"What Happens When the Poor Receive a Stipend"?

In “What Happens When the Poor Receive a Stipend,” Moises Velasquez-Manoff, a science writer, reports on a remarkable study of a “natural experiment” in the impact of giving poor people more money. (I learned of this study from an email to the law clinicians' listserve from Francine Lipman of UNLV's William S. Boyd School of Law; she's a close observer of poverty issues.) It’s clear that poor people have many problems which make it hard for them to break out of poverty, and from that proposition it can be argued that money won’t actually help them, because those other problems will prevent them from using their new resources to change their lives.

But this natural experiment, studied by Professor Jane Costello of Duke University and others, suggests otherwise. The Eastern Band of Cherokee Indians in North Carolina, opened a casino in 1996 and decided to “distribute a proportion of the profits equally among its 8,000 members.” By 2001, “casino profits amounted to $6,000 per person yearly.” That’s a lot of money, and in fact by that year “the number of Cherokee living below the poverty line had declined by half,” apparently from approximately 20 % of the Cherokee population to 10 %.

But weren’t the no longer poor Cherokees still subject to all the ills that had plagued them before? Well, no. “[J]ust four years after the [cash] 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.” The effect continued in subsequent years: “Minor crimes committed by Cherokee youth declined. On-time high school graduation rates improved.” And it turned out that “[t]he earlier the supplements arrived in a child’s life, the better that child’s mental health in early adulthood.”

Why was this? One possibility is that it wasn’t money alone that changed things, but rather the combination of money for individual households plus social programs that the Cherokee government also created using additional casino revenues. Another of the social scientists studying these events, Randall Akee of UCLA, thinks otherwise, however, since apparently the social indicators began improving even before many of the social programs got under way.

Why would more money make so much difference? No doubt that’s a big question but here are two straightforward possible answers. One is that what makes the poor different from the rich is, after all, mostly just one thing: the poor have less money. Many problems that the rich have can be solved with money. Similar problems that the poor have cannot – because there’s no money. In particular, as Velasquez-Manoff suggests, the stress that parents feel when they can’t provide for their families – stress that likely affects their parenting in many ways – may simply go away when they can provide for their families after all.

The other answer is that what giving each household money did was to enlist the ingenuity of every household in improving its lot. It would take a really ardent believer in paternalism to imagine that the government could think better for each of these households than the households could for themselves. The cash enabled the people to do what they otherwise could not, namely to seek the good for themselves.

One natural experiment is not enough to settle a complex social question. A decline in mental illness to almost the levels of better-off children still leaves plenty of mental illness, and plenty of need for other programs to address it. I’m certainly not arguing that people always make good choices, even when they have the resources to do so. But people – rich and poor – are both flawed and powerful, and it’s always right to keep in mind how much people can accomplish if they actually have the chance.