Moises Velasquez-Manoff, “What Happens When the Poor Receive a Stipend?”

by Karl Widerquist | Jan 26, 2014 | News, Research

[Michael W. Howard]

In this column, Velasquez-Manoff summarizes ground-breaking research by Duke University epidemiologist Jane Costello and UCLA economist Randall Akee on the effects of regular unconditional cash disbursements to every member of the North Carolina’s Eastern Band of Cherokee Indians, as equal shares of some of the profits of their casino. There have been many casinos build within Native American communities, which is sometimes controversial. However, gambling can be a fun and safe past time when casinos are run well. Visitors might want to read this article by the South Florida Reporter to learn how to find a reputable casino. Furthermore, casinos provide much-needed jobs and income for those living nearby. After five years, by which time the yearly profits per person amounted to $6000, the number in poverty declined by half, a surprising result for Costello. “The expectation is that social interventions have relatively small effects,” Costello told Velasquez-Manoff. “This one had quite large effects.” Other effects included a decline in minor crimes by youth, an increase in high school graduation rates, and, especially when the income arrived early in a child’s life, better mental health in early adulthood. The study thus tends to support the view that poverty can cause mental illness, rather than poverty being explained by mental illness. It is thought that the income facilitated better parenting by reducing the stresses of poverty. Even income arriving for 12-year-olds, according to Akee, has benefits that in five to ten years exceed the cost of the extra income.

Harrah's Cherokee Casino -via Daily Kos

Velasquez-Manoff does not mention the relevance of this study for basic income policy, but it is particularly relevant. First, even major studies like the Mincome pilot program in Manitoba were of fixed length. Critics could say that behavior was affected by the expectation that the income would end. Here, the payments are ongoing. Second, the payments, although not sufficient to cover basic needs, are substantial. By 2006, the yearly stipend had risen to $9000 per person. So, unlike Alaska’s Permanent Fund Dividend, these payments have been a more substantial percentage of individual incomes among poor families. Yet, as basic income advocates would expect, there appears not to have been a substantial work disincentive. Rather, the steady supplements to wages have relieved the stresses of seasonal, irregular employment, with numerous benefits to family and community life, and this, as Charles Karelis has argued, in The Persistence of Poverty, enables work. Akee “calculates that 5 to 10 years after age 19, the savings incurred by the Cherokee income supplements surpass the initial costs – the payments to parents while the children were minors.”

The study also raises interesting questions. The source of the funding is a business owned by the tribe; it is a “bottom-up” initiative. Would it make a difference to the outcomes if the source were publicly owned resources or tax revenues? Not all of the casino revenue went to cash payments. Some went to infrastructure and social services.

There are some questions regarding the long-term sustainability of these policies. For example, the growth of online casinos like https://thisisstory.com which may cut into the Cherokee casino profits if they continue to grow. But for the most part, these policies look like they will continue.

Were the positive outcomes due to the complementarity of these policies? Could there have been better outcomes if more had been spent on in-kind goods, or if more had been disbursed in cash? Whatever the answers, this study shows the positive potential of substantial universal unconditional cash payments in the fight against poverty.

Moises Velasquez-Manoff, “What Happens When the Poor Receive a Stipend?” Opinionator, New York Times, January 18, 2014.

EDITOR’S NOTE: In reaction to Velasquez-Manoff’s article, several other authors wrote articles about the project, some making the connection to BIG:

Matt Bruenig, “A Cherokee Tribe’s Basic Income Success Story,” Policy Shop, January 19, 2014.

Jared Bernstein, “The Transfer of Income to Poor Families with Children Can Be An Investment with Long Term Payoffs,” On the Economy, January 19th, 2014.

Dave in Northridge, “What Happens when Poor People get Cash? An Empirical Study,” Daily Kos, Jan 20, 2014.