The pandemic has created both a public health emergency and a gigantic financial shock. Millions of people have lost their livelihoods. People need cash to support themselves and their loved ones, and this pandemic brings to the fore a policy set of responses that Dr. Lisa Gennetian, Pritzker Associate Professor of Early Learning Policy Studies at Duke University, and Dr. Daniela Del Boca, Professor of Economics at the University of Torino have worked on for many years. Dr. Lawrence Aber, Willner Family Professor of Psychology and Public Policy and University Professor at NYU, recently spoke with Drs. Del Boca and Gennetian about their research, the families involved in their studies, and reactions to cash transfer programs. Their conversation was edited for clarity and length.
Aber: Let's begin by describing different types of cash transfers. There are unconditional cash transfers, conditional cash transfers, and universal basic income.
Gennetian: I think there is a lot of confusion around the distinctions, especially with all the momentum around universal basic income happening in the U.S. prior to the pandemic. The key operative term is universal. The universal aspect of universal basic income is what distinguishes it from cash transfers, even though the mechanism is the same, which is getting cash in the hands of people.
Del Boca: Unconditional transfers provide cash to people below some poverty levels without requiring any behavioral changes. Conditional transfers instead require that individuals engage in some productive behavior such investing in their education or health. For example, families are entitled to receive conditional cash transfers if they enroll their children in a better school, monitor their children’s health, or invest in their own human capital, such as actively looking for a job. These are all investments that a family may or may not do, not only because they have limited resources, but also because they don't know enough about how each behavior is a return on their investment. Conditional cash transfers may incentive them to acquire more information.
Aber: What parts of the world are you studying and which types of cash transfers?
Del Boca: My work on cash transfers now is mainly on Italy. Italy is an important context because since 2007, Italy has seen an enormous increase in their poverty rate, especially among families with children and immigrants. Italy does not have a tradition of experimental research, so there were not many researchers doing experiments and understanding what kind cash transfer or conditional cash transfer would be better for families. A few years ago, I was asked by a foundation to help understand why a very generous cash transfer did not seem to combat the family’s poverty in the long run. We introduced conditionality in the cash transfer and we conducted a randomized experiment in which we divided people receiving conditional cash or unconditional or nothing. Those who received a conditional cash transfer were asked to complete a course on actively looking for a job, and managing their money. This condition actually seemed to work very well. When we compare a family who receives conditional cash transfers and unconditional ones and took the mentoring courses we see a very strong and significant effect. Conditional cash transfers families were more likely to look for a job and find a job, manage their money better, and save more. Since then only conditional cash transfers were used.
Gennetian: It is really interesting starting off with the Italy context. I'm involved in a very different type of study here in the U.S., The Baby’s First Years study, emerged from a similar concern around poverty. What are some solutions to poverty, with a particular eye on child poverty, and with some acknowledgement that targeting child development very early in life might be the most promising in terms of reducing the negative impacts of poverty as they grow older.
Baby’s First Years is asking this basic question: if we increase and improve income during those first few years of a child's life, do we see measurable impacts on early brain development and then subsequent effects on education and behavior and health? We're doing that by giving Mothers, at the time of the birth of their child in the hospital, an unconditional cash transfer. We give them $333 a month for 40 months. We're doing that on a debit card that has a large footprint that allows use across the United States. They can withdraw cash and they can use it like any kind of debit card that you can imagine, all with no fees.
Baby’s First Years is also designed as a randomized control study similar to the methods we just discussed. In our study, the comparison group is called the “low cash gift group.” Low cash gift group families are receiving $20 a month for 40 months of the child's life. We in part designed it this way because we didn't want the mechanism used to give out the cash to interfere with the impact of having more income. Everyone gets a debit card. Everyone gets a little bit of money. One group gets a substantial amount of money on a monthly basis with no strings attached and the other group gets a smaller amount of money on a monthly basis with no strings attached.
Part of our thinking here was not only to answer an important question about the impact of poverty reduction during children’s earliest years of life but also to do in a way that represents a reasonable policy to set children on a positive course without adding more demands to families.
Aber: What kind of resistance or receptivity have you found among policymakers, the public, and recipients? Among some policymakers and policy analysts, cash transfers have a bit of a bad reputation. If you give someone money, why would they work? When planning and executing your studies, have you experienced social attitudes and political attitudes related to the proposals for cash transfers?
Del Boca: We did some work on the effect of cash transfer on labor supply and fertility across Europe. We actually found some disincentive effect on labor supply especially among low educated women. They had very low wages and they couldn't get much money working in the labor market. This is one of the reasons for the bad reputation of unconditional cash transfers among policy makers. I think this is particularly crucial when the unemployment benefits are generous and jobs available are poorly paid
Gennetian: If we're really thinking about children's wellbeing, if that’s the objective, then is it such a bad thing that the labor supply effects might be different than for individuals who aren't supporting children? In other words, you might see cutbacks in work hours that then get put into more quality time with children and better child development outcomes. I think the comparative question is a really important one. If there is not a great labor market that can help people have income, then we need to think about alternatives so that we can keep consumer demand high, we can keep food on the table and we can take care of individuals in ways that don’t foster a long-term dependence on public assistance.
The other criticism that we've certainly is related to the question “why are you handing out cash to the poor? They're poor because they've obviously made choices to get there.” This is the whole critique about poor judgment and bad decisions. “Why are we giving more money to people who don't know how to make good decisions?” This is a very wrongheaded argument for lots of reasons: it's fueled by stereotypes and inaccurate assumptions about being trapped by poverty. Plus, there is very little actual evidence to support this view. In reviews of the effects of cash transfers, we do not see increases in buying temptation goods and engaging in what people call “sinful behaviors” like drugs and alcohol abuse. There is not broad support for that type of argument.
Aber: What are the families like who are the targets of your interventions and how much variability is there? Does one size fit all or how much is it possible to customize? Who's getting the money?
Gennetian: With the Baby’s First Years study, we thought about checks, we thought about actual cash, and we landed on debit cards for lots of practical reasons. We also happen to have the transaction data available to us from the debit card so we can actually learn something about how the cash is being used, not necessarily what's being bought, but we know every transaction. When we did our pilot, 1 out of 5 of the Mothers in the pilot study had never used a debit card. That's fascinating and surprising in the U.S. Two years out now for our four-site study sample, Moms get their monthly cash disbursement on the debit card and the far majority of them take it out as cash via an ATM right after they get it. They want cash, actual cash, which is so interesting to me.
Del Boca: The targets of our intervention are poor families with young child children. There is a large variability across origin of immigration, but in terms of income level, education they are quite homogenous. Only families with a larger number of children receive more money proportional to the number of children.
Aber: I think that reflection is very important for us to be mindful of during the pandemic. Inequalities seem to be multiplying and deepening in so many ways. There's a story there.
Gennetian: I agree that this is super important and goes back to the role of context. While cash transfers can be argued as one of the most equitable types of policies, it doesn't mean that it gives equitable agency and power to all individuals because it will depend on circumstances, local environments and systems.
Aber: How has the pandemic changed your own thoughts and interests about cash transfers? Will your work stay more or less on course or will you change it in some fundamental way?
Del Boca: We decided to stay on course but analyze in more depth the impacts of measures adopted after Covid. In particular we are analyzing the impact of the lockdown and the school closures which led to an incredible growth in housework and childcare for families with children. Children in particular have suffered very much since for months they have lost their socialization, their peer group, their teachers, and sometimes there is no computer available to follow class from home. For us, research is more difficult now because it is more complicated to interview them in their home (given the fear of contagion) so we have to do phone interviews.
Gennetian: We are staying on course and our families are even more thankful that they had a year of cash transfers before the pandemic hit. And now the cash transfer is even more essential to their lives so they've stayed closely connected. Our response rates have increased because they're sheltered in place. And for those that consent to the research they are additionally eligible for research participant payments. We have not been able to do some of the data collection around brain functioning and hair cortisol and parent child video interactions, which is a downside, but we are continuing with phone interviews until we can get back to them in person.