Groundbreaking $36 Million Guaranteed Income Experiment Reveals Surprising Impacts on Work and Well-Being

Largest U.S. Guaranteed Income Experiment Reveals Mixed Results

In a groundbreaking study titled "The Employment Effects of a Guaranteed Income: Experimental Evidence from Two U.S. States," researchers Eva Vivalt, et al explore the impacts of unconditional cash transfers on employment outcomes. Published by the National Bureau of Economic Research (NBER) in July 2024, this experiment involved 1,000 low-income individuals receiving $1,000 monthly for three years. The control group, consisting of 2,000 participants, received $50 monthly. This study, the largest of its kind in the U.S., provides valuable insights into how guaranteed income affects labor supply, income, and personal life.

Experiment Setup

The study involved 1,000 low-income individuals as the treatment group and 2,000 individuals as the control group. Participants in the treatment group received $1,000 per month unconditionally for three years, while those in the control group received $50 per month.The study was conducted over three years and published in July 2024. The experiment was carried out in two U.S. states. The aim was to investigate how unconditional cash transfers affect employment, income, and personal well-being.

Key Takeaways

1. Reduction in Labor Supply: The study found a 2.0 percentage point decrease in labor market participation among recipients, with a reduction of 1.3-1.4 hours per week in labor hours.

2. Decreased Income: Despite receiving cash transfers, participants saw a reduction in total individual income by about $1,500 per year, mainly due to decreased salaried or wage income.

3. Increased Leisure Time: The primary use of additional income was for increased leisure time, rather than more productive activities like education or entrepreneurship.

4. No Improvement in Job Quality: There were no significant changes in job satisfaction, working conditions, or wages.

5. Household Effects: The reduction in labor supply and income was not limited to individuals but extended to other household members, indicating joint decision-making within households.

6. Entrepreneurship and Education: While participants showed more interest in entrepreneurial activities, this did not translate into significant entrepreneurial ventures. Similarly, improvements in education outcomes were modest and statistically insignificant.

Deep Analysis

The study's findings challenge the common belief that guaranteed income can substantially improve economic and personal well-being. Despite the significant financial support, participants did not invest heavily in long-term productive activities. The reduction in labor supply, both in terms of participation and hours worked, suggests that guaranteed income may disincentivize work, even without the disincentives of means-tested programs.

Additionally, the modest increase in leisure time over more productive uses indicates that recipients might prioritize immediate comfort over future gains. This trend was also evident in the increased duration of non-employment and the lack of significant entrepreneurial activity. Interestingly, the report of more disabilities or health problems could imply that financial stability allows individuals to address long-neglected health issues or might be a self-justification for reduced work effort.

Did You Know?

1. Largest Experiment: This study is the largest unconditional cash transfer program evaluated by a randomized controlled trial (RCT) in the U.S. to date.
2. Surprising Income Effect: Participants' total individual income decreased despite receiving substantial cash transfers, challenging assumptions about the economic benefits of guaranteed income.
3. No Major Educational Gains: While there was a slight increase in completing high school or post-secondary programs, the overall impact on formal education was modest.
4. Health Reporting: There was a significant increase in participants reporting disabilities or health problems that limit their work, which could reflect better healthcare access or changes in self-perception.

This comprehensive study provides crucial insights into the nuanced impacts of guaranteed income, revealing that while it offers greater financial freedom and leisure time, it does not necessarily lead to improved economic or employment outcomes. These findings will play a critical role in shaping future policies on unconditional cash transfers and their intended benefits.