In recent years, proponents of Guaranteed Basic Income (GBI) — programs that provide direct cash payments to low-income individuals with no strings attached— have touted it as a solution to fighting poverty. In response, numerous states and localities have created GBI programs, particularly in the wake of the coronavirus pandemic.
Both Minneapolis and St. Paul created GBI pilots during the pandemic, giving randomly selected low-income families $500 per month. St. Paul’s program started in 2020 and was expanded in 2022 to run for two more years. The Minneapolis GBI pilot gave cash to 200 households between June 2022 and June 2024. And in the 2024 session, the House Children and Families Finance and Policy Committee approved a bill to create a $100 million GBI program, which did not go far.
Whether such efforts will continue in Minnesota is yet to be seen. But new research sheds light on whether programs like these can meaningfully reduce poverty.
Study findings
In a recent NBER working study, a group of 1,000 randomly selected participants in Illinois and Texas was given $1,000 a month each for three years, starting in 2020. Outcomes among this group were compared to those of another group of 2,000 who received $50 per month over the same period.
The good news, according to the study, those who received $1,000 per month reported better parenting behaviors and also increased the use and quality of non-parental child care.
However, the transfer
did not have a meaningful effect on most educational outcomes measured in school administrative records, nor did it affect characteristics of the home environment, child food security, exposure to homelessness, or parental satisfaction.
Additionally,
While the transfer reduced parents’ stress and mental distress in the first year of the program, these effects were short-lived and dissipated by the second year of the transfer..
No panacea
Poverty imposes substantial costs on poor families and the rest of society. Efforts to lift families out of poverty, therefore, must be championed. At the same time, policymakers must ensure that resources are only invested in efforts with proven outcomes.
Spending time and money on ineffective solutions wastes limited resources while leaving the poor in unfavorable conditions. In this regard, empirical evidence is an invaluable resource when evaluating the effectiveness of various anti-poverty measures.
Ideally, effective anti-poverty strategies must result in long-term self-sufficiency. However, to offer sustained benefits, GBI, by its nature, requires continued spending on low-income families. This limits its ability to improve income mobility.
As the study illustrates, the few benefits of GBI do not translate to meaningful improvements in recipients’ lives. Some benefits, such as stress reduction, are temporary.
