Imagine combining the characters of a billionaire tech founder, academics from some of the most prestigious research institutions in the world, and a cast of three thousand residents of the United States living below the poverty line. It’s not the pitch for cinematic a summer blockbuster, but a summary of the season’s hottest methodical and meticulous research study. It has captured media attention across the political spectrum.
Eva Vivalt, Assistant Professor of the Department of Economics at the University of Toronto, was one of the lead researchers in a Research Practice Partnership (RPP) that spent years investigating the outcomes of unconditional cash transfers to people living in poverty.
1000 people with average annual household incomes of $29,000 living in Illinois and Texas received transfers of $1000 per month for three years. A control group of 2000 people from the same locations and income levels received $50 each per month. Described as the “Sam Altman-backed basic income study,” in the popular press since the study results came out at the end of July, $24 million of the almost $40 million in cash transfers was funded by the Altman-founded OpenAI through OpenResearch. The project was driven by Altman’s often-stated belief that some form of basic income may be necessary as AI replaces people in jobs.
The experimental design, data collection and analyses by Vivalt et al was funded through research grants including contributions from the National Institute of Health and National Science Foundation. The experiment resulted in a trilogy of working papers. Vivalt presented The Employment Effects of a Guaranteed Income: Experimental Evidence from Two U.S. States and a coauthor presented the results of one of two companion papers, Does Income Affect Health? Evidence from a Randomized Controlled Trial of a Guaranteed Income at the National Bureau of Economics Research (NBER) Summer Institute. A third paper, The Impact of Unconditional Cash Transfers on Consumption and Household Balance Sheets: Experimental Evidence from Two US States, will be released on Monday, Aug. 5.
The US government invests a great deal in cash transfer programs including the Child Tax Credit (CTC), the Earned Income Tax Credit (EITC), and Temporary Aid to Needy Families (TANF). However, this study was unlike many others because of the unconditional nature of the cash transfers.
“Our cash transfer doesn’t come with any disincentive to work,” Vivalt explained. “There are many cash transfer programs, but they are means tested and when people earn a bit more, their cash transfers are clawed back. Unlike these other programs, our cash transfer doesn’t have any disincentive to work, so if you observe people working less, it is just a result of their own preferences and it’s purely an income effect. This makes our results compare more to studies of lottery winners.”
Participants used the cash transfers toward rent, food, transportation and other necessities.
“We didn’t see some of the things that policymakers and the general public are sometimes concerned about, like spending on vice goods like gambling or smoking or alcohol.” Vivalt said. “Maybe 1% of the transfers overall – which is not very much – is used for that, and it doesn’t seem to be causing anybody any major problems, in that transfers weren’t enabling addiction or anything like that.”
According to Vivalt’s results, people who received the cash transfer of $12,000 each year worked an average of 1.3 hours per week less and reduced their earned income by $1,500 each year. The extra time was used primarily for leisure. With access to choices afforded by the cash transfers, a participant like Maggie, a single mother of eight who, before the transfers was working as both a school bus driver and direct support professional for adults with developmental disabilities, could watch almost an entire movie every week.
“There’s no judgment of people spending more time on leisure,” Vivalt said. “That just shows what people’s actual preferences are. Cash gives people the freedom to pursue their own preferences, and people use it for a variety of different things. Cash is also an imprecise tool. We do not see much in the way of impacts on health, for example, and if you want to improve health you might get more bang for the buck with a more targeted intervention. But that is part of the trade-off with cash transfers: You might see less movement on any one outcome than you would with a more targeted program, but in exchange people have more freedom to make decisions about their lives.”
Return to the Department of Economics website.
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