Employment

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07.21.24

Key Findings: Employment

Read the NBER Working Paper

How does unconditional cash affect employment?

• Employment rates and work hours rose substantially over the course of the study for both recipients and control participants, but the increases for control participants were larger. 

• On average, recipients were 2 percentage points less likely to be employed than control participants.

• Recipients worked an average of 1.3 fewer hours per week compared to control participants. 

• The wide variation across participants and the diverse ways people chose to reallocate that time reflect how cash can increase people’s agency to make employment decisions that align with their individual circumstances, goals, and values.

At the time of enrollment, unemployment was high due to the COVID-19 pandemic. 58% of recipients and 59% of control participants were employed. By the end of the program, employment rates rose to 72% for recipients and 74% for control participants.

Looking at employment status over time, recipients were, on average, about 2 percentage points less likely to be employed during years two and three. The effect on the number of months employed is equivalent to roughly 8 fewer days (0.26 months) of employment during the previous year. Yet there is wide variation in employment across both groups. The visualization below helps illustrate this. The trend lines show quarterly average employment rates for recipients and control participants over time. The colored bands around the lines represent the 90% confidence intervals for the estimates: larger shaded bands indicate more variation and smaller shaded bands indicate more precision.

Notice how the red shaded band around the recipient line is larger than the purple shaded band around the control line. This shows that there is more variation in employment rates among recipients. Overlap in the bands indicates a degree of uncertainty due to wide variation. Put simply, there may be too much variation to be sure of clear differences in average employment rates between recipients and control participants at certain points in time. 

In addition to whether or not people were employed, we collected data on the number of hours worked. Across the three years, recipients worked an average of 1.3 fewer hours per week compared to control participants. Similar to the effect of the cash on employment rates, there is widespread variation in work hours.

The differences in employment rates and hours worked translated into differences in individual and household income, excluding the cash transfers. Both total household and individual income increased considerably for all participants, but the increase was larger for control participants. The effect on recipients’ individual earned income from employment was roughly -$1,500, an amount equivalent to about 4% of the average individual income among control participants.¹ The effect on total household income² was between -$2,500 and -$4,100, equivalent to roughly 5% of the average total household income of control participants.^3,4 

Although both individual and household income were lower for recipients at the end of the program without the transfer, recipients’ average individual income was roughly $10,000 higher and average household income was roughly $6,100 higher for recipients than control participants including the transfer amount. The table below shows the average individual and household income for both recipients and control participants, with and without the transfers of $1,000 and $50 per month. 

This fact—that individual and household income are higher for recipients, transfers included— is critical to our understanding of their employment decisions. It suggests that recipients were able to use the cash transfers as replacement or supplemental income and had increased agency to work fewer hours or reduce the number of jobs held. The same may be true for recipients’ partners who, on average, reduced their work hours by an amount comparable to recipients. The transfer may allow other adults in recipients’ households the opportunity to adjust their earnings, leading to a larger difference in total household income. The visualization below shows household yearly income over time with and without the transfer amounts. 

The impact of the cash depends on each participant’s circumstances, and average effects obscure the variation in work outcomes for different recipients.

Cash can increase agency to make employment decisions that align with recipients’ individual circumstances, goals, and values. Though our subgroup analyses are exploratory and should be seen as offering insights rather than definite answers, we observe notable patterns that highlight recipients’ diverse experiences.

Age: There was no statistically significant effect on employment or hours worked for recipients over 30.⁵ In contrast, recipients under 30 were roughly 4 percentage points less likely to be employed and worked an average of 1.8 fewer hours per week compared to control participants.⁶ We also observe larger effects on formal education among those in this age group, suggesting younger adults may be more likely to use the money to enroll in post-secondary education and work fewer hours while in school, though this alone would not account for the observed differences in employment. 

Single parents: Recipients who were single parents at the time of enrollment were about 3.9 percentage points less likely to be employed and worked an average of 2.8 hours less per week than single parent control participants.⁸ For recipients who were not single parents at enrollment, we do not find statistically significant effects on employment or hours worked.⁷ 

Income at enrollment: While cash can give some people agency to reduce their work hours or employment, our findings suggest that this is particularly true for recipients whose household income was highest at enrollment. These recipients were 4.4 percentage points less likely to be employed and the effect on the hours they and their partners jointly worked was, on average, 3.7 hours less per week.⁹ In contrast, the average reduction in joint work hours was -2.1 for the lowest income recipients and -2.8 for the middle income recipients.¹⁰ In general, estimates on employment and hours worked for the lowest income group were much less precise and varied in magnitude.

Cash can increase people’s agency to make employment decisions that align with their individual circumstances, goals, and values. Recipients were more likely to be searching for a job, but they were more selective. 

One potential explanation for the differences in employment and income is that cash transfer allowed recipients to prolong periods of unemployment in order to find jobs that better matched their skills. We do find that the average length of continuous spells of unemployment over the course of the study is about 1 month longer for recipients than for the control group, but they apply to fewer jobs. This suggests that recipients were able to be more selective in their job searches.

We find that people’s job preferences vary and there are not clear patterns, with one exception. Among those searching for a job, recipients were 5.5 percentage points more likely to indicate that interesting or meaningful work is an essential condition for any job they would accept.¹¹ 

Though they may be more selective and take more time to look for a job, we find that recipients remain engaged in looking for work. Over the course of the program, recipients were 6 percentage points more likely to be actively searching for a job—a 10% increase compared to the average among control participants. Recipients were also 4.5 percentage points more likely to have applied for a job, an increase equivalent to 9% of the average among control participants.  

Recipients had increased agency to make employment decisions that worked best for them and their families.

Another potential explanation for the reduction in work hours and income is that recipients were able to work fewer hours or reduce the number of jobs held and use the cash transfer to replace or supplement their income. This could allow them to spend more time with kids, pursue education or training, prioritize their physical or mental health, take a lower paying job that was more enjoyable or offered opportunities for advancement, or simply take a break. 

Data from time diaries and surveys suggest that this time is distributed across a number of different activities, but the largest increases are in driving, social leisure (time spent with others engaging in social activities, recreation, entertainment, eating, etc.), and home production (particularly errands, grocery shopping, etc.). The visualization below shows effect of the cash on daily time use, in minutes. 

Because there is so much variation across recipients, however, the time use data alone does not provide a clear picture of what reductions in employment or work hours look like in the context of recipients’ lives. To illustrate, we draw on our comprehensive qualitative data.

Prioritizing time with family

Some recipients used the cash to replace the income lost from quitting their job or reducing work hours, opting to instead be a full time caregiver or spend time with family. Bethany left her job to homeschool her three children, two of whom had recently been diagnosed with autism and ADHD and were struggling with traditional education. After receiving the first $1000 deposit, another recipient, Nathan, cut his 50 hour work week in half so he could spend more time with his four-year-old son, teaching him things that he never did or learned from his own father. Nathan worked fewer hours all three years and spent an “unprecedented” amount of time with his son, hunting, fishing, gardening, fixing cars, driving around and listening to music, and playing Pokemon Go. 

Prioritizing education or training 

For some recipients, the cash transfers helped them finish school or provided an opportunity to pursue further education or training. Though quantitatively we do not observe significant effects on educational attainment overall, the impact is stronger for recipients under 30 at the time of enrollment. One recipient, Tara, quit working following a car accident when her employer refused to accommodate her follow-up appointments. She used the cash to cover her expenses while she completed a year-long job training program and internship. The training program offered a monthly stipend of $300 to $600—an amount she could never afford to live on prior to the cash transfers. By the end of the program she had started a full-time position with a multinational company. Though several participants described experiences similar to Tara’s, for others the investments have yet to translate into a better job. Sophia was still searching for a full-time job five months after receiving her degree. “I had gotten two really good job offers. I couldn’t accept either one of them because my transportation was down, and they weren’t within the city where I could ride the bus.” 

Prioritizing physical or mental health

For individuals struggling with physical and mental health challenges, the cash transfers may make it possible to take time to seek care or prioritize their wellbeing. Some participants were able to use the time away from work to improve their physical and mental health, and ultimately return to work during the transfer period. For others struggling with their health, the transfer provided a lifeline during the program but did not help them return to work, and it was unclear how she would make ends meet after the transfers ended. For example, Tessa experienced a brain injury several years before enrolling in the program; it impairs her ability to drive and makes it difficult for her to live independently. She had repeatedly applied for and been denied disability and continued to do so unsuccessfully during the program. At the time of enrollment, she was working 20 hours a week at a warehouse job that was contributing to a decline in her physical health. She quit the job, did not work again during the program, and used the cash transfer to pay all of her expenses, including the cost of a surgery she had been putting off. Tessa viewed the transfers as a replacement for denied disability payments, and she said the program gave her hope and a positive outlook.

Prioritizing taking a break

For people who were working long hours in low-income jobs to make ends meet—or had been prior to being laid off due to the pandemic—the transfer made it possible for them to simply take a break. For some recipients, the break was more valuable than the extra dollar.

Shawn, for example, had been working 72 hours a week at the time of enrollment. His goal was to eventually start his own music company, so in the first year of the study he was working long hours producing music while also working for another company. Then one day, Shawn told us, “I felt like I just wanted to take a break, like not do as much work just for myself and my mental.” He explained, “It was nothing that made me wanna do it; is just one day, I just decided, you know what, I'm gonna just take a slight break and just either try to do something else or just relax...I haven't really been doing anything but playing a game really, but it's good.” Shawn explained he had been working a lot at that time and could sense he was starting to get overwhelmed. He wanted to stop before it got to that point and the cash transfers helped make that possible. “It is a thousand…since that is covering that portion of the rent…that gave me a lot more freedom to do what I wanted…like to buy certain things, go different places, do different things.” Shawn valued the low stress levels and minimal daily worry that the cash helped provide over a high-paying job.

Prioritizing employment opportunities

Some recipients used the cash transfer not to step away from work, but to pursue employment opportunities that might not have been possible without the financial cushion provided by the transfer. 

In Lisa’s case, this meant taking a lower paying job in a different field. She learned about an entry-level position with opportunities for advancement, but the hourly wage fell short of what she required to cover her expenses. She was optimistic about the potential for growth in the role and took the job, planning to supplement her income with cash transfer payments in the meantime. Two years later, her gamble paid off: she was in a salaried position, making close to six figures. At the time of the most recent interview, Lisa had gotten two promotions.

Overall we do not find a change in job quality across a plethora of measures. However, the analysis we have done so far is only the first step—in the coming months we will be digging deeper into different types of jobs, the extent to which new jobs reflect participants’ priorities during job searches, what happens after the transfers end, and much more. 

What can we take away from all of this? 

Some recipients showed that as long as they have enough money to meet their basic needs, they are willing to give up some additional income and the items it would allow them to buy to meet their other needs—for caregiving, leisure, learning, exploring, and a myriad of other ways they value spending time. The cash gave them more flexibility to do so.