Free money

In Community and Relationship by Martin OliverLeave a Comment

A number of experiments with giving homeless and impoverished people extra money have shown that concept as a cheaper option than social security support, apart from the very obvious humanely enriching result, which has more chance of offering real change.


Traditionally, homelessness was largely restricted to individuals with substance issues, past traumas or mental health challenges. As the neoliberal economic experiment continues and inequality rises, families are increasingly finding it difficult to keep a roof over their heads.

In the US, where getting fired from a job is a frequent cause of homelessness, authorities sometimes take hardline attitudes that unsurprisingly fail to solve anything. New York City’s police union encourages police to take photos of homeless people when off-duty and post them on social media. Some cities such as Fort Lauderdale in Florida have made feeding the homeless an offence.

A very different approach was trialled in London in May, 2009, in an innovative experiment involving 13 men who had been homeless for anywhere between four and forty-five years. In a program administered by a local charity, each was given a budget of 3,000 pounds (AUD $6,400) with few strings attached. They were guided to draw up action plans, and were asked to spend the money on something that would help them get off the streets.

At the end of the first year, the men had been surprisingly frugal, with an average of 800 pounds (AUD $1,700) per person spent, on items such as a phone, training shoes, clothing, a passport, and a dictionary. Some went into training courses to develop skills, and one purchased a caravan in rural Suffolk. A year later, 11 of the 13 had found a home, mostly in hostels or shelters, when bandaids and authoritarian responses had consistently failed. This would hopefully represent a first step towards their finding a place of their own.

One estimate suggests that the average homeless person in the UK costs the state roughly 26,000 pounds (AUD $55,000) a year in health, police, and prison costs, while also supporting other layers of legal and social service bureaucracy. The total cost of the ‘personalised budget’experiment was under 50,000 pounds (AUD $106,000).

Organisers felt that the money was having an effect through shifting thinking in positive directions and arousing a sense a possibility. Just by giving the homeless some choice, autonomy, and responsibility it made all the difference.

Inevitably this challenges the right-wing narrative that the ‘poor’are unable to be responsible with money, which in turn explains why they are poor. Anotherclosely associated belief is the notion that giving people free money makes them lazy, when the opposite has often been found to be true.

Outcomes from pilot projects in different countries have found that such financial gifts create better outcomes in the areas of employment, health and education. Entrepreneurial activities increase, and with it come increases in income. The Malawi Social Cash Transfer Pilot Scheme targets the poorest people living in a number of districts whose households lack family members in a position to seek work. Involving 46,000 households, it has been expanding since the first pilot in 2006. Results have been tracked, and show across-the-board improvements in children’s health.

A downside to means-tested unemployment benefits is that they can create a disincentive to find work if they drop as income rises. An alternative to this is a basic income that could be paid to everybody, unconditionally and with no strings attached, regardless of financial circumstances. Some analysts who have investigated this believe that it is workable but would require tax increases. Basic income is generally supported by smaller political parties such as the Greens and the Pirate Party, and in some countries such as Namibia and Finland a high level of public support is crossing over into the political mainstream.

One of the most remarkable basic income trials ran from 1974 to 1979 in Dauphin, a small city in Canada. Extended to the lowest-income members of the community, a thousand families received monthly cheques that were sufficient to lift them above the poverty line.

Surprisingly, the authorities failed to evaluate the results after it finished, and the data was instead left gathering dust in an attic until being analysed 35 years later by Evelyn Forget from the University of Manitoba. She identified improvements across the board, including the elimination of poverty, average marital age going up, birth rates going down, better school exam results, a noticeable drop in hospital visits, reduced domestic violence, and an improvement in mental health.There was only a modest drop in the number of hours worked.

Another basic income experiment has been running in the Otjivero-Omitara settlement in Namibia, a district with a population of roughly a thousand, selected because of its low socio-economic status. Payments were made to everybody aged less than sixty, the national retirement age.

Unlike many other government implemented programs, this was run by a grassroots group, the Basic Income Grant Coalition, which secured funding donations from a range of bodies, most of them faith-based. Interruptions in funding caused it to operate sporadically, between January 2008 and December 2009, and from 2014 onwards.

Within one year, the number of households in poverty plummeted, and the proportion of people engaged in income-generating activities rose. There was a marked drop in underweight children, the proportion of parents paying school fees doubled, school drop-out rates fell to zero, and the settlement saw a drop in crime.

At the opposite end of the spectrum are Centrelink benefits such as Newstart, which carry a hefty load of accompanying baggage: negative judgments coming from some quarters, being required to attend interviews, onerous job application requirements, and an ethos of mutual obligation reflected in initiatives such as ‘work for the dole’.

Other welfare programs greatly restrict where the money can be spent. In America, the SNAP program (formerly food stamps) involves tokens that must be spent on food, with the underlying concern that money might otherwise be wasted or spent on luxuries.

A more extreme version of this syndrome in Australia is compulsory income management, which is mandatory for the unemployed in a few locations around the country.Highly paternalistic, it controls 50-70 per cent of their spending habits, while introducing cumbersome bureaucracy into an area of their lives where they formerly had free choice. Perhaps the additional cost of $4,400 per person per year would be more useful as a free gift to those targeted rather than being spent on treating them like children.

If we are going to learn lessons from what works, and what fails to work, then ideally we should be replicating more of the UK’s personalised budgets, trialling basic income programs, and ensuring that compulsory income management does not spread any further.

About the Author
Martin Oliver

Martin Oliver

Martin Oliver is based in Lismore, and writes on a range of environmental, health and social issues. He takes the view that sustainability is about personal involvement, whether this involves making our lives greener, lobbying for change at a political level, or setting up local eco-initiatives.

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