(by Tyler Durden | Zero Hedge) – The “experts” didn’t expect it to turn out this way. An experiment conducted by Harvard University and University of Exeter social scientists found no-strings-attached handouts harmed low-income recipients rather than help them.
Funded by an anonymous nonprofit, the study centered on an experiment in which 2,073 low-income people were randomly selected to receive a single, unconditional cash transfer of either $500 or $2,000. Another 3,170 low-income study subjects received no money from the study.
The experiment was conducted from July 2020 to May 2021. On average, the subjects were earning roughly $950 a month while receiving another $530 in food stamps and other government benefits. A little over half were unemployed and 80% had children.
Over a 15-week period, participants were periodically surveyed about their financial, physical and mental health. Across a wide range of financial and non-financial attributes, researchers found no positive effects on those who received free money — but plenty of negative ones.
For a few weeks, people who received the extra money spent more than the control group — $182 a week for the people who received $500, and $574 a week for the ones given $2,000.
The additional spending didn’t bolster their financial health. The handout recipients reported the same rate of overdraft fees, late-payment charges and cash advances as did those who didn’t receive the extra money. And it was all downhill from there. The handout recipients reported:
- Less earned income
- Less job satisfaction
- Lower work performance
- More financial stress
- Less liquidity
- Worse sleep
- Worse physical health
- More anxiety
- More loneliness
The Wall Street Journal’s Allysia Finley writes:
“It’s no surprise that people who received a large percentage of their monthly income for doing nothing were less motivated to work and less satisfied with their work.
Earning a paycheck can give workers a sense of personal agency that encourages them to make better financial and health decisions. Receiving a handout may do the opposite.”
Significantly, while there was a marked difference between results for the handout recipients and the control group, there was no difference between those who received $500 and those who received $2,000.
Before commencing the study, researchers asked 477 social scientists and policy-makers to predict the outcome. As a group, these “experts” felt the extra money would have a multitude of benefits. They were dead wrong.
Finley isn’t surprised: “Most liberal academics and politicians believe government handouts are the solution to all problems. If transfer payments were a ticket to the middle class, the War on Poverty would have succeeded long ago.”
The study undermines common arguments for universal basic income (UBI), a scheme by which all Americans would receive a monthly income of, say, $1,000, without any requirement to demonstrate need. The concept was elevated to peak prominence by 2020 Democratic presidential hopeful Andrew Yang. Read Full Article >