Unconditional Cash & Parental Priorities
At a Glance: Unconditional Cash and the "Money vs. Time" Decision
In a new paper (Money or Time? Heterogeneous Effects of Unconditional Cash on Parental Investments by Hema Shah, Lisa A. Gennetian, Katherine Magnuson, Hirokazu Yoshikawa, Laura R. Stilwell, Kimberly Noble, and Greg Duncan) unconditional cash aid given to low-income mothers prompts distinctly different parental investment choices between Latino and Black families: Latino families significantly increased monetary spending on their children, while Black families tended to shift towards dedicating more maternal time to them, including reducing work hours and increasing early learning activities.
Why it matters
Understanding these varied responses to cash assistance is crucial for designing effective and equitable poverty reduction policies. The study's findings highlight that a one-size-fits-all approach to cash transfers may not achieve uniform results across diverse communities, emphasizing the need to consider varying family circumstances, preferences, and existing support systems. This research offers a rare look into how cash is used when eligibility isn't tied to other demographic factors, providing cleaner insights into behavioral responses.
The Big Picture: Understanding Heterogeneous Responses
While income support programs have grown, reducing child poverty, how different families use this aid, beyond just income or earnings changes, isn't well understood. This is especially true for unconditional cash transfers. Families respond based on their unique preferences, local economic conditions, and structural factors, which can vary systematically by household characteristics like race and ethnicity.
Persistent Disparities: Children in Latino and Black communities face higher poverty rates (22.0% and 20.3%, respectively, in 2023, compared to 7.2% for non-Hispanic white children). These differences persist even when accounting for various poverty measures.
Context Matters:
Black families have historically faced systemic exclusion from wealth-building, structural racism in employment, and disproportionate impacts from mass incarceration, often leading to single-mother households and different interactions with social programs.
Latino families, a diverse group with many being native-born citizens but often having immigrant parents, may face language barriers, documentation challenges for benefits, and stigma, despite high adult employment rates and often having two-parent households.
Study's Unique Contribution: The Baby's First Years (BFY) study allows examination of these responses without the confounding factor of program eligibility criteria, as the cash gift was provided directly and universally to enrolled participants.
The Baby's First Years (BFY) Intervention
Design: A randomized controlled trial where 1,000 low-income mothers and their newborns were recruited from 12 hospitals in four diverse U.S. communities (New York City, New Orleans, greater Omaha, Twin Cities) in 2018-2019.
Randomization: Families were randomly assigned to receive either:
A "high-cash" gift of $333 per month.
A "low-cash" gift of $20 per month.
Delivery: Payments began right after the child's birth, deposited monthly onto a debit card with a "4MyBaby" logo, and are set to continue until the child is 76 months old. The cash is a non-taxable gift, with measures taken to minimize interference with other public benefits.
Participants: Of the enrolled families, 41% of mothers identified as Latino (diverse origins including Dominican, Mexican, Puerto Rican) and 40% as non-Latino Black. The remaining 19% (White, Asian/Pacific Islander, American Indian/Alaska Native, multiracial, other) were too small for separate analysis in this study.
Baseline Snapshot: Latino and Black Families in BFY
Even before the cash transfers, there were notable differences:
Latino Mothers: Slightly older, fewer years of education, less likely to have worked in the year before birth, less likely to receive SNAP, Medicaid (for mother), or housing assistance. More likely to be married or living with the child's biological father. A higher proportion were immigrants (68.4% foreign-born vs. 6.3% of Black mothers). 61.5% completed the baseline survey in Spanish.
Black Mothers: More likely to have worked in the prior year, have higher receipt of SNAP, Medicaid, and housing assistance. More likely to be single and never married. Predominantly U.S.-born (93.7%).
Site Distribution: 59% of Latino families were in New York City; 59% of Black families were in New Orleans.
Key Findings: How Cash Gifts Were Used
The study analyzed data from children ages 1, 2, and 3, with some child development data up to age 4.
Impact on Household Finances (Similar for Both Groups):
Net monthly household income increased for both groups in the high-cash arm (approx. $202 for Latino families, $247 for Black families).
However, these net figures masked some differences:
Latino households saw reductions in earnings from other household members.
Black households reported reductions in government income (e.g., less likely to receive housing or LIHEAP assistance).
Latino Families' Response (High-Cash Group):
Increased Monetary Investment in Children: Child-focused expenditures (diapers, books, toys, clothes, electronics, activities) rose by $99.41 per month on average, roughly one-third of the $313 cash difference.
Increased Spending on Eating Out: Spending on food from restaurants/takeout increased by $59.79 per month.
No Change in Maternal Time: No statistically detectable effects on maternal employment or time spent on maternal-child activities.
Marginal Propensity to Consume (MPC): Showed a higher MPC for child-specific goods from government income than from maternal income. The BFY cash gift had an even larger effect on child-focused spending (5x that of government income, 14x that of maternal income). This suggests earmarking or "mental accounting," where the perceived source or purpose of income influences spending.
Black Families' Response (High-Cash Group):
Increased Maternal Time Investment in Children:
Mothers were 8.2 percentage points less likely to work more than 40 hours/week.
Average weekly work hours decreased by 3.75 hours.
Time spent on parent-child early learning activities increased by 18.86 minutes/week. About 8% of the reduced work time shifted to these measured activities.
Mothers were 5.5 percentage points more likely to participate in education programs (suggestive evidence).
Limited Change in Child-Focused Spending: No overall significant effect on the child-focused expenditure index. However, spending on books increased by $14.84 per month.
Increased Spending on Utilities: Household utility expenditures rose by $37.13 per month.
Marginal Propensity to Consume (MPC): Showed a higher MPC for child-specific goods from maternal earnings compared to government income.
Robustness: The differing impacts on monetary vs. time investments were largely robust even when accounting for baseline differences in family structure (e.g., single motherhood), maternal nativity, and metropolitan area. However, the time use changes for Black mothers were less pronounced when restricting the sample to single mothers, suggesting that family structure plays some role.
Impact on Child Development (Through Age 4)
Generally No Differential Impact: For most child developmental outcomes measured (social-emotional, cognitive, language), the cash gift did not produce statistically different effects between Latino and Black children, or between high-cash and low-cash groups within these ethnicities.
One Exception: Executive Function:
Children in Latino families receiving the high-cash gift showed a positive effect on objectively assessed executive functioning (MEFS scale) at age 4.
No such effect was found for children in Black families.
Latino children in the low-cash group had lower baseline MEFS scores than Black children in the low-cash group; the cash gift helped close this gap. This effect was primarily seen in boys.
What Explains the Differences?
The paper suggests several interconnected factors:
Baseline Government Benefit Reliance: Latino families in BFY had lower baseline receipt of benefits like SNAP and housing aid. Black families, with higher initial benefit use, might have used government aid for necessities, potentially freeing up the BFY cash for other uses or allowing for time-based investments. The cash gift led to a reduction in reported government benefit receipt among Black families.
Family Structure: Latino families were more likely to have two parents in the household. Single mothers, more prevalent in the Black cohort, might allocate time and income differently. While family structure explained some, it didn't account for all differences, especially in expenditures.
Parenting Preferences, Norms, and Beliefs: Cultural norms (e.g., higher breastfeeding rates among Latino mothers, consistent with national data) and beliefs about child-rearing could influence investment choices.
Income Fungibility and Labeling: The study supports the idea that income isn't always perfectly fungible.
Latino families' higher spending on children from government income (and the BFY gift, labeled "4MyBaby") aligns with "mental accounting," where income is earmarked based on its source or perceived intent.
Black families' higher propensity to spend maternal earnings on children suggests different internal household dynamics or priorities for earned income.
Discussion & Implications
Flexibility is Key: Unconditional cash allows families to address their most pressing needs, which vary. Latino families prioritized material investments, while Black families prioritized time-based investments.
Complementary to Existing Supports: The BFY cash gift appeared to complement existing income sources differently for each group.
Long-Term Outcomes: While immediate impacts on child development (barring executive function for Latino children) were limited by age 4, the authors suggest that benefits, such as increased maternal education for Black mothers, might translate to improved child outcomes later in life.
Policy Relevance: These findings underscore the importance of looking beyond the average effects of anti-poverty programs. Policies may need to be nuanced or accompanied by other supports to address the specific constraints and leverage the diverse investment strategies of different communities.
Bottomline
This research provides compelling evidence that how families use unconditional cash support is not uniform. Latino families in this study used the additional income primarily to increase monetary investments in their children. Black families, in contrast, used it more to increase maternal time investments, including time for early learning and potentially maternal education, alongside a reduction in intensive work hours. These distinct pathways reflect the complex interplay of economic conditions, social contexts, and family priorities.