Do Cash Payments Help Poor Families?

BY DAN FROSCH

Days after Haley Stewart gave birth to her fourth child, a healthy baby girl named Julianna, a check for $1,500 was deposited into her bank account. After that, Stewart received $500 every month for the first six months of baby Julianna’s life.

The money, which mostly came from the government, had no strings attached. Stewart, who lives in rural Michigan, could spend it on her mortgage, diapers, groceries or clothes for her other children. What it bought, said Stewart, 28 years old, was relief.

“It felt like I had an elephant sitting on my chest with all of my other children,” she said. “This time, I was able to settle in and breathe without feeling like the next shoe was going to drop.”

It is one of the most hotly debated questions among economists, academics and policymakers: Do cash payments to poor families improve their lives?

The question has taken on new urgency in the Trump era. Administration officials have encouraged couples to have more children. At the same time, the administration has cut federal aid programs for poor Americans, slashing the budget for Medicaid and food stamps.

The idea of simply handing cash to poor families is one way, some child poverty experts argue, of circumventing complex government bureaucracies and more efficiently delivering aid. Others say that without regulated programs, money will go to waste and might not make a measurable difference.

In Michigan, new mothers started receiving cash payments in January 2024, part of a program called Rx Kids that pays families using a mix of nonprofit money and federal funds administered by the state.

Last month, the American Journal of Public Health published initial findings from a study of the program in the city of Flint, where it first launched last year. Researchers found that pregnant mothers who received a one-time payment of $1,500, followed by additional $500 monthly payments during their child’s first year, fared better on several measurements of financial and emotional well-being than mothers who didn’t receive the cash.

The study, which has been peer reviewed, compared survey responses from 190 of the Flint mothers who received the cash in 2024, to the responses from 145 mothers from 2023 who didn’t get cash. All of the women gave birth at the same local hospital, which serves many low-income families, though there were no income restrictions for the program.

Researchers found a 7.7 per--centage point drop in the portion of 2024 moms who owed money on their mortgage or back rent compared with their counterparts who received no cash.

Researchers also found a 12.5 percentage point drop in the portion of mothers who said they didn’t have enough of the kinds of food they wanted, compared with the moms who didn’t receive cash; and a 13 percentage point decline in postpartum depression.

“At its core, this paper reaffirms that perinatal poverty is treatable— with the right prescription at the right time,” said study leader Dr. Mona Hanna, a Flint pediatrician and associate dean for public health at Michigan State University’s College of Human Medicine.

Hanna, who helped uncover the Flint water crisis in 2015, said using unconditional cash payments worked because it cut out the bureaucratic tangle that can dissuade families from enrolling in government- assistance programs. The program has expanded beyond Flint to 10 other areas in Michigan, and has drawn bipartisan backing.

“I thought it was another liberal program just to hand money out before I learned about how it worked,” said Michigan State Sen. Roger Hauck, a Republican who supports the cash payouts.

Hauck said he likes that the program allows mothers to decide how they want to spend money, and that it could help ease the financial burden for mothers in rural areas.

Even as Michigan broadens its program, another recent, large study threw cold water on the premise of cash for poor families.

That study, called Baby’s First Years, showed little effect after years of cash payments to mothers. A thousand low-income mothers with newborns in New York City, New Orleans, Minneapolis/St. Paul and the Omaha metropolitan area were randomly given monthly installments of either $333 or $20 for the first six years of their child’s life.

Four years after the children were born, preliminary results didn’t show any substantive differences in developmental outcomes between the children whose mothers got the larger sums and those who got the far smaller ones.

The study, funded by the National Institutes of Health and pri vate donations, looked at several metrics related to child development, including language, emotional problems and brain activity.

The results set off a firestorm of reaction from all sides of the issue. Skeptics of cash transfers, including the conservative American Enterprise Institute, say that Baby’s First Years shows the approach doesn’t work, and that good parenting and steady employment outweigh the benefits of free cash.

Supporters say that the cash was likely too small to make a difference, and that the pandemic, which overlapped with the study, potentially affected its findings.

Greg Duncan, a prominent child poverty expert and professor at University of California, Irvine, who is helping lead Baby’s First Years, said he had expected to see differences and was surprised by the findings. He cautioned that the pandemic might have played a role in the results.

“Until we better understand the effects of unconditional cash transfers, protecting and expanding our nation’s investments in other, more proven safety net programs makes the most sense,” he said.

Katherine Magnuson, professor of social work at the University of Wisconsin-Madison, who is also helping lead Baby’s First Years, said it was too early to draw policy conclusions. She noted that the project didn’t distribute money prenatally, as Rx Kids did, and that it was possible more cash would have made a difference in cognitive development.

Both researchers agreed that the results didn’t attempt to measure the overall well- being of a child, which could have been improved by a mother’s ability to purchase things for her child she couldn’t previously afford.

Another large recent study, funded partly by OpenAI Chief Executive Sam Altman, also showed less promising results. In that project, 1,000 low-income adults were given $1,000 a month for three years compared with 2,000 participants who got $50 a month over the same time frame.

Some 58% of the participants had children at the time they enrolled in the study. The money didn’t show effects on several measurements including educational outcomes, food insecurity and overall home environment.

Elizabeth Rhodes, lead researcher on the project, said that while the extra cash helped people in different ways, it didn’t show the impacts researchers hypothesized. She noted that because the money was used for so many disparate reasons, it was challenging to measure the true effects.

“There are two narratives on cash transfers out there,” said Dr. Sumit Agarwal, of the Michigan project. “One is that they’re a cure-all. Another narrative is that they don’t work. Our research doesn’t fall into either camp.”

Instead, what the Michigan results show so far, he said, is that cash transfers can help in the right situation, when the need is acute.

Haley Stewart, who lives in rural Michigan, got cash payments after the birth of her fourth child.