How Does Unconditional Cash Affect Spending?
The cash transfers increased recipients' ability to meet their basic needs and provide support to others.
- In terms of dollar amounts, the largest increases in spending in response to the cash transfers were on basic needs—food, rent, and transportation.
- Relative to the average for control participants, the largest increase was on financial support to others.
- Recipients who had lower household incomes at enrollment experienced the greatest impact on overall spending and financial support to others.
The variation in spending reflects recipients' diverse circumstances. The flexibility of the cash increased their agency to decide what to prioritize based on their specific goals and values.
Cash provides flexibility for recipients to meet their basic needs.
On average, recipients increase their spending by $310 per month.1 Though we find increased spending across almost every category, recipients primarily use the cash transfers to meet their basic needs. Food, housing, and transportation were the largest expenditures for participants overall at the time of enrollment, and increases in these categories make up over half the estimated effect on recipients' spending. On average, recipients increased their monthly spending by:
- Food: $67
- Rent: $52
- Transportation:2 $50
The graph below shows the average impact of the cash transfers on monthly spending across the categories for which the $1,000 had a significant effect. Though there were also increases in spending on debt payments, pets, and education-related expenses, these effects were not statistically significant.
The increase in spending across almost all expenditure categories reflects the variety of participants’ needs and goals. Cash provides the flexibility to meet those diverse needs, and it is responsive when those needs shift based on recipients' circumstances. The one category where spending did not increase was spending on mortgage payments, which decreased non-significantly due to low levels of homeownership among participants. However, the significant increase on rent spending aligns with our findings that recipients are, on average, 10% more likely to move housing units, 11% more likely to move neighborhoods, and 5% more likely to pay for housing compared to the average control participant.
Cash provides increased flexibility to support others.
Recipients of the cash transfers also provided significantly more financial support to others. As a percentage of the average spending for control participants, we find the greatest increase on support to others. Spending on others increased by an average of $22 per month—a 26% increase relative to control participants. This measure captures spending on gifts to friends and family, loans to others, donations to charity, and alimony payments. The visualization below shows the impact of the cash transfers on monthly spending across categories as a percentage of the average spending among control participants.
The rise in financial support to others suggests that the cash transfers had a ripple effect beyond the recipients themselves, benefiting the lives of others around them. One recipient, Zelda, told us that before she started receiving $1,000 each month, “We had our electric shut off and we had to borrow money from my sister-in-law.” But then she started receiving the $1,000 and, “Instead of us borrowing money, my mother-in-law and my sister-in-law borrowed money from us…I'm like, ‘Don't worry about it, I totally understand. I've been there not so long ago, I get it.’’
Like Zelda, some recipients relied on occasional or consistent financial help from friends and family before the start of the transfers. This financial support was an important resource for them, and the cash allowed some recipients to be that source of financial support to others. Though at times overwhelmed by the needs of those in their families and communities, many qualitative participants like Zelda expressed satisfaction in being able to help others, often for the first time in their lives.
The impact on spending was greatest for recipients in lower income households at enrollment.3
When we look at recipient spending by subgroups we find wide variation in the impact of the cash transfers based on recipients’ financial positions at enrollment. We collected data on recipients’ household income relative to the federal poverty threshold—an income threshold set by the U.S. Department of Health and Human Services.4 Recipients fell into one of three categories: below 100% of the threshold (lower income), between 100% and 200% (middle income), or between 200% and 300% (higher income). To put this in perspective, the average household income for participants was $29,991 at enrollment.
Looking across these three income categories, we find the greatest impact on spending for recipients in the two lower income categories at the start of the study. In fact, there is not a significant effect of the cash transfers on total spending for the higher income recipients. Average total monthly spending increased by:
- Lower income recipients: $294 5
- Middle income recipients: $427 6
- Higher income recipients: $71
In addition to the varied impact on total spending, we find notable differences in the effect of the transfers on spending across different categories by household income. The table below shows the effect of the cash transfers on spending categories, both for the average recipient and by recipient income level at time of enrollment.
| Spending Category | Increase for Average Recipient | Lower Income Recipient | Middle Income Recipient | Higher Income Recipient |
|---|---|---|---|---|
| Food | $67*** | $57 | $98** | $11 |
| Transportation | $50*** | $57 | $65** | -$4 |
| Rent | $52** | $30 | $52 | $68 |
| Support to Others | $22*** | $25*** | $29*** | $10 |
| Total | $310*** | $294*** | $427*** | $71 |
*Denotes significance at 0.10, **denotes significance at 0.05, ***denotes significance at 0.01
Our subgroup analyses are exploratory and should be seen as suggestive rather than definitive conclusions. However, breaking down spending by income level at enrollment offers invaluable insights into the varying needs, limitations, and opportunities shaped, at least in part, by recipients' initial circumstances. While the share of spending differs between the lower and middle income recipients, across both groups recipients are spending most of the money on basic needs—food and non-alcoholic beverages first, transportation second, and rent third. However, increased spending for recipients in the higher income group is largely concentrated on spending on rent. This suggests that higher income recipients may not have needed to increase spending on food or transportation as much, because these basic needs were perhaps already being met before the transfers began. In addition to increased spending on rent, higher income recipients also increased their spending on more discretionary things such as recreation and vacations.
The impact of the cash transfers on total spending for higher income recipients was much smaller than the effect for lower income recipients and not statistically significant. When we look at the effect of the transfers on pre-transfer income, however, we see the opposite pattern. Both total individual and total household income decrease more for higher income recipients than lower income recipients. Taken together, these findings suggest that higher income recipients had more flexibility to use the cash transfers as replacement or supplemental income, allowing them to work fewer hours or reduce the number of jobs held rather allocating the money to increased spending. It’s possible that higher income recipients were better able to meet their basic needs in the absence of the transfer and, with the transfer, were willing to forgo some additional income and reduce spending on some things to prioritize other needs—for leisure, learning, exploring, and a myriad of other activities they might value. Conversely, lower income recipients did not have that same flexibility.
All of the data we collected across multiple outcome areas highlight the complexities of people’s lives and needs. This is especially apparent in the data on the impact of the cash transfers on spending. Cash does not solve all problems, but it is the a tool that can be used to address, to varying degrees, the diverse challenges people face over time. This became immediately apparent when program staff called to notify participants who had been randomly selected to receive the $1,000 transfers. Recipients expressed hundreds of different pressing needs, ranging from a father's funeral costs, back surgery, diapers for a newborn, car repairs, fines for speeding tickets, unpaid school tuition, and a computer and internet service for distance learning, to impending foreclosures, phone and electricity shutoffs, and money to renew a professional license in order to be able to get a job. In that moment, cash was the only tool that provided the flexibility to address those diverse needs, and cash was responsive when those needs shifted based on recipients' circumstances and the unique challenges posed by the pandemic and the larger economic context. Yet, as the differences in spending by income level suggest, the amount of flexibility cash provides greatly depends on the other resources at one’s disposal.
This analysis is only the beginning—in the coming months we will continue to explore the variety of ways the unconditional cash impacted spending, how that varied by participants’ circumstances, and what happens to spending now that the transfers have ended.