Here's one idea to alleviate poverty: just give out cash.
The Swiss could soon give that a try. The country will vote this Sunday on whether to guarantee an income of around $30,000 a year to every citizen. Polls suggest the policy is unlikely to pass but it has sparked a global debate on government assistance.
In the middle of that debate is an experiment conducted in Seattle and Denver. From 1971 to 1982, the U.S. government gave cash allowances to around 4,800 poor families. Unlike the Swiss proposal, the experiment didn't guarantee an income for all citizens. Rather, it tested a "negative income tax" where poor families would get money from the IRS instead of paying taxes.
The purpose of the experiment was to see if free money would change the way people worked. It did. Results showed a 7 percent decline in work hours, which led the government to scrap the experiment.
But Karl Winderquist, an associate professor at Georgetown University-Qatar, doesn't think free money would necessarily sap a country's labor force. He discussed the lessons of the Seattle-Denver experiment with Colorado Matters host Ryan Warner.
Click the audio player above to hear their conversation and read interview highlights below.
On what the government learned from the Seattle-Denver experiment:
"They were trying to learn how this program attacks poverty, what can it do for people and what the costs and effects of it were. And they found a lot of interesting things. It does incredible things to reduce poverty and the side effects of poverty, including things like students doing better in school, students staying in school. These are some of the holy grails of direct intervention in poor kids lives. ...
"It turns out if their families aren't dirt poor, they stay in school longer. You had better nutrition. You got lower incidence of low birth weight babies. Less infant mortality. And even in the in one experiment they found fewer incidence of people are with psychiatric disorders. So they found a lot of very positive results."
On the effect the program had on the workforce:
"When you have unemployment insurance and you get a job, you lose your unemployment insurance. When you have a basic income and you get a job, you're always better off with a job. You keep your basic income.
"So as a lump sum it does not have a work disincentive effect -- at least in marginal terms, which are very important to economists. It does have an income effect. When you have more money and that money doesn't require you to work, then it is possible for you not to work.
"And you did see some of those effects. ... The group that wasn't receiving a negative income tax record worked relatively less per week than the experimental group receiving the negative income tax. But that was because the people who receive the negative income tax took more time to find a good job, not because anybody actually dropped out of the labor force. They didn't find any evidence of that whatsoever."
On why the program ended:
"Well, it was an experiment and it was never meant to be permanent. There were four experiments in the U. S. and one in Canada. All of them were meant to be temporary.
"There was very serious consideration of creating a basic income guarantee in the United States. As a matter of fact, it passed the House of Representatives twice in the early 70s and failed fairly narrowly in the Senate. It was a very watered-down version, but was something along these lines.
"That was when streamlining and improving the welfare system was very popular in the 60s and 70s with the War on Poverty and Republicans, in the form of Nixon's Family Assistance Plan, kind of signed on to that. But then once you got to about 1980 it was all about cutting the welfare system, not reforming and improving it. Even the so-called welfare reform we got under Clinton was a cut very much more than it was a reform."
On the current attitude toward poverty:
"We all kind of like to think that we're better than those poor people. That the reason that we are successful and they're not is because we know what we're doing and they're making all these mistakes. And if they just became obedient servants to those minimum wage employers they would eventually work their way up.
"And that's simply not true. A minimum wage job will leave you deeply in poverty especially if you have a family. The basic income is kind of like a net. If you want a trapeze artist to do better tricks, the best thing to do is get to give them a net."
