The Guadalajara-Minnesota Connection
As new markets open up, entrepreneurs rush in to fill the demand. An alert reader sent me this picture taken yesterday of a bus parked at a south Metro hotel.…
At the height of the pandemic, in 2020, St Paul created a guaranteed income program, giving $500 every month to 150 families — no strings attached. The program ran for 18 months, from October 2020 to April 2022.
The Center for Guaranteed Income Research at the University of Pennsylvania, which was responsible for overseeing the program, recently released a study on how the program has fared. The catch-all title, especially in the local media seems to be that the program worked, since among other things, it increased employment, improved the well-being of families, and increased savings — although that went away after the program ended.
But there are a few caveats to consider before hailing this program as a success.
Unlike experimental studies, which often include a control group to which participants in a certain treatment group are compared, this study was nonexperimental. So, as the authors note, this
limits the ability to make causal inferences about the impact of the GI on observed outcomes.
The program was, moreover, short-term. So, it’s possible that over the long-term the results would be non-existent.
The families involved in the study were not selected at random but were pulled from the College Bound program — a universal savings program that gives parents a $50 seed for a child born after 2020 for college savings.
Additionally, as the authors explain, the city of St. Paul tried to elicit participants outside those who were auto-enrolled into the college-bound program. However, this led to an over-representation of families who are WIC-eligible families, further making the results less generalizable.
This study was conducted at the height of the pandemic. And during that period, people were likely more stressed than usual, about numerous things. So, some of the results seen here would otherwise likely not be seen in normal times.
What’s also especially important to note is the fact that this program started when most states, including Minnesota, were opening their economies after the stringent lockdowns that mostly occurred in the summer of 2020. Minnesota did not fully open its economy until about Summer 2021.
So, the employment gains that are described in this study could very well be attributed to the post-lockdown recovery and not necessarily to the program. Not to mention that during the pandemic, the federal government spent trillions of dollars in relief measures including stimulus checks, and expanded unemployment benefits, all of which could have had some impact on people.
This, of course, is something the authors took note of.
The pandemic itself also introduced challenges in ensuring the study’s broad applicability. Conducting the study during the COVID-19 pandemic meant that the findings may be inextricably tied to the socioeconomic conditions prevalent during that period, affecting the external validity and generalizability of the results to other times and settings. The economic turmoil and the various relief measures during the pandemic could have swayed participants’ financial behaviors and responses, which might have differed from their behaviors under normal economic conditions. In addition, the behavioral and psychological impacts of the pandemic on individuals might have influenced the results, particularly in areas like mental health, stress, and coping.
Certainly, it’s quite intuitively not a stretch to imagine that extra money could make someone else’s life less stressful especially if they are struggling with basic expenses. But then again, the nature and timing of this study don’t make it suitable for those generalized conclusions about guaranteed income programs.
But even if that study was indeed successful and we could attribute all the positive effects to the program alone, we already have numerous programs designed to do just that. Every year, states and the federal government spend trillions of dollars on welfare programs intended to improve the lives of the poor. Minnesota is, in fact, one of the most generous states on welfare spending.
If those programs are not working, shouldn’t we figure out why before introducing new programs and pouring more money into the seemingly elusive war against poverty?
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