Fight Poverty by Giving Poor People Money

A blog about business and economics.
Jan. 19 2014 11:42 AM

Fight Poverty by Giving Poor People Money

Because of the way poverty is defined in the United States, it's obvious that poverty can be effectively combated by giving money to people who are living in poverty. Nonetheless, people might wonder if cash grants suffice to actually tackle the adverse consequences of poverty. But here's a great writeup from Moises Velasquez-Manoff of a study of an unconditional cash transfer program related to a casino gambling windfall among the Cherokee that suggests yes it can*:

[J]ust four years after the supplements began, Professor Costello observed marked improvements among those who moved out of poverty. The frequency of behavioral problems declined by 40 percent, nearly reaching the risk of children who had never been poor. Already well-off Cherokee children, on the other hand, showed no improvement. The supplements seemed to benefit the poorest children most dramatically. [...]
She and her colleagues kept following the children. Minor crimes committed by Cherokee youth declined. On-time high school graduation rates improved. And by 2006, when the supplements had grown to about $9,000 yearly per member, Professor Costello could make another observation: The earlier the supplements arrived in a child’s life, the better that child’s mental health in early adulthood. [...]
What precisely did the income change? Ongoing interviews with both parents and children suggested one variable in particular. The money, which amounted to between one-third and one-quarter of poor families’ income at one point, seemed to improve parenting quality.
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Of course it takes many decades to understand the truly long-term consequences of cash grants for children, but the best evidence we have shows a large positive impact of welfare checks on life outcomes for kids who benefited from the pre-Depression version of cash assistance for poor single moms. And even though domestic poverty in a rich country is actually quite different from absolute poverty in low-income countries, we see similar impacts for the global poor. It turns out that we could do an awful lot to improve human welfare by focusing our efforts more narrowly and more intensely on spreading the wealth around.

*Correction, Jan. 21, 2014: A previous version of this post misspelled the last name of
Moises Velasquez-Manoff.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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