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    A Canadian study gave $7,500 to homeless people. Here’s how they spent it. Archived Message

    Posted by Ken Waldron on September 10, 2023, 7:44 pm

    A Canadian study gave $7,500 to homeless people. Here’s how they spent it.

    The results show the power of cash transfers to reduce homelessness.

    By Sigal Samuel Updated Sep 2, 2023

    Ray, a man in his 50s, used to live in an emergency homeless shelter in Vancouver, Canada. Then he participated in a study that changed his life. He was able to pay for a place to live and courses to prepare him for his dream job.

    The newly published, peer reviewed PNAS study, conducted by the charity Foundations for Social Change in partnership with the University of British Columbia, was fairly simple. It identified 50 people in the Vancouver area who had become homeless in the past two years. In spring 2018, it gave them each one lump sum of $7,500 (in Canadian dollars). And it told them to do whatever they wanted with the cash.

    “At first, I thought it was a little far-fetched — too good to be true,” Ray said. “I went with one of the program representatives to a bank and we opened up a bank account for me. Even after the money was there, it took me a week for it to sink in.”

    Over the next year, the study followed up with the recipients periodically, asking how they were spending the money and what was happening in their lives. Because they were participating in a randomized controlled trial, their outcomes were compared to those of a control group: 65 homeless people who didn’t receive any cash. Both cash recipients and people in the control group got access to workshops and coaching focused on developing life skills and plans.

    Separately, the research team conducted a survey, asking 1,100 people to predict how recipients of an unconditional $7,500 transfer would spend the cash. They predicted that recipients would spend 81 percent more on “temptation goods” like alcohol, drugs, or tobacco if they were homeless than if they were not.

    The results proved that prediction wrong. The recipients of the cash transfers did not increase spending on drugs, tobacco, and alcohol, but did increase spending on food, clothes, and rent, according to self-reports. What’s more, they moved into stable housing faster and saved enough money to maintain financial security over the year of follow-up.

    “Counter to really harmful stereotypes, we saw that people made wise financial choices,” Claire Williams, the CEO of Foundations for Social Change, told me.

    The study, though small, offers a counter to the myths that people who become poor get that way because they’re bad at rational decision-making and self-control, and are thus intrinsically to blame for their situation, and that people getting free money will blow it on frivolous things or addictive substances. Studies have consistently shown that cash transfers don’t increase the consumption of “temptation goods”; they either decrease it or have no effect on it.

    “I have been working with people experiencing homelessness as a family physician for years and I am in no way surprised that the people who received this cash used it wisely,” Gary Bloch, a Canadian doctor who prescribes money to low-income patients, told me.

    “It should be fairly self-evident by now that providing cash to people who are very low-income will have a positive effect,” he added. “We have seen that in other work (conditional cash transfer programs in Latin America, guaranteed annual income studies in Manitoba), and I would expect a similar outcome here.”

    What’s more, according to Foundations for Social Change, giving out the cash transfers in the Vancouver area actually saved the broader society money. Enabling 50 people to move into housing faster saved the shelter system $8,277 per person over the year, for a total savings of $413,850. That’s more than the value of the cash transfers, which means the transfers pay for themselves.

    The research team also looked at what’s effective at changing the public perception about cash transfers to homeless people. They found that pointing out how cash transfers actually produce net savings for society, as well as showing how homeless people spend the money, are both effective ways to counter stereotypes among the public.

    “People think that the status quo is cheap, but it’s actually incredibly expensive,” Williams said. “So why don’t we just give people the cash they need to transform their lives?”

    The benefits — and limitations — of giving people free money
    Williams developed the idea for experiment, called the New Leaf Project, when her co-founder sent her a link to a 2014 TED talk by the historian Rutger Bregman titled “Why we should give everyone a basic income.” It argued that the most effective way to help people is to simply give them cash.

    The general idea behind basic income — that the government should give every citizen a monthly infusion of free money with no strings attached — has gained momentum in the past few years, with several countries running pilot programs to test it.

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    • A Canadian study gave $7,500 to homeless people. Here’s how they spent it. - Ken Waldron September 10, 2023, 7:44 pm