Abstract
Children represent the largest indirect beneficiaries of the U.S. social welfare system. Yet, many questions remain about the direct benefits of cash aid to children. The current understanding of the impacts of cash aid in the U.S. is drawn primarily from studies of in-kind benefits, tax credits, and conditional cash aid programs. A corresponding economics literature focuses on the role of income and the labor supply responses of parents, parenting skills, and early education as family investment mechanisms that reduce socioeconomic inequality in children’s well-being. In contrast to the U.S., dozens of low- to middle-income nations use direct cash aid—conditional or unconditional—as a central policy strategy, with demonstrated positive effects across a host of economic and health measures and selected aspects of children’s health and schooling. This paper reviews the economic research on U.S. safety net programs and cash aid to families with children and discusses what existing studies reveal about the impacts of cash aid on family investment mechanisms and children’s outcomes. We specifically highlight gaps in understanding the impacts of unconditional cash aid on children. We then review nine contemporary unconditional cash transfer programs and discuss their promise and limitations in filling the U.S.-based economic evidence gap.
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Notes
Children and the elderly are the two largest populations as beneficiaries of the U.S. social welfare system. Estimates from 2020 suggest that Social Security lifts 16 million people aged 65 or older above the poverty line (Romig, 2022). In contrast, over 12 million children were residing below or near the federal poverty level in 2020 (Creamer et al., 2022).
Social protection encompasses many of the tenets of safety net programs as applied in the U.S. but is also broader in its implication of the state or nation’s role in preserving and protecting health and economic welfare of its citizens and residents. UNICEF defines “social protection” as “[t]he set of public and private policies and programmes aimed at preventing, reducing and eliminating economic and social vulnerabilities to poverty and deprivation.” This definition includes, but is not limited to, cash transfer programs (UNICEF 2016). World Bank research on social protection in low- to middle-income nations can be found here: https://www.worldbank.org/en/topic/socialprotection.
See Moffitt (2016) for a review of the literature on means-tested transfer programs in the United States. In particular, Medicaid was signed into law in 1965 under Title XIX of the Social Security Act and provides health insurance to low-income individuals and families, with temporary expansions authorized under the American Rescue Plan of 2021 (Council of Economic Advisors, 2021).
See the following for primary evaluation results from each of the 16 program/site combinations: Connecticut’s Jobs First (Bloom et al., 2002); Florida’s Family Transition Program (Bloom et al., 2000); the Los Angeles Jobs-First Greater Avenues for Independence Evaluation (Freedman et al., 2000); the Minnesota Family Investment Program (Gennetian & Miller, 2000; Miller et al., 2000); the National Evaluation of Welfare-to-Work Strategies (Hamilton et al., 2001); the New Hope Project (Huston et al., 2001); and the Canadian Self-Sufficiency Project (Michalopoulos et al., 2002; Quets et al., 1999).
Similar positive schooling effects did not emerge among adolescents (Gennetian et al., 2004), potentially because adolescents were taking on more adult-like responsibilities such as caring for younger siblings as mothers entered work.
In 2017, eleven municipalities in the Netherlands began two-year experiments which are often characterized as basic income experiments, although their goal was to test conditional benefits designed to promote reintegration into work. In total, the experiments recruited 5000 social assistance beneficiaries, who were randomized into four treatment groups which varied slightly across sites: the self-management and exemption group, the earnings release group, the tailor-made supervision group, and the standard treatment group (Muffels & Gielens, 2019). Participants in the self-management and exemption group were expected to help themselves in the re-entry to work and were exempted from existing job application and reintegration requirements, while participants in the earnings release group were rewarded for their attempts to find work with a 50 percent income withholding rate instead of the standard 75 or 100 percent. Participants in the tailor-made supervision group received extra work re-entry support. The standard treatment group, functioning as the control group, received standard Dutch social assistance benefits. Results from 752 participants in the Utrecht experiment, conducted by researchers at Utrecht University, demonstrate small impacts on labor market participation, social participation, health, and well-being (Verlaat et al., 2020). None of the evaluation results published in English discuss impacts of the Netherlands experiments on children and families in particular.
Finland’s nationwide basic income experiment was conducted over a two-year period from 2017 to 2018. The experiment randomly assigned 2000 unemployment benefit recipients between the ages of 25 and 58 to receive 560 euros per month, with a control group of 5000 participants. Preliminary evaluation results do not show statistically detectable employment effects and do show positive effects on well-being, although effects were not identified separately among families with children (Kangas et al., 2019). Furthermore, Verho et al. (2022) do not find statistically detectable employment effects in the full sample, while Hämäläinen & Verho (2022) find positive employment effects among families with children only. Child outcomes were not included in program evaluations.
Examples include the use of instrumental variables and fixed-effects strategies to estimate the causal effect of income on children’s outcomes in the absence of experimental evidence. Løken et al. (2012) instrument for income using regional and time variation in the economic boom resulting from the discovery of oil in Norway. Black et al. (2014) interpret childcare subsidies as income shocks. Oreopoulos et al. (2008) instrument for income using firm closures and the resulting worker displacement. Other experimental and quasi-experimental studies in this literature largely focus on the joint impacts of income and environmental factors, or “nurture,” on children’s outcomes. One common empirical strategy leverages the random assignment of adoptees to adoptive families (Björklund et al., 2006; Das & Sjogren, 2002; Plug & Vijverberg, 2003; Sacerdote, 2002). Another common empirical strategy capitalizes on comparisons of twins and finds that correlations between siblings’ outcomes are much higher for monozygotic twins than for ordinary siblings, suggesting that “nature” plays some role (Mogstad & Torsvik, forthcoming).
Unlike other unconditional cash transfer programs, which may be viewed as income supplements, guaranteed income programs are often justified as a human entitlement. That is, guaranteed income programs are motivated by the idea that all citizens deserve economic security and dignity (Gonzalez & Bidadanure, 2020). The Center for Guaranteed Income Research, the Stanford Basic Income Lab, and Mayors for a Guaranteed Income jointly maintain the Guaranteed Income Pilots Dashboard, which provides updated data on guaranteed income pilots across the United States. The dashboard can be accessed here: https://guaranteedincome.us/.
This list of programs initially evolved prior to publication of Shah and Neighly (2022); however, became refined by the available information in this publication, and the work of the Guaranteed Income Community.
This field is rapidly evolving as community based organizations, philanthropy, and academic partners continue to announce new family-targeted cash transfer initiatives. For example, the recently announced Rx Kids program will provide unconditional cash allowances to all pregnant mothers and babies in the city of Flint, Michigan. https://msutoday.msu.edu/news/2023/rx-kids-program-aims-to-tackle-poverty-improve-health-flint-moms-babies.
Magnolia Mother’s Trust launched a “Storytelling Series” to share video interviews of mothers’ stories and “elevate the wisdom and experiences of … families.” Interviews can be found here: https://springboardto.org/magnolia-mothers-trust/storytelling-series/. GiveDirectly has also shared video interviews of COVID-19 lump-sum transfer recipients, found here: https://www.givedirectly.org/covid-19/us/.
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We thank Todd Dalrymple, The Duke Endowment, for inspiring a brief memo that sparked this paper.
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Shah, H., Gennetian, L.A. Unconditional cash transfers for families with children in the U.S.: a scoping review. Rev Econ Household (2023). https://doi.org/10.1007/s11150-023-09672-8
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DOI: https://doi.org/10.1007/s11150-023-09672-8