.S. guaranteed income study to assess whether impacts vary depending on how often transfers are received—specifically whether small-yet-frequent or larger-and-lumpier payments work better for recipients,” said Constantino who co-authored this research alongside Sidhya Balakrishnan from Jain Family Institute Sewin Chan Jonathan Morduch both affiliated with New York University Johannes Haushofer based at National University Singapore.

Findings showed greater decreases in credit card debt among those receiving bi-monthly rather than quarterly payments.

Critics argue direct unrestricted money might reduce work motivation but authors found no significant effect on full-time employment though slight declines occurred among those initially working under twenty hours weekly when joining this scheme

Between February 2021 April 2023 unemployment surged while incomes dropped nationwide excluding these transfers average monthly incomes within this scheme stood $333 below those outside it reflecting smaller slower gains during recovery according Constantino

Recipients averaged $302 less monthly spending compared controls non-housing debts fell nearly $2k over eighteen months implying possible use towards repayment although not statistically significant

They reported less eviction fear yet no notable improvements overall psychological financial wellness some differences emerged demographically males noted larger negative impacts whereas females saw betterment especially single mothers who experienced increased earnings without labor force withdrawal hours worked rose amongst employed single moms

Unexpectedly findings diverged past studies suggesting prior high indebtedness potentially influenced outcomes further timing proved minimally impactful contrary expectations

Future inquiries might explore "anticipatory" actions delivering aid preemptively against severe weather conditions determining effectiveness alternative interventions bolstering resilience amidst emerging threats quicker recoveries sustained improvement longer term sustainability envisioned goal additional exploration supported Robert Wood Johnson Foundation Policies Action J-PAL private donors backed effort initially featured Stanford Doerr School Sustainability publication