November 19, 2021

“What Could Be:” The Potential of Guaranteed Incomes to Ensure Economic Security

By Ainsley Buck, Child Policy Research Certificate student ’22

Prior to the pandemic, wealth and income inequality reached a record high. COVID-19 only widened these gaps, resulting in the most racially stratified economy that the United States has ever faced. While they are peaking now, these disparities are far from new. Over the last generation, the systematic devaluation of labor has resulted in flattening wages, which has disproportionately impacted people of color due to their overrepresentation in the labor workforce. The “pull yourself up by your bootstraps” mentality, deeply embedded in U.S. culture, suggests that laborers’ financial struggles are a choice, disguising the fact that “people are working, the economy is not” (Natalie Foster).

On November 9, 2021, Natalie Foster, co-chair and co-founder of the Economic Security Project, and Dr. Aisha Nyandoro, CEO of Springboard to Opportunities, tackled the topic, “What Happens When You Give People Money: The Future of Economic Security for Children and Families,” as part of the Center for Child and Family Policy’s Sulzberger Distinguished Lecture Series.

Foster founded the Economic Security Project in 2016 in response to the labor devaluation and resulting stratification described above, with the goal of ameliorating economic instability. Dr. Nyandoro launched Magnolia Mother’s Trust in 2018, which currently boasts the title of longest-running cash support initiative in the country. Magnolia Mother’s Trust directly targets racial disparities by focusing on low-income Black women, whose needs have been especially dismissed in our history.

            Ainsley Buck

Both the Economic Security Project and Magnolia Mother’s Trust advocate for guaranteed incomes, which ensure that eligible people receive money on a regular basis. As Nyandoro expresses, “needs are individual, the cash is ubiquitous.” Cash has built-in flexibility, allowing families to cover whatever they deem to be their most urgent needs, immediately decreases experiences of poverty and food insecurity, and reduces stress levels. Pilot programs have long demonstrated that guaranteed incomes are an effective way to pull people out of poverty and provide economic security. Dr. Nyandoro replicated these results with women enrolled in Magnolia Mother’s Trust. These women received $1000 in cash on a monthly basis, no strings attached, for 12 months straight. With this assistance:

  • On time bill payments increased from 27 percent to 83 percent
  • Mothers’ ability to create emergency funds increased from 40 percent to 88 percent
  • Reports of having enough money for food increased from 64 percent to 81 percent

Dr. Nyandoro urges us all to help shift the narrative on poverty by amplifying the voices of those experiencing it. Women in Magnolia Mother’s Trust have the opportunity to share their stories in Ms. Magazine twice a month. This spotlight ensures that their side of the story is heard. Thanks to this initiative, Dr. Nyandoro shares that, beyond her impressive statistical outcomes, “we are seeing joy.” Magnolia Mother’s Trust has provided its women with more than just economic security: the financial benefits are amplified with agency, stress relief, and happiness.

Despite its success, policymakers have been hesitant to rely on cash support. “We have become rooted in what is, rather than what could be,” says Dr. Nyandoro, on stagnation in the economy and welfare system. Currently, the welfare system punishes people for being poor, according to Dr. Nyandoro and Ms Foster. The pandemic, however, has required the welfare system to shift toward cash support as a tool for providing economic security. In fact, the distribution of benefits as part of COVID-19 relief demonstrated how quickly the government can address and alleviate economic instability with cash: “[it] is the currency of urgency,” Foster says.

Guaranteed incomes have come into the spotlight recently with the Biden administration's American Rescue Plan. Enacted in July 2021, the Child Tax Credit, which essentially serves as a guaranteed income for families and children, has the potential to cut child poverty in half. However, the credit will cease at the end of the calendar year unless Congress passes an extension. Foster and Nyandoro urge us to support this extension. Why? Because giving people cash works.