But here's a great writeup from Moises Velazquez-Manoff of a study of an unconditional cash transfer program related to a casino gambling windfall along 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.
http://www.slate.com/blogs/moneybox/2014/01/19/fight_poverty_by_giving_money_to_the_poor_more_evidence_that_it_works.html
Welfare Works
That’s what makes new research into Mothers’ Pensions, one of America’s earliest welfare programs, so fascinating. These state-level programs for widows became popular in the early decades of the 20th century, before the financial strain of the Great Depression rendered them nonviable; later, the New Deal stepped in with the federal program Aid to Families With Dependent Children (AFDC; later replaced by Temporary Assistance for Needy Families or TANF).
Anna Aizer, Shari Eli, Joseph Ferrie, Adriana Lleras-Muney, and a team of research assistants took a detailed look at kids who grew up in Mothers’ Pension households and drew some conclusions about the long-term benefits of modest cash transfers. The program is old enough that almost all the kids whose moms received money are dead now, allowing the researchers to conclude definitively that it increased life expectancy. What’s more, World War II draft records show that poor kids whose moms received pensions were substantially healthier, had more years of schooling, and earned higher incomes than similar kids whose moms didn’t get pensions.
What Happens When You Just Give Money To Poor People?
The idea behind this is simple. Poor people know what they need, and if you give them money they can buy it.
But to some veterans of the charity world, giving cash is worrisome. When we first reported on this we spoke with Carol Bellamy, who used to run UNICEF, and who said people might spend the money on things like alcohol or gambling.
To see whether this was actually happening, researchers did an experiment. They surveyed people in Kenya who received money from GiveDirectly, and a similar group of people who didn't get money.
The results from the study are encouraging, says Johannes Haushofer, an economist at MIT's Poverty Action Lab who was one of the study's co-authors.
"We don't see people spending money on alcohol and tobacco," he says. "Instead we see them investing in their kids' education, we see them investing in health care. They buy more and better food."
People used the money to buy cows and start businesses. Their kids went hungry less often.
Niehaus says for him, the most interesting results from the new research were the improvements in mental health. Getting money made people happier, less stressed out.
http://www.npr.org/blogs/money/2013/11/08/243967328/episode-494-what-happens-when-you-just-give-money-to-poor-people
A trial in Vietnam in 2006 gave one-off handouts to 550 households; two years later, local poverty rates had fallen by 20 percentage points. The scheme was dubbed “cash for coffins” after elderly recipients spent the money on their funeral arrangements to save their children the expense.
A different scheme has been running in northern Uganda for four years. The government gives lump sums of around $10,000 to groups of 20 or so young people who club together to apply. Chris Blattman of Columbia University, New York, who has studied the programme, calls it “wildly successful”. Recipients spent a third of the money learning a trade (such as metalworking or tailoring) and much of the rest on tools and stock. They set up enterprises and work longer hours in their new trades. Average earnings rose by almost 50% in four years.
In such conditions, the schemes provide better returns than job-training programmes that mainstream aid agencies favour. Remarkably, they even do better than secondary education, which pushes up wages in poor countries by 10-15% for each extra year of schooling.
http://www.economist.com/news/international/21588385-giving-money-directly-poor-people-works-surprisingly-well-it-cannot-deal
Free money might be the best way to end poverty
In May 2009, a small experiment involving 13 homeless men took off in London. Some of them had slept in the cold for more than 40 years. The presence of these street veterans was far from cheap. Police, legal services, health care: Each cost taxpayers thousands of pounds every year.
That spring, a local charity decided to make the street veterans — sometimes called rough sleepers — the beneficiaries of an innovative social experiment. No more food stamps, food-kitchen dinners or sporadic shelter stays. The 13 would get a drastic bailout, financed by taxpayers. Each would receive 3,000 pounds (about $4,500), in cash, with no strings attached. The men were free to decide what to spend it on.
I didn’t have enormous expectations,” an aid worker recalled a year later. Yet.... None of the men wasted his money on alcohol, drugs or gambling. A year later, 11 of the 13 had roofs over their heads. (Some went to hostels; others to shelters.) They enrolled in classes, learned how to cook, got treatment for drug abuse and made plans for the future. After decades of authorities’ fruitless pushing, pulling, fines and persecution, 11 vagrants moved off the streets.
The cost? About 50,000 pounds, including the wages of the aid workers. In addition to giving 11 individuals another shot at life, the project had saved money by a factor of multiples. Even The Economist concluded: “The most efficient way to spend money on the homeless might be to give it to them.”
What if this pilot program has broader implications? Societies tend to presume that poor people are unable to handle money. If they had any, people reason, the poor and homeless would probably spend it on fast food and cheap beer, not on fruit or education. This kind of reasoning nourishes the myriad ingenious social programs, administrative jungles, armies of program coordinators and legions of supervising staff that make up the modern welfare state.
We like to think that people have to work for their money. In recent decades, social welfare has become geared toward a labor market that does not create enough jobs. The trend from “welfare” to “workfare” is international, with obligatory job applications, reintegration trajectories, mandatory participation in “voluntary” work. The underlying message: Free money makes people lazy.
Except that it doesn’t.
In recent years, numerous studies of development aid have found impressive correlations between free money and reductions in crime, inequality, malnutrition, infant mortality, teenage pregnancy rates and truancy. It is also correlated with better school completion rates, higher economic growth and improvement in the condition of women.“The big reason poor people are poor is because they don’t have enough money,” economist Charles Kenny, a fellow at the Center for Global Development, wrote in June. “It shouldn’t come as a huge surprise that giving them money is a great way to reduce that problem.”
http://www.washingtonpost.com/opinions/free-money-might-be-the-best-way-to-end-poverty/2013/12/29/679c8344-5ec8-11e3-95c2-13623eb2b0e1_story.html
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