Will giving away free money work?

Is giving the homeless free money the most efficient way to help them?

In 2009 an experiment was conducted in London. Thirteen homeless men were given 3000 pounds each, with no conditions attached to them. They were provided with free counseling services (which was optional) and could spend the money however they wish to.

All they had to do was answer one question -

What do they think is the best to do with this money?

Did this question change the whole perspective of how they went about spending the money?

Apparently it did.

OUTCOME

After a year, eleven of those thirteen people had a house, got enrolled for studies, learned to cook, joined rehabilitation centers for drug abuse and most importantly, started making plans for the future.

The costs of putting eleven people out of the streets of London, including the salaries of the aid workers, was 50,000 pounds.

That puts the cost of putting a roof over the head of a homeless man in London costs around 4545 pounds.

There were 8000 homeless people in London as of 2015–2016, which has probably increased. Giving them all a roof, will cost around 37 million pounds.

The cost of the proposed Garden Bridge is 175 million pounds.

What is of importance to the London City? The Garden City Bridge whose initial costs was put at 115 million pounds, has now increased to 175 million pounds. The extra 60 million pounds needed is being pledged by Transport and Treasury department.

Common Misconception

• Poor do not know how to handle money.
• People have to work hard for money.
• Free money makes people lazy.

How does free money bring progress?

A New York Times reporter kept track of a Kenyan man who was given $500. This was a lot of money for someone who earns $2 everyday down in the quarries. A couple of months later, he had his own scooter service for transporting people in his village. Doing that alone he was earning $6-$9 everyday. When Google took a look at the data provided by the company which gave the man and lot other poor people money, they gave $2.5 million, seeing its positive effects.

Almost 12,000 Ugandan youths were given upto $400 without any questions asked. The results of these programs were astounding. These youth invested in education and entrepreneurship which increased their income levels by 50%. The same thing was done with women. Their incomes increased too, with findings that more the money that was given to them, the more were their chances of getting increased income.

“Poverty is not lack of character. Its lack of money. Lack of opportunity. Lack of investment. Its when the society turns its back and makes you invisible.”

History

Free money is something which has been proposed as a method to decrease poverty by some of the great minds. The term that was used then wasn’t free money but rather basic income which was seen as a basic human right.

Basic income was seen as something which is the right of every human being, without any questions being asked about whether or not he deserves it or not.

In 1973 an experiment was conducted in a Canadian province. The Governor had allocated $17 million for the Mincome project. The experiment took place in a province called Dauphin. Dauphin had a population of about 13,000. The objective of the project was to ensure that none of the family drops below the poverty line. Therefore, 1000 families were given a monthly paycheck, without any questions asked.

Mincome hit a roadblock when the new elected Governor refused to fund the expensive project. The project involved a team of psychologists, economists and sociologists. So after four years the project was shut down and even the results were not known. The results of the experiment was just locked away.

In 2009, a professor in the name of Evelyn Forget got access to these files. After studying and analysing them for almost three years, she came to the conclusion.

Mincome was a tremendous success.

Why didn’t it take off?

The main reason that basic income did not take off is that the politicians feared that the people will stop going for jobs, start getting more children just to get more of the basic income and live off it. What happened was the exact opposite. The people who were under Mincome had better education completion records, the average martial rate went up and the birth rates dropped.

Evelyn Forget’s most valuable insight was that the hospital visits reduced by almost 10%. And if Mincome was applied nationwide, Canada could have saved $100 billion a year in hospital visits.

Long before the Dauphin project, there were four of these projects in USA. These took places in Denver, Seattle, North Carolina and Pennsylvania.

The researchers were looking for answers to three of their questions :-

1. Will these programs make the people work less?
2. Will these programs be expensive if they are implemented?
3. Will it be politically difficult to implement these?

The answers of these are obvious, considering that there exists nothing which guarantees basic income today.

The answers they got were :- No , No and Yes.

The laziness prophecy did not come anywhere near fulfilling. Only 9% of the households recorded a slump in the working hours. For this slump too there were valid reasons. The 9% comprised of young mothers, students in their twenties, people who opted out of the work force to get into education. In all of the four areas, the experiment only bought out positive results, grades improved, dropout rates decreased, health of the population became much better than before.

The experiments showing the tremendous success was decided to be replicated into a Welfare Income Reform.

In 1970, the plan for the reform was voted into the Senate. But as soon as it reached there, the politics started. The senators started bringing up data which they thought were relevant to the overall impact of Welfare Reform. It was found out that the divorces in Seattle had increased by 50%. And this in turn made them to believe that a Welfare Reform will encourage women to be more independent, which they clearly did not want. For months the bill just kept rolling back and forth in the political bandwagon, ultimately not being passed.

Later it was found out that the data of the increases in divorces were infact wrong. What a costly mistake it was.

Conclusion

Our whole assumption that giving away a Basic Income will in turn people lazy has been proven wrong plenty of times. As humans it is in our nature to consider everyone else less superior and not in our levels. But what if every other human, regardless of whether it is a homeless or not, has a in-born urge in them to work hard, to enjoy the better things in life, to push and move forward and not just live of basic income. Yes of course there are cases of these backfiring like in the Indian city of Mumbai, where slum dwellers were given free flats, which they ended up selling and returning to the slums. But at the end of the day, people need money to get that extra push, to move forward, to get better and not stay at the same low level of income they earn now. Whether giving them this extra push is necessary or not should be decided by the governments of today.