cash grants for the poor

Another startling finding of academic research: the poor really do benefit from receipt of unearned cash! This might seem obvious, but many presume that the poor will waste any cash handed over to them, especially if they are aboriginal North American Indians. A common belief is that the poor are lazy, drink and smoke too much, and are bad parents, so access to free cash will actually make them behave even worse. In North Carolina (USA), a researcher came across a ‘natural experiment’, and used it to test this ‘theory’ of the lazy class.

So when, in 1996, the Eastern Band of Cherokee Indians in North Carolina’s Great Smoky Mountains opened a casino, Jane Costello, an epidemiologist at Duke University Medical School, saw an opportunity. The tribe elected to distribute a proportion of the profits equally among its 8,000 members. Professor Costello wondered whether the extra money would change psychiatric outcomes among poor Cherokee families.

When the casino opened, Professor Costello had already been following 1,420 rural children in the area, a quarter of whom were Cherokee, for four years. That gave her a solid baseline measure. Roughly one-fifth of the rural non-Indians in her study lived in poverty, compared with more than half of the Cherokee. By 2001, when casino profits amounted to $6,000 per person yearly, the number of Cherokee living below the poverty line had declined by half. ….

When Professor Costello published her first study, in 2003, the field of mental health remained on the fence over whether poverty caused psychiatric problems, or psychiatric problems led to poverty. So she was surprised by the results. Even she hadn’t expected the cash to make much difference. “The expectation is that social interventions have relatively small effects,” she told me. “This one had quite large effects.”

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.

Moises Velasquez-Manoff, “What Happens When the Poor Receive a Stipend?“, The Great Divide, New York Times blog, 18 January 2014.

Surprise, even a small amount of money makes a big difference in the lives of the poor!

For more, see the full blog at the link above, and this interview of Professor Costello:”Jane Costello: What the Great Smoky Mountains Study is telling us about mental illness among children“.

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