paral

Stockton’s Basic-Income Experiment Pays Off

by Annie Lowrey, The Atlantic, Mar 03, 2021

A new study of the city’s program that sent cash to struggling individuals finds dramatic changes.
Two years ago, the city of Stockton, California, did something remarkable: It brought back welfare.

Using donated funds, the industrial city on the edge of the Bay Area tech economy launched a small demonstration program, sending payments of $500 a month to 125 randomly selected individuals living in neighborhoods with average incomes lower than the city median of $46,000 a year. The recipients were allowed to spend the money however they saw fit, and they were not obligated to complete any drug tests, interviews, means or asset tests, or work requirements. They just got the money, no strings attached.

These kinds of cash transfers are a common, highly effective method of poverty alleviation used all over the world, in low-income and high-income countries, in rural areas and cities, and particularly for households with children. But not in the United States. The U.S. spends less of its GDP on what are known as “family benefits” than any other country in the Organization for Economic Cooperation and Development, save Turkey. The Temporary Assistance for Needy Families (TANF) program spends less than one-fifth of its budget on direct cash aid, and its funding has been stuck at the same dollar amount since 1996—when the Clinton administration teamed up with congressional Republicans to turn it into a compulsory-work program. Those changes sliced into the safety net, allowing millions of people to fall through.

Most adults without children have no program to help them keep gas in the car and a roof over their head, no matter how poor they are. Most families with kids don’t have one either. In the United States, poverty is used as a cudgel to get people to work. We got rid of welfare for poor families’ and poor individuals’ own good, the argument goes. Give people money, and they stop working. They become dependent on welfare. They never sort out the problems in their life. The best route out of poverty is a hand up, not a handout.

The researchers Stacia Martin-West of the University of Tennessee and Amy Castro Baker of the University of Pennsylvania collected and analyzed data from individuals who received $500 a month and from individuals who did not. Some of their findings are obvious. The cash transfer reduced income volatility, for one: Households getting the cash saw their month-to-month earnings fluctuate 46 percent, versus the control group’s 68 percent. The families receiving the $500 a month tended to spend the money on essentials, including food, home goods, utilities, and gas. (Less than 1 percent went to cigarettes and alcohol.) The cash also doubled the households’ capacity to pay unexpected bills, and allowed recipient families to pay down their debts. Individuals getting the cash were also better able to help their families and friends, providing financial stability to the broader community.

“It let me pay off some credit cards that I had been living off of, because my household income wasn’t large enough,” one recipient named Laura Kidd-Plummer told me. “It helped me to be able to take care of my groceries without having to run to the food bank three times a month. That was very helpful.” During the study, Laura also experienced a spell of homelessness when the apartment building she was living in had a fire. The Stockton cash helped her secure a new apartment, ensuring that she could afford movers and a security deposit.

The researchers also found that the guaranteed income did not dissuade participants from working—adding to a large body of evidence showing that cash benefits do not dramatically shrink the labor force and in some cases help people work by giving them the stability they need to find and take a new job. In the Stockton study, the share of participants with a full-time job rose 12 percentage points, versus five percentage points in the control group. In an interview, Martin-West and Castro Baker suggested that the money created capacity for goal setting, risk taking, and personal investment.

“The big change was how it helped me see myself,” Tomas Vargas, another recipient, told me. “It was dead positive: I am an entrepreneur, I think of business ideas, I make business choices, I want to be financially stable.” When the program started, he worked in logistics. Now, in addition to nurturing his side projects, he is a case manager for individuals on parole.

He noted that receiving the money had made him more civically and politically engaged, if also more infuriated at the country’s scorn toward low-income households. “It’s like it’s a big game,” he said. “These people are living with a silver spoon, talking—but how about you walk this life? Have you ever even seen it?”

Finally, the cash recipients were healthier, happier, and less anxious than their counterparts in the control group. “Cash is a better way to cure some forms of depression and anxiety than Prozac,” says Michael Tubbs, a former mayor of Stockton, who spearheaded the project. “So many of the illnesses we see in our community are a result of toxic stress and elevated cortisol levels and anxiety, directly attributed to income volatility and not having enough to cover your basic necessities. That’s true in the public-health crisis we’re in now.”

More work, less destitution, more family stability, less strained social networks, less stress, fewer incidences of homelessness, fewer skipped meals: This is what welfare could give the country.

And it just might. America’s welfare politics have shifted radically of late, in part because of the economic pressures felt by Millennials, the first generation in recent U.S. history likely to end up poorer than their parents. Two once-in-a-lifetime recessions, persistent wage stagnation, wild wealth and income inequality, the student-debt crisis, housing shortages, and a broader cost-of-living crisis have made redistributive policies much more palatable to them—and they’re now the country’s largest voting bloc. The pandemic has shifted U.S. welfare politics too, emphasizing the need for child-care benefits and demonstrating the power of cash as stimulus.

Right now, Democrats are pushing to send low- and middle-income parents $300 a month for each child younger than 6 and $250 a month for children ages 6 to 18 as part of President Joe Biden’s $1.9 trillion coronavirus-relief package. The program would be temporary, but there is wide support for making it a permanent entitlement. Senator Mitt Romney, a Utah Republican, has put forward a proposal to eliminate TANF and replace it with a straightforward child allowance. A number of state, local, and nonprofit efforts are getting going too.

The Stockton demonstration project is ending. But a group Tubbs founded, called Mayors for a Guaranteed Income, is extending the initiative nationwide, with cities from Compton to Gary to Newark making plans to send low-income residents cash.

These policies are being described as child allowances, guaranteed incomes, and universal basic incomes—not as welfare—thus dropping some of the racist freight attached to TANF. But they are, in fact, a kind of welfare. Both as a policy and a concept, it is what so many Americans need.

Busting the Myth of ‘Welfare Makes People Lazy’

by Derek Thompson, The Atlantic, Mar 08, 2018

Cash assistance isn’t just a moral imperative that raises living standards. It’s also a critical investment in the health and future careers of low-income kids.

“Welfare makes people lazy.” The notion is buried so deep within mainstream political thought that it can often be stated without evidence. It was explicit during the Great Depression, when Franklin D. Roosevelt’s WPA (Works Progress Administration) was nicknamed “We Piddle Around” by his detractors. It was implicit in Bill Clinton’s pledge to “end welfare as we know it.” Even today, it is an intellectual pillar of conservative economic theory, which recommends slashing programs like Medicaid and cash assistance, partly out of a fear that self-reliance atrophies in the face of government assistance.

Many economists have for decades argued that this orthodoxy is simply wrong—that wisely designed anti-poverty programs, like the Earned Income Tax Credit, actually increase labor participation. And now, across the world, a fleet of studies are converging on the consensus that even radical welfare programs—including basic-income programs and what are called conditional cash transfers—don’t make people any less productive.

Most notably, a 2015 meta-study of cash programs in poor countries found “no systematic evidence that cash transfer programs discourage work” in seven different countries: Mexico, Nicaragua, Honduras, the Philippines, Indonesia, or Morocco. Other studies of cash-grant experiments in Uganda and Nigeria have found that such programs can increase working hours and earnings, particularly when the beneficiaries are required to attend classes that teach specific trades or general business skills.

Welfare isn’t just a moral imperative to raise the living standards of the poor. It’s also a critical investment in the health and future careers of low-income kids.

Take, for example, the striking finding from a new paper from researchers at Georgetown University and the University of Chicago. They analyzed a Mexican program called Prospera, the world’s first conditional cash-transfer system, which provides money to poor families on the condition that they send their children to school and stay up to date on vaccinations and doctors’ visits. In 2016, Prospera offered cash assistance to nearly 7 million Mexican households.

In the paper, researchers matched up data from Prospera with data about households’ incomes to analyze for the first time the program’s effect on children several decades after they started receiving benefits. The researchers found that the typical young person exposed to the program for seven years ultimately completed three more years of education and was 37 percent more likely to be employed. That’s not all: Young Prospera beneficiaries grew up to become adults who worked, on average, nine more hours each week than similarly poor children who weren’t enrolled in the program. They also earned higher hourly wages.

This finding has direct implications for the United States, where a core mission of the Republican Party is to reduce government aid to the poor, on the assumption that it makes them lazy. This attitude is supported by many conservative economists, who argue that government benefits implicitly reward poverty and thus encourage families to remain poor—the idea being that some adults might reject certain jobs or longer work hours because doing so would eliminate their eligibility for programs like Medicaid.

But this concern has little basis in reality. One of the latest studies on the subject found that Medicaid has “little if any” impact on employment or work hours. In research based in Canada and the U.S., the economist Ioana Marinescu at the University of Pennsylvania has found that even when basic-income programs do reduce working hours, adults don’t typically stay home to, say, play video games; instead, they often use the extra cash to go back to school or hold out for a more desirable job.

But the standard conservative critique of Medicaid and other welfare programs is wrong on another plane entirely. It fails to account for the conclusion of the Prospera research: Anti-poverty programs can work wonders for their youngest beneficiaries. It’s true north of the border, as well. American adults whose families had access to prenatal coverage under Medicaid have lower rates of obesity, higher rates of high-school graduation, and higher incomes as adults than those from similar households in states without Medicaid, according to a 2015 paper from the economists Sarah Miller and Laura R. Wherry. Another paper found that children covered by Medicaid expansions went on to earn higher wages and require less welfare assistance as adults.

“Welfare helps people work” may sound like a strange and counterintuitive claim to some. But it is perfectly obvious when the word people in that sentence refers to low-income children in poor households. Poverty and lack of access to health care is a physical, psychological, and vocational burden for children. Poverty is a slow-motion trauma, and impoverished children are more likely than their middle-class peers to suffer from chronic physiological stress and exhibit antisocial behavior. It’s axiomatic that relieving children of an ambient trauma improves their lives and, indeed, relieved of these burdens, children from poorer households are more likely to follow the path from high-school graduation to college and then full-time employment.

Republicans have a complicated relationship with the American Dream. Conservative politicians such as Paul Ryan extol the virtues of hard work and opportunity. But when they use these virtues to inveigh against welfare programs, they ignore the overwhelming evidence that government aid relieves low-income children of the psychological and physiological stresses that get in the way of embracing those very ideals. Welfare is so much more than a substitute for a paycheck. It is a remedy for the myriad burdens of childhood poverty, which give children the opportunity to become exactly the sort of healthy and striving adults celebrated by both political parties.

Welfare Money Is Paying for a Lot of Things Besides Welfare

by Zach Parolin, The Atlantic, Jun 13, 2019

Instead of giving cash assistance to poor families, states are widening the racial divide.
What do a Christian overnight camp, abstinence-only sex education, and pro-marriage advertisements all have in common? They’ve all been funded with money that used to provide cash assistance to low-income families.

In the United States, the federal Temporary Assistance for Needy Families program—often known simply as “welfare”—is administered by the 50 states, which have considerable leeway in how to spend the money. The choices states make are unmistakably correlated with race. The higher the proportion of African Americans in a state, the more likely officials are to try to change the way poor families run their lives, rather than simply help them with basic expenses. Many know TANF as the nation’s primary cash assistance program for low-income families. But depending on which state you live in, TANF may provide barely any cash assistance at all.

In a new study published in the journal Socio-Economic Review, I find that a state with a higher share of black families is less likely to allocate TANF funds toward the provision of cash assistance, but more likely to allocate TANF funds toward efforts to “encourage the formation of two-parent families” and “reduce the incidence of out-of-wedlock pregnancies.” The stated assumption behind these initiatives is that strengthening the family unit has greater long-term benefits than simply giving money to needy people.

In practice, though, the diversion of TANF funds away from cash support and toward programs meant to influence family formation has likely exacerbated racial differences in poverty. A clear pattern emerges: A black family in poverty is more likely than a white family to be offered advice via a “Healthy Marriage Initiative” in place of direct cash support.

These racial inequities in states’ use of TANF funds turn out to have important consequences for racial differences in child poverty. I find, for example, that closing the racial differences in states’ use of TANF funds would narrow the black-white child-poverty gap by up to 15 percent.

Arkansas’s experience epitomizes these findings. The state has a large African American population and no shortage of poverty. Yet in 2017, Arkansas spent only 4 percent of its total TANF budget on cash assistance. Instead, the state allocated two-thirds of the budget for the “formation of two-parent families” and the “reduction of out-of-wedlock pregnancies.”

But Arkansas is hardly alone in spending less on cash support. From the introduction of TANF, in 1997, to 2017, total spending on cash assistance across all states declined from $14 billion a year to $7 billion. (In constant dollars, the amount of money spent on cash assistance has fallen by two-thirds.) While cash support has waned, however, states’ TANF budgets haven’t changed: The federal government provides states the same chunk of money each year to run their TANF programs. Thus, every dollar that a state does not spend on cash assistance should generally be spent on another program or service that, at least in theory, will support low-income families.

So where is the money? In Mississippi, a state that spends comparatively little on cash support, TANF funds have been used to finance an abstinence-only sex-education curriculum that “teaches the social, psychological, and physical effects of engaging in sexual activities.” Officials in Louisiana, where only 4 percent of poor families with children receive cash support, redirect TANF funds toward an Alternatives to Abortion program that discourages low-income families from terminating pregnancies. Southern states aren’t the only ones using the money for moral uplift. In Maine, children were bused off to a TANF-funded Christian summer camp. In Connecticut, TANF money was diverted toward compulsive-gambler assistance.

To be sure, not all of the excess TANF funds are spent on summer camps and sex ed. Many states use the resources to fund child-care programs, earnings subsidies for the working poor, and other efforts to promote or incentivize employment. Some states, such as Georgia, have spent the largest chunk of their TANF funds on child-welfare services and foster-care support. Both are worthy purposes, but other states pay for these services out of general revenues rather than TANF funds.

Meanwhile, fewer and fewer families in need are receiving direct cash support—an essential resource for reducing levels of child poverty.

To understand why a state’s racial composition is the strongest predictor of how it allocates TANF resources, consider that academic research has shown time and time again that many Americans tend to view black families as lazy, unworthy of help, and receiving “more than they deserve” from the state. Whether researchers are exploring Why Americans Hate Welfare, as Martin Gilens did in his 1999 book, or asking “Why Doesn’t the U.S. Have a European Welfare State?,” as Alberto Alesina and colleagues asked in 2001, the answer nearly always begins and ends with evidence of racialized perceptions of the beneficiaries of social assistance. These perceptions have crept into many policy-making decisions, including those relating to TANF. Indeed, my results show that—unlike race—the share of single mothers in the state, a state’s wealth, or which political party has control of its legislature explains little of the variance in states’ cash-assistance spending.

Removing the racial inequities in states’ TANF allocations would mark a large step in reducing racial differences in child poverty. For context, the estimated 15 percent reduction in the black-white child-poverty gap is comparable to the effect of moving all children from single-mother households into two-parent households (while keeping all other characteristics of the households as is).

This is not to say that single motherhood is unimportant—more children growing up in two-parent households would surely be a good thing. But if a state’s purported goal is to reduce the number of its residents living in poverty, offering cash support coupled with employment incentives is likely to be more effective than sex-education courses or ad campaigns “promoting the value of healthy marriage.”

TANF is not the only social program in the U.S. that stratifies low-income families based on state boundaries and skin color. In Jamila Michener’s new book, “Fragmented Democracy: Medicaid, Federalism, and Unequal Politics,” the Cornell political scientist depicts in vivid detail how state differences in Medicaid policies “tether health policy even more deeply to race and poverty.”

Most concretely, Michener points out that eight of the 11 states with the largest share of the nation’s black population are among those that have failed to implement Medicaid expansion. Even among Medicaid beneficiaries, access to dental treatment, hearing or vision support, and end-of-life services vary by state. If a person eligible for Medicaid “got sick in the wrong state during the wrong year,” Michener writes, “the consequences of policy fragmentation could be life altering.”

Other examples of “policy fragmentation” abound. Today, roughly half of the 50 states offer a supplement to the federal earned-income tax credit, but the average black family is less likely than the average white family to live in one of those states. States vary in levels of minimum wage, paid-leave policies, and investments in early-childhood education, but again, regional and racial inequities are large. And perhaps most damaging, states have long varied with respect to their criminal-justice policies. In 11 states, at least one in 20 black men is incarcerated. Ironically, the states most likely to chide black women for raising children alone—and to promote marriage as the key to poverty reduction—tend to be the same states that incarcerate the largest share of black men. Including the incarcerated population in our estimates of poverty in the U.S. would only widen racial divides.

“Federalism,” as Michener poignantly writes, “is a primary channel through which the geography of opportunity is shaped in America.” The question of in which state a low-income family lives is associated more and more with how well that family is able to live. And more often than not, low-income families of color tend to find themselves living within the borders of a more punitive state.

We often perceive policy makers as defenders of economic opportunity, and social policy as a set of tools to alleviate inequalities. But as Michener’s work shows, and as the data on TANF suggest, state governments often function as a source of inequality rather than its cure. Instead of narrowing gaps between the advantaged and disadvantaged, social policy can, when deployed unevenly across the country, act to deepen them instead.

Zach Parolin is a post-doctoral researcher at Columbia University Center on Poverty & Social Policy.