How no-strings-attached money changes poor teens

Showing that a regular, no-strings-attached disbursement of money can benefit poor adolescents psychologically is an important new finding, says Emilia Simeonova. "We've seen in our results that this is a way to improve the lives of the poor, the kids in particular." (Credit: MIKI Yoshihito/Flickr)

Increasing poor families’ income can significantly improve their children’s psychological well-being, according to new research.

The evidence comes from a study of adolescents whose low-income Native American families began receiving annual payments from a new casino on their tribe’s reservation.

“I was surprised that the findings from our analysis were so clear,” economist Emilia Simeonova says. “People may assume that giving money to families in need is a good thing, but you still have to prove it. You want to know whether the extra money makes a difference, and in this case I believe we have shown that.”

Simeonova, an assistant professor at Johns Hopkins University’s Carey Business School, conducted the study with colleagues from Duke University and the University of California, Los Angeles. They worked with data from the Great Smoky Mountains Survey, a longitudinal study launched in 1993 to examine the psychological traits of 1,420 poor children in western North Carolina, including several hundred children in the Cherokee tribe. Their working paper is available here.

Four years into the study, the Eastern Band of Cherokee opened a casino in the survey zone and started distributing half the profits as extra cash income for adult members of the tribe. The impact of this new yearly income—about $4,000 per adult, or 20 percent of the average Native American families’ annual earnings—is what Simeonova and her colleagues focused on.

Surprising changes in personality

Native children in households with at least four years of extra income showed clear gains in “conscientiousness” (being organized, responsible, and hard-working) and “agreeableness” (behaving unselfishly). The children even showed progress—though less marked—in an unlikely sounding measure of good health, “neuroticism.” As Simeonova explains, neuroticism can be a positive trait in small amounts, indicating self-awareness and an ability to appreciate the feelings of others.

It was surprising, Simeonova says, to find changing personality traits at 11 and 13, ages by which cognitive abilities are considered firmly established. The researchers also found that children at lower levels of psychological development when the study began showed the greatest improvements after the extra dollars started flowing to their families.

[Tax credit adds income while cutting stigma]

“Previous research shows that low-income parents devote most of their resources to their brighter, more promising children, in the hopes of boosting their educational opportunities,” Simeonova says. “But we saw here that parents were spending more time with their kids who were lagging developmentally. We think this accounts for the fact that these children made the greatest gains.”

With the new money, most families living on the reservation stayed there, but families living off the reservation tended to move to areas of demonstrated higher levels of education and income. Simeonova speculates that the children in the study benefitted from this change in environment.

Benefits for parents, too

Otherwise, she states, the GSMS didn’t reveal how the families spent their additional income.

“We saw only the apparent effects of the money,” she says. “For example, the parents continued to work at their usual jobs but reported they felt less stressed in general. They said they fought less with their spouses and with their kids, though the divorce rate of this group didn’t change. There was less alcohol consumption among the parents, and they were less likely to see a mental health counselor. And the kids said that they were getting to spend more time with their parents and that they were enjoying it.”

Showing that a regular, no-strings-attached disbursement of money can benefit poor adolescents psychologically is an important new finding, Simeonova says.

“We’ve seen in our results that this is a way to improve the lives of the poor, the kids in particular,” she says. “That’s not to say that it would make everything perfect in the lives of these families, but we concluded that the money clearly had major, positive effects.”

She hopes to extend the research by looking at the effects of similar casino-related payments to low-income Native Americans in other states.

Source: Johns Hopkins University