Income volatility — rapid and unpredictable changes in monthly income — affects most U.S. households living in poverty, forcing low-income individuals to choose between paying for basic needs like housing and utility bills or health-related expenses like medications. For children, this financial instability prevents access to healthy foods, stable shelter, and other resources needed to thrive.[1]

Guaranteed income (GI) — recurring, unconditional cash transfers — can smooth income volatility, promote economic stability, and improve health and wellbeing for children and families.

Today’s guaranteed income efforts build off the evidence from the expanded Child Tax Credit (CTC) of 2021 which nearly cut the child poverty rate in half in a single year.[2] Like guaranteed income, the CTC provided recurring, monthly cash payments to millions of households to smooth income volatility, reaching more than 80% of U.S. children. When the CTC expansion expired, child poverty soared again, with rates more than doubling from 2021 to 2022.[3]

For those living in poverty, guaranteed income (GI) reduces income volatility by supplementing other programs, services, and employment that fluctuate month-to-month. In this way, GI recipients do not have to choose between meeting basic needs, paying unexpected expenses, and making health-promoting choices for themselves and their children.

For example, the Bridge Project’s focus on eradicating childhood poverty led its founder, High Impact Philanthropy Academy alumna Holly Fogle, to begin funding direct cash for families during the COVID-19 pandemic. While families all needed to buy diapers, formula, and healthy food, they also had unexpected expenses crop up, like needing to buy tires to get to work or a computer so their older children could participate in school. Says Fogle, “They were all making different decisions about how to spend the money, but they knew what decision was right for their family.” Launched in 2021, the Bridge Project is now one of the largest funders of guaranteed income in the United States.

Direct cash helps families meet their ever-changing needs. Emerging evidence from the University of Pennsylvania’s Center for Guaranteed Income Research (CGIR) suggests that GI leads to improved financial health and stability, which in turn supports better housing quality, enhanced employment opportunities and choices, increased parental time with children, and even decreased intimate partner violence.[4]

CGIR co-founder Amy Castro says, “Although we still have much to learn, these findings are part of the largest database on unconditional cash in the world and move us one step closer towards evidence-based policymaking on cash.”

By design, government-provided social services programs restrict how families can use program support. By funding guaranteed income, philanthropy can help families meet their needs more directly and efficiently. Here are ways philanthropy can help:

Fund guaranteed income (GI) to increase healthcare access and treatment. Serious health problems, such as a diagnosis of cancer, are one of the biggest predictors of financial insecurity and bankruptcy. One study found that medical bills account for 40% of personal bankruptcies.[5]

Anneliese Barron, executive director of One Family Foundation, describes the situation that low-income cancer patients face: “We all know how expensive it is to treat cancer even with health insurance — there are copayments, deductibles, medications, and loss of income due to time off work. Because of these costs, up to 30% of cancer patients delay or skip their cancer treatments altogether.”

Her organization is funding a CGIR study on cash as a medical intervention to allow patients to focus on their health without an additional layer of financial stress. CGIR researcher Meredith Doherty says, “Financial well-being and health are intrinsically linked.”

Add guaranteed income to your other funding efforts, especially for place-based and population-specific strategies. When combined with other programs, unconditional cash can create new opportunities for recipients and their children through better health and educational outcomes.[6] For example, in addition to providing intensive coaching to caregivers to support childhood wellbeing, the Malawi-based nonprofit Yamba Malawi also provides unrestricted direct cash transfers of $20 a month to caregivers for the first year of the program. Yamba Malawi has found that caregivers use these payments to address immediate needs like food and medical bills.

Advance related research and innovation to support policymaking. As guaranteed income emerges as one of the most effective tools for reducing poverty, funding can create more support for its use among policymakers and the general population. For example, Penn’s Center for Guaranteed Income Research is evaluating the impact of GI in a cross-site study with roughly 19,000 participants enrolled in treatment and control groups. GI recipients will together receive over $111 million in direct cash payments by the end of the full study. In addition to benefiting the recipients, CGIR will house guaranteed income study data, providing scholars across disciplines and from around the world access to CGIR’s data for evidence-based policymaking.

Many longstanding government program policies have not yet been updated to reflect guaranteed income. In particular, IRS rules on direct cash transfer programs mean that beneficiaries who receive payments may risk losing the government benefits, like Medicaid, Pell Grants and Social Security Disability Income, that the guaranteed income was meant to supplement. Funding efforts to formulate or improve policy is another way philanthropy can help.[7]

Contributors:

Amy Baker Castro, PhD, and Allison Thompson, MSS, PhD, Center for Guaranteed Income