Cash could be ‘the welfare of the future’ according to a Bloomberg article exploring how cash payments give people in need ‘the breathing room to chart a better life course’ and will be key to America’s COVID-19 recovery.
The provision of cash handouts to individuals in America is a cornerstone of Biden’s $1.9 trillion COVID-19 relief bill, and this signals a major shift in policy thinking away from the traditional ‘hand up, not a hand out’ approach of the 80s and 90s. Back then, both state-administered block grants and tax credits would come with the requirement of people earning some income for themselves. This was informed by old thinking that welfare recipients would ‘choose to live off government benefits instead of getting a job’, which has been debunked by work such as this paper by Henrik Kleven. He concludes that the number of people in work is primarily limited by the availability of jobs.
Modern research is in favour of cash transfers. A 2018 literature review by Ioana Marinescu showed various unconditional transfer programmes boosted incomes, health and education. Similarly, a study of the Alaska Permanent Fund, which distributes cash payouts to Alaskans, found it increased part-time work by 17 percent and had no overall negative effect on employment.
