Low- and middle-income parents who receive universal payments increase spending on children

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When receiving cash without strings attached, low- and middle-income parents increased their spending on their children, according to a Washington State University study. The study, published in the journal Social forces, also found that the additional funding had little impact on spending related to children of high-income parents.

For the study, WSU sociologist Mariana Amorim analyzed the expenses of recipients of Alaska Permanent Fund payments. Funded by state oil revenues, the fund is the closest US program to a universal basic income. Every Alaskan resident receives a payment called a dividend; the total amount varies each year, but over the period covered by this study, 1996 to 2015, payments averaged about $ 1,812 per person, or $ 7,248 for a family of four, after adjustment for inflation in 2014 dollars.

Amorim found that after the lump-sum payments, low- and middle-income parents made more purchases of education, clothing, recreation and electronics for their children.

The results contradict a common argument in the United States that poor parents cannot be trusted to receive money to use however they want, Amorim said.

The data suggests that low-income parents are responsible for using cash payments, so we don’t need to be so afraid to give poor people money that can help their families. Low-income parents need to spend more of the money they received on basic necessities, like catching up on bills or fixing a broken car, but they still managed to invest the amount. remaining to invest in their children. “

Mariana Amorim, WSU sociologist

Amorim used 20 years of data from consumer spending surveys to analyze spending by parents in Alaska around the time they received annual payments from the fund. She compared these spending habits to those of parents in the continental United States who did not receive the payments.

While all parents appeared to increase some child-related expenses after the installments, low- and middle-income parents have increased their spending in categories that may be most important to their children’s future, such as education. In contrast, high-income Alaskan parents showed no significant increase in child-related spending after remittances, except for a modest increase in clothing purchases.

Although the data could not reveal the exact reason, Amorim said that the lack of a significant change in spending related to children may indicate that high-income parents have already maximized their spending in this area or are saving significantly. money for future investments.

“We know that with their normal income, high income parents spend a lot on their children,” Amorim said. “High-income Alaskan parents can save a lot of money on payments, and that’s why we don’t see spikes in current spending. This is something I can’t investigate with this data, but s ‘they’re saving for college or a down payment on the house, we might see bigger inequalities in the future. “

Although the study has policy implications, Amorim warned that Alaska’s program is not a perfect model for universal basic income policies. The Alaska dividend is a one-time payment that affects how people spend their money. For example, research suggests that electronics expenses increase when people receive a lot of money at the same time because they can afford those big ticket items. If they were given a smaller amount of money each month, parents can choose to spend on items with smaller or more spread out costs, like books or monthly lessons.

The universal nature of one-off payments in Alaska, however, provides key information about how low-income parents spend their money compared to high-income parents, and how socio-economic differences in spending decisions might affect families. future inequalities.

“The spending behaviors of low-income parents suggest they are trying to catch up, even though they cannot keep pace with higher-income parents in the long run,” Amorim said.

Source:

Journal reference:

Amorim, M., (2021) Socioeconomic Disparities in Parental Spending After UTC: The Case of the Alaska Dividend. Social forces. doi.org/10.1093/sf/soab119.


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