What happens when people get cash with no strings attached?

The worry, and why it can be tested

The usual objection to unconditional cash, often called basic income, is that people will stop working. It is a fair question, and it no longer needs to be argued in the abstract. Governments, charities and researchers have paid real money to real people, often with a randomly chosen comparison group, and measured what happened.

Alaska: a dividend since 1982

Every year Alaska pays every resident a dividend from the Alaska Permanent Fund, a public investment fund built from oil revenue. It is universal, permanent and has run for more than 40 years.

Economists Damon Jones and Ioana Marinescu compared Alaska with similar states. The dividend had no effect on employment overall. Part-time work rose by 1.8 percentage points, about 17%. Their explanation: people with extra money spend it locally, which creates jobs that offset anyone who works less.

Finland: 2,000 unemployed people, 2017 to 2018

Finland's government picked 2,000 unemployed people at random and paid them €560 a month, tax-free, for two years, whether or not they found work. A similar group stayed on ordinary unemployment benefits.

• Employment rose slightly: six more days of work in the year measured.
• Recipients reported less mental strain, depression, sadness and loneliness, and felt better about their finances.

The money did not make people idle. It also did not transform their job prospects.

Stockton, California: $500 a month

The Stockton Economic Empowerment Demonstration gave 125 randomly selected residents $500 a month for two years. In February 2019, 28% of recipients held full-time jobs. A year later, 40% did. In the comparison group the share rose from 32% to 37%. Recipients also showed less depression and anxiety.

The sample is small. Researchers said some people used the money to cover the gap while they trained, took an internship or applied for better jobs.

Kenya: the money spreads

The charity GiveDirectly makes large one-off cash transfers to poor households in rural Kenya. Randomised studies found households spent the money on food, assets and businesses, and reported better psychological wellbeing. A later study of the whole local economy found each dollar transferred generated about $2.40 in local economic activity, with little rise in prices. Neighbours who got nothing gained too, because recipients spent the money with them.

Children: the casino study

In the 1990s a casino opened on Eastern Cherokee land in North Carolina, and every tribal member began receiving a share of the profits. Researchers happened to be following children in the area for a mental health study already. They could compare children whose families were lifted out of poverty with children who stayed poor and children who were never poor.

Among children whose families escaped poverty, psychiatric symptoms fell by about a third, from 4.28 to 2.90 on the study's scale. They reached the level of children who had never been poor. Children in families that stayed poor showed no such fall.

The study that found less

The largest recent US trial paid 1,000 low-income people $1,000 a month for three years, in two states, against a comparison group paid $50 a month. Its results are less flattering.

• Recipients worked one to two hours a week less, and so did their partners.
• Employment fell by about 4 percentage points, and earnings by about $1,900 a year.
• Most of the freed time went to leisure. The quality of people's jobs did not change.
• Wellbeing rose at first, then returned to the comparison group's level.

An honest summary has to hold both. Cash does not make most people stop working. It can make some work a little less. How much depends on the amount, who receives it, and what else is going on in their lives.

What the studies add up to

Question	What the evidence says
Do people stop working?	No. Effects range from slightly more work (Finland, Stockton) to none (Alaska) to slightly less (US $1,000 study).
Is it wasted?	In Kenya, spending went to food, assets and businesses, and lifted neighbours.
Does it help children?	The Cherokee study found clear falls in children's psychiatric symptoms when families left poverty.
Does wellbeing improve?	Yes in Finland and Stockton; in the US $1,000 study the gain faded.

No country yet pays a permanent, universal income large enough to live on. Alaska's dividend is universal and permanent but small; the others were temporary or limited to one group. What the evidence rules out is the claim that cash with no strings makes most people give up work.

Checking claims you hear

1. Ask whether there was a comparison group. Without one, a rise in jobs may just be a good year.
2. Ask how big and how long. $500 a month for two years is not a basic income for life.
3. Ask who received it: unemployed people, poor households or everyone. The answers differ.
4. Look for the less flattering results too. Good summaries include them.