Busting 5 Common Myths About Cash Assistance
The Common Narrative Around Cash Assistance Is Often Inaccurate and Incomplete
Myth or Fact? The number of programs and pilots in the U.S. that distribute direct, unconditional, and unrestricted cash to individuals and their households is rapidly increasing.
This is a fact. In September 2022, there were 100 pilots of this nature operating in the U.S. and more programs have taken off since then. In November 2023, Colorado will gain a better idea of just how many programs and pilots are operating in the state through a Colorado Direct Cash Transfers Landscape Analysis and Review conducted by Point b(e) Strategies in partnership with The Women’s Foundation of Colorado and the Colorado Direct Cash Transfers Community of Practice.
These direct cash payments are commonly connected to the notion of guaranteed income, basic income, and universal basic income. Although there are various terms to describe this type of cash assistance, they all meet the same goal – getting unrestricted cash into the pockets of more individuals.
The Women’s Foundation of Colorado’s WINcome grantmaking program is part of this movement. WINcome provides flexible and direct cash assistance to women to support their economic security and advances equitable systems so women and families can thrive. Now in our second year of WINcome, we have learned from and alongside 19 WINcome grant partners about the impacts that flexible cash assistance has on women, their families, and their communities. One thing that we’ve learned is that the common narrative around cash assistance is often inaccurate and incomplete. Let’s address some of the most pervasive misconceptions.
Myths About Cash Assistance
#1 People only spend the cash on things that aren’t “useful”
In reality, an overwhelming majority of people participating in programs that offer flexible cash assistance spend the cash on things that they or their families need to get by. The top three uses of the flexible cash assistance for participants of our WINcome program were food, transportation, and rent/mortgage. We know that soon after households with children received the Advance Child Tax Credit in July 2021, the percent of households with children experiencing food insufficiency went from 11% to 8%, the largest decrease compared to households that did not receive this influx of unrestricted cash. One of the most well-known guaranteed income pilots in the country, the Stockton Economic Empowerment Demonstration (SEED), reported the largest spending category in the first year of the pilot was food. According to the Denver Basic Income Project’s midterm report released in June 2023, participants of this pilot also prioritized spending their no-strings-attached cash on immediate needs, like transportation, groceries, and hygiene care.
#2 Flexible cash assistance only helps short-term, emergency needs
While it is true that flexible cash assistance helps people meet short-term and emergency needs, many individuals utilize the cash to invest in their futures. WINcome participants who own businesses stated they were able to invest funds back into their business. One program participant stated, “It’s really helping me to think about my business in a different way. I’m learning how I look at my customers and my target market to make my business stronger.” The longest-running guaranteed income demonstration in the country, the Magnolia Mother’s Trust, reported that 46% of mothers in their 2022-2023 cohort had money in savings after the pilot year, an increase of 43% from pre-pilot year data.
#3 People who receive flexible cash assistance will no longer want to work
This is one of the greatest myths about cash assistance and guaranteed income. Within it is an assumption that people, specifically people who participate in cash assistance programs, do not want to pursue formal employment. This is false. WINcome participants expressed employment and job security are top issues that impact their economic security and resiliency. While recognizing nontraditional forms of employment, such as caregiving to children and elders, are still forms of unpaid labor, it is important to note that the findings from research done in direct cash transfer programs suggest that participants continue to work or increase their participation in employment. Findings from an analysis of the Alaska Permanent Fund Dividend, which distributes a lump sum of cash to Alaskan residents annually, found that part-time employment increased by 17%. The lump sum amount varies each year. This year, Alaskans received $3,284. In cases where participants decreased their employment participation, it was mostly to pursue other economic mobility opportunities, such as attending post-secondary education or job training.
Myth #4 The existing public benefits system is the answer to poverty
Existing public assistance programs, like Temporary Assistance for Needy Families (TANF) and Supplemental Nutrition Assistance Program (SNAP), among others, provide critical assistance to people living in poverty in the U.S. However, the restrictive nature of this assistance, both in the front end when it comes to eligibility requirements and the application process, and in the receiving end when it comes to how the financial assistance can be utilized, is a barrier to accessing and utilizing the benefits themselves.
Participants in our WINcome program found public assistance to be both helpful and challenging. Among the challenges faced for WINcome participants include untimeliness, inaccessibility, and ineligibility for immigrants. Even when families have public benefits, it is not enough to cover necessities. For example, the Urban Institute found that SNAP benefits do not cover the cost of a meal in nearly all counties in 2022. We know the Benefits Cliff is an additional, significant barrier for individuals pursuing economic security. An increase in income or assets can tip someone over the public assistance income eligibility limits, leaving them with not enough income to cover their basic needs, but too much to qualify for assistance. This often disincentivizes individuals from accepting a raise or more hours of work.
Flexible cash assistance and guaranteed income programs are built on a foundation of trust, dignity, and no work requirements. This freedom, coupled with strengthened public benefits programs and protections for participants in flexible cash assistance programs and pilots, allows participants to meet their needs comprehensively.
Myth #5 There are no clear policy paths toward increasing cash in women’s pockets
The truth is, there is a national movement for basic income building momentum and there are multiple pathways that can be taken at the local, state, and federal level to efficiently move more cash to and increase opportunity for women and their families. We witnessed the federal Child Tax Credit (CTC) lift more than 5 million people out of poverty when it was expanded in 2021. Although this was not a permanent expansion federally, 12 states have enacted child tax credits, including Colorado. With the support of the Jain Family Institute in 2023, WINcome grant partners and policy experts, the Colorado Fiscal Institute and the Colorado Center on Law & Policy, successfully led the effort to expand Colorado’s CTC to more children living in poverty. WFCO joined in that effort and elevated the bill to expand the CTC to a lobbying priority.
Beyond tax credits, a secure economic foundation for individuals includes systems change in labor, benefit, protection, and equity policy. Cash assistance, through guaranteed income, basic income, or flexible cash assistance is one piece to this puzzle, a piece we know works.
Get involved in the movement for flexible cash assistance
Looking to get involved in the movement for flexible cash assistance, including guaranteed income and direct cash payments or have another myth about cash assistance you want to bust? Join the Colorado Direct Cash Transfers Community of Practice (CCOP)! This state-focused community of practice was inspired by the national Guaranteed Income Community of Practice that is spearheaded by the Economic Security Project.
The CCOP meets regularly to learn from and with various direct cash stakeholders, including direct cash pilots, interested nonprofit organizations, governmental entities, public policy organizations, and community participants in direct cash pilots. The Women’s Foundation of Colorado is proud to co-convene the CCOP along with Impact Charitable; Colorado Children’s Campaign; Colorado Fiscal Institute; Donnell-Kay Foundation; Emergency Family Assistance Association; Dakota Foundation; and a Family, Friend and Neighbor caregiver participating in the Thriving Providers Project in Colorado. Please email Crystal Ayala-Goldstein, programs manager, for more information.