Cash Transfer Programs Can Build Choice, Speed, and Equity
In the past year, federal economic impact payments and the success of several cash transfer projects have contributed to growing demand for cash transfers in the United States. Cash transfers easily get cash to people who need it most, for them to use as they deem best.
During the COVID-19 pandemic, THRIVE East of the River provided emergency relief through cash transfers to more than 500 households in Washington, DC’s Ward 8. A recent Urban Institute study of why small and large donors contributed more than $4 million to enable these cash gifts revealed that funders are motivated by speed, equity, and choice, especially during an emergency.
How the THRIVE East of the River effort provided households with direct cash
The cash transfer effort grew out of a partnership among four community-based organizations (CBOs) that sought to address COVID-19’s disproportionate economic effects on their clients. The four CBOs—Bread for the City, the 11th Street Bridge Park (a Building Bridges Across the River project), the Far Southeast Family Strengthening Collaborative, and Martha’s Table—provided enrolled households with $5,500 of no-strings-attached cash, delivered in one payment or in monthly installments of approximately $1,100 each.
One of THRIVE’s key tenets is respecting “the power of our residents to make their own decisions,” meaning that THRIVE doesn’t ask participants to go to great lengths to prove they deserve and are eligible for assistance. Through the cash transfer program, the THRIVE CBOs distributed donor funds to Ward 8 residents who had seen them previously for social service needs but did not impose an income threshold for participants or other limitations on how the money should be spent.
Lessons from the THRIVE effort on the benefits of cash transfers
At the outset of the pandemic, donors’ top priority was responding quickly, and THRIVE presented an opportunity to get cash into the hands of those who need it. The first donor to donate to THRIVE reiterated the need for a quick response, saying, “We were very concerned about how the response to the pandemic would affect the most marginalized communities in the city. I was grateful that [Bridge Park and its partners] had, not a solution, but a way to help.”
THRIVE donors also wanted to get money to those who needed it most and to prioritize equity in giving. One CBO executive director said the majority of their donors were compelled by the direct cash component of THRIVE, with new donors in particular citing cash transfer as the factor that brought them to the table. In Ward 8, more than 90 percent of residents are Black and 64 percent of residents make less than $50,000 per year, which motivated donors to give specifically to THRIVE. As one donor put it, “If you start with the data, Black people, particularly Black mothers, are the folks in DC most locked out of economic opportunity.” For donors looking to take decisive, tangible action to support equity and reduce disparities in their communities, THRIVE provided a way to support residents directly.
Cash transfers also enable recipients to choose how to spend the money. One philanthropic expert noted that many donors, especially individual donors, prefer “nonintermediated impact,” or giving directly to people and not to 501(c)(3) organizations. The growth of GoFundMe pages and the resurgence of mutual aid groups on a national scale during the pandemic demonstrate the desire for nonintermediated impact. GoFundMe’s CEO said an estimated one in three new fundraisers is COVID-19 related, often seeking to cover basic needs, such as food, housing, or health care. GoFundMe’s growth over the past year and before the pandemic reflects a larger shift in giving patterns and the growing need that federal, state, and local safety net mechanisms have not kept up with.
Most cash transfer models are built on the idea that recipients are better situated and more likely to address the challenges in their lives if given money directly, as opposed to through a third party. The THRIVE CBOs, which have worked in Ward 8 and across DC for decades, say they prefer to offer choices to the households they serve but are often bound by the red tape accompanying restricted benefits offered from public sources. One CBO director explained, “The way most of us solve child care, or rent, or a flat tire is we go to the bank and we pay for those things and continue our lives because we don’t have to go to the extra step [of going to a recertification office or going to a food bank]. If you have to make ends meet that way, it’s not the most rational way to conduct your life.”
Cash transfers can help donors to fill safety net gaps and advance racial equity
As cash transfers become increasingly popular, philanthropists and policymakers alike are recognizing that local cash transfer programs can address deficiencies in the US social safety net. This shift in perspective partly results from the understanding that putting money in someone’s hands helps them meet their most pressing needs and the growing evidence showing that cash recipients are more likely to spend the money on key needs and not on temptation goods.
The donors we spoke with believe THRIVE is in a unique position to illuminate cash transfers’ challenges, trade-offs, and benefits to policymakers. THRIVE can continue to test new ways to break the cycle of poverty while providing those who need assistance with choice and agency and filling the gaps in our social safety net.
The Urban Institute has the evidence to show what it will take to create a society where everyone has a fair shot at achieving their vision of success.