Cash isn’t the only thing guaranteed income programs can deliver

Cities have been testing the idea that giving low-income residents unrestricted cash payments as an income supplement can help them achieve economic security and build local economies. And the data shows they are right.

Across the United States, an increasing number of local governments are piloting programs in which low-income residents are given regular, recurring payments—usually over two years. The programs aim to give historically underresourced populations a way to gain enough stability to start building wealth. 

Policies at all levels of government have perpetuated poverty among Americans, particularly among people of color and other minorities, Mayor Melvin Carter of St. Paul, Minnesota, told Route Fifty. And lawmakers and the public have long believed that giving assistance to low-income individuals will result in them mismanaging their money, for instance, or spending it on drugs. 

“We believed all of that nonsense with no evaluation, no data, research…. We just accepted it,” he said. But guaranteed income pilots are churning out data that shows “when low-income Americans have money, they spend it on their kids, they spend it on rent, they spend it on food, they spend it on all the same stuff that [higher-income individuals] would spend it on.” 

That’s the idea behind Mayors for a Guaranteed Income, a network of local leaders advocating for the implementation of basic income initiatives. Since 2020, more than 125 mayors have joined the coalition, and about 60 local communities have conducted or are conducting guaranteed income pilot programs, he said. The group has helped deliver more than $250 million in unconditional cash payments to thousands of Americans. 

The St. Paul mayor, and co-chair of the coalition, helped roll out the first MGI-affiliated pilot program in the nation. From October 2020 to April 2022, the program provided 150 residents with monthly $500 payments via prepaid debit cards. The city leveraged funds from the Coronavirus Aid, Relief and Economic Security Act, which Carter said many local governments are doing to support basic income projects.

In Minnesota, for instance, Carter said businesses are often hesitant to establish roots in the state because of historically low unemployment rates. But companies underestimate how much of the unemployed population are willing and able to seek new job opportunities, so cash assistance policies can help remove barriers for those looking to join the workforce. 

Data from the pilot showed that the number of participants employed increased from 49% to 63% from the pilot’s start to six months after its conclusion. That extra cash gave residents leeway to seek more stable, higher-paying work, he said. They had time, for instance, to take time from a part-time hourly-wage position to apply for full-time work. The income supplement could also help pay for child care that frees them to work more. 

Plus, unrestricted cash helps families address their individual needs effectively. Carter, whose family used to be enrolled in the Special Supplemental Nutrition Program for Women, Infants, and Children program, said while federal assistance programs are aimed at helping families, they often include stringent restrictions on what individuals can purchase. 

Under WIC, Carter could only purchase certain types of milk, eggs or peanut butter, for example, but his daughter had allergies to those foods. “The government decided we could use these resources for cow’s milk, but not for soy milk that she could actually drink,” Carter said.

Policymakers must understand that families know what they need better than lawmakers sitting in city hall or in a state or federal legislature, he said. 

In 2021, San Antonio Mayor Ron Nirenberg joined Mayors for a Guaranteed Income amid the city’s cash transfer pilot program. The city worked with UpTogether, a nonprofit dedicated to systems change across U.S. governments, and other philanthropic partners such as San Antonio Area Foundation and the H.E. Butt Foundation. The partners funded a $5 million cash assistance project, with the city contributing about $1.9 million to the program through federal relief funds, according to Jesús Gerena, CEO of UpTogether. 

One thousand individuals and families were chosen for the cash transfer program that ran from December 2020 to January 2023. Participants had to have a household income at or below 150% of the federal poverty line and had to have experienced an economic hardship due to the pandemic, such as job loss or reduced working hours. 

Participants received an initial payment of $1,908 in December, followed by eight quarterly installments of $400 from April 2021 until January 2023, for a total of $5,180. Individuals were given money through prepaid cards or the nonprofit’s online platform UpTogether Community, where people can create a profile to link their bank account information.

A University of Texas-San Antonio assessment of program outcomes released earlier this month found that individual and household income among participants generally increased over the course of the program. Between April 2022 and January 2023, the percent of unemployed cash recipients decreased from 39.4% to 34.8%, and homeownership increased from 10.5% to 12.5%. Researchers, however, said those changes were not statistically significant. 

The evaluation also suggested that cash assistance is “a tremendous stress reliever,” Kara Joyner, principal investigator and professor of sociology and demography at the University of Texas at San Antonio, told Route Fifty. The additional income, for instance, meant recipients could more easily meet their financial obligations. 

Plus, the money had “ripple effects into other areas of their lives,” researchers wrote. It allowed individuals to choose whether to pursue new education and employment options, reduce their food insecurity or spend less time working and more time with family and loved ones. 

“I was able to do more at times because I was able to get my bills met, in turn I had extra money to be able to spend on my children and take them out or get them what they needed or wanted,” one respondent reported. “I feel without the extra money I had coming in some of those times spent at parks or outings with my family would not have been possible.” 

For future cash transfer programs, respondents said they believe monthly, instead of quarterly, payments would be more helpful. They also suggested program managers offer resources and services to help participants create and work toward financial goals. Stakeholders, Joyner said, should collect programming data before, during and after completion to effectively evaluate the long-term impacts of cash transfers. 

“I think the general mental model is that when it comes to investing in people who are facing financial hardship, it’s seen as a handout,” Gerena said. However, when we pass tax breaks or issue refunds to “folks who already have wealth … it’s seen as a [good investment] because we know it pays dividends.” 

“If you remove those stereotypes, it’s really about people and what happens when we invest in people,” he said. “The truth is, what [cash assistance] does is create the space for people to start making new decisions about their lives.”