Barrier Busters: Unconditional Cash Transfers as a Strategy to Promote Economic Self-Sufficiency

April 16, 2019

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Stephanie S. Moore, Michael Gordon, Elise Gahan, & Julie Gowda

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Neighborhood Network (NN) was launched in 2012 as a strategy to promote economic self-sufficiency among residents of a low-income neighborhood in Detroit. NN, a program convened by a nonprofit human services agency in the city, coordinates various services provided by seven nonprofit organizations and connects residents with resources that help them work toward their goals. NN Coordinators met regularly with participants to set goals, discuss progress, and connect them with appropriate resources, such as entrepreneurship training, financial literacy resources, and childcare. NN participants also had the option of participating in additional programs, including group sessions intended to strengthen relationships and build accountability among members as they make progress towards their goals. NN has served over 350 residents and facilitated significant positive changes in participants’ employment, income, and community involvement (Sobeck, Brown, & Capps, 2015).

Yet, seemingly small barriers often present major obstacles that prevent NN participants from progressing toward their goals. These barriers can take many forms, including low wages, limited education, and debt. In many cases, these barriers could be overcome with relatively small amounts of money. The NN Barrier Busters (NN-BB) program was introduced as a strategy to help NN participants overcome these barriers and pursue long-term economic self- sufficiency. NN-BB provides small, one-time cash awards for residents to use as they see fit.

This paper explores the NN-BB program from the perspectives of participants’ needs, goals, and the barriers they confront, as well as exploring the program’s effects on participants’ self-sufficiency. Findings suggest that programs like NN-BB may be an effective strategy for promoting self-sufficiency.

Poverty in the United States

More than 43 million Americans – nearly one in seven – live in poverty (Proctor, Semega, & Kollar, 2016). One and a half million households live in extreme poverty, surviving on $2 per day in cash income per family member (Edin & Shaefer, 2015). Tragically, one-third of those in poverty are children (Proctor, Semega, & Kollar, 2016). At 39.4%, the rate of poverty in Detroit, Michigan is more than three times the national average of 12.7% (United States Census Bureau, 2017).

Common misfortunes, such as a broken car or an injury, can have catastrophic effects for people living in poverty (Stiglitz, 2012). Financial fragility refers to the inability of a household to withstand a financial shock and is commonly measured by asking whether an individual would be able to come up with $2,000 in one month to meet an emergency need (Lusardi, Schneider, & Tufano, 2011). In 2015, nearly one-third of Americans were considered financially fragile (Gupta, Hasler, & Lusardi, 2018). Financial fragility impacts people across all incomes, with 30% of middle-income families being financially fragile. In a related study that focused on individuals’ ability to immediately come up with funds, the Federal Reserve Board reported that 47% of Americans would need to borrow money or sell some of their possessions to pay for a $400 emergency (Gabler, 2016).

The consequences of financial fragility are compounded by the fact that poverty tends to affect families across multiple generations. People who live in poverty are likely to have parents who are also poor and therefore unable to provide a financial safety net in times of emergency. Among Americans raised by parents in the lowest economic quintile, 43 percent remain in the bottom quintile as adults and 70 percent remain below the middle quintile (Urahn et al., 2012). As compared to people in other OECD countries, American children born to poor parents are more likely to be in poverty as adults (Stiglitz, 2012).

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