What Happens When You Give People Free Money? The Answer Might Surprise You – Executive Summary

A study wanted to understand the effects of unconditional cash distribution to the poor, giving 922 euros a month to 1,000 people for three years. Now the results are known.

The study, conducted by OpenResearch, a research lab funded by OpenAI CEO Sam Altman, looked at US citizens and found that most of the money was spent on basic needs, but did not result in significant improvements in physical well-being or long-term financial capacity.

The researchers found that although the donations were helpful and not spent on things like drugs and alcohol, they did not solve deep problems of income inequality.

The study, described as the most comprehensive on “unconditional cash”, found that the €33,000 spread over three years was not enough to make a lasting impact on beneficiaries’ finances.

This included 1,000 people aged 21 to 40, from families with an annual income of around €28,000, in 10 counties in Illinois and Texas in the USA. The control group, made up of 2,000 people with similar characteristics, received just €46 per month.

The benefits varied across different aspects of participants’ lives. There was an average increase of €20 per month in spending to help others, such as relatives and friends. In addition, beneficiaries sought more health care and improved nutrition for their families.

However, the study also revealed that recipients took on more debt, especially for cars and mortgages, which reduced their net worth.

The data suggest that recipients cut back on their work to some extent, using the free money to fill the gap. For every dollar received, participants’ earnings fell by at least 12 cents and their total household income fell by 21 cents. This suggests that the unconditional transfers allowed recipients to make employment decisions that better aligned with their personal circumstances and life goals, even if it led to lower wages.

The study provides new data to the debate over universal basic income. Progressive groups see basic income as a solution to poverty, while conservatives criticize such programs as encouraging laziness.