Pennies from Heaven – Why cash works best to ensure all children thrive

Jess Berentson-ShawTax and Welfare

Today the Morgan Foundation’s new book Pennies from heaven is released. In it we propose that all New Zealand families with a child under 3 years of age receive $200 a week unconditional payment called a “Thriving Child” payment. We also propose that many of the conditions placed on parents in receipt of welfare payment are removed. We also propose that ALL low-income families receive a basic income to ensure while they have a dependent child in their care their incomes are sufficient.

It may be controversial stuff here in New Zealand, but is a pretty business as usual set of policies in countries where the value of all children is recognised, and the wellbeing of the families raising them is seen as paramount.

Giving people more money is not only the most obvious way to help families; it is also the most effective.

We need new ideas to create a fairer country for all Kiwis. We need to focus on what works, and our current approaches may be popular but they are not very effective for children.

We considered the effectiveness and cost-effectiveness of a large number of popular interventions on improving children’s wellbeing before coming up with the proposal.

These include intensive in-home pre-schooling, parental training, housing interventions, in-kind services such as food in schools and nurses in schools, additional cash for families with children, compulsory employment programmes for parents and more.

They all sound like good ideas, but nothing was as powerful in improving lives and preventing negative outcomes for children, as unconditional cash benefits.

We looked at the best quality science and used systematic methods (read more about these methods)

One particular powerful experiment we looked at was the Great Smoky Mountain’s Study of Youth:

The Great Smoky Mountains Study of Youth is a research programme that has followed a large group of children in Western North Carolina throughout their lives. In longitudinal studies such as this, the children who participate are interviewed at regular periods throughout their lives (and all at the same time).

Included in the Great Smoky Mountains study were a large group of Native American children from the Eastern Band of Cherokee Indians living in a Federal Reservation area.

What is really interesting about this study is that after it had been running for some years, a casino wholly owned and operated by the tribal Government was opened on the Eastern Cherokee reservation. A portion of the profits from the casino started being distributed to all adults who are members of the tribe; they are paid every six months and this has been happening since 1996. The average annual amount each adult in a household receives is US$4,000, so a two-adult household has seen a US$8,000 increase in their annual income.

What the sudden injection of casino payments did was to create what is called a “natural experiment”: Without intent or design, a particular group in a community (in this case, children) were subject to a very specific change in their lives (an intervention), while another group who were living in the same community were not subject to this intervention. In this natural experiment, some children in the study had a significant increase in their family income, while others did not. This gave the researchers a perfect opportunity to see what impact a large increase in income had on the Eastern Cherokee children’s well-being and compare their outcomes to those children who did not benefit from such an increase. The experiment occurred in the context of a longitudinal study so the researchers could also observe what happened to the children over time. As incomes in one group of children were suddenly increased at a single point in time, the researchers could be very confident that any differences observed between those children who lived in households receiving the payments and those without were caused by the change in income.

The study found that in households that moved from being in poverty to being households that were no longer in poverty – based on the US federal poverty line – because of the payments, children showed significantly fewer behaviours associated with mental illness (such as attention deficit hyperactivity disorder, anxiety, depression).

The payments also led to increases in the average length of completed education, reductions in crime among teenagers, fewer arrests for parents, increases in parental supervision of children and more positive interactions with mothers (as reported by children). These improvements were greatest for the poorest households, and educational attainment improved where the payments were made to mothers, not fathers.

Why does unconditional cash work? Because it addresses the real problem – the stress

Low-income families are not the problem, the problem is the stress caused by being poor.

One of the major factors that mean children from low-income low opportunities families don’t thrive as other children do is the stress their families are under.

In New Zealand children from low-income families are at greater risk of dying in infancy and childhood, don’t do as well at school, experience more behavioural problems, and get involved in the criminal justice system at a greater rate. They go on to do less well as adults. Conversely, children of well off families are much more likely to thrive, go on to do well as adults and have thriving children themselves.

This has everything to do with the universal reality of stress. It isn’t about low-income families, it’s about all families and what happens to us when we end up poor.

Scientific research shows financial stress narrows people’s cognitive abilities to make decisions – we all only have so much “cognitive bandwidth” and struggling with rising costs, insecure work, and meeting punitive welfare conditions limits it.

Parental stress can also affect children’s physical development. Neurological imaging studies show us that the brain development of children from resource poor families differs with children from other families. We can understand this research through the role of parental bonding. In the first years of a child’s life all the neural connections they need are built by their interactions with those that care for them. If their primary caregiver is under pressure they have less energy, time, ability to dedicate to those vital interactions.

Children who are exposed to poverty in key development periods also experience stress themselves- the physical effects of which can affect their brain and immune system development. Our own famous Dunedin Multidisciplinary study shows children who grow up poor are more likely to experience heart related illnesses as adults even if they have moved out of poverty as adults. The childhood poverty has had a long-term effect on their cardiovascular system.

When symptoms become causes

What happens over time, across families and generations is that the symptoms of the stress that we observe become the very things that can prevent families from being able to right the scales. For example the negative impacts of poverty as a child may affect your abilities and wellbeing as an adult and so it goes on. Yet our brains are plastic, adaptable, able to make new neural connections, learn and change under better conditions.

So while we may moralise about the “poor decisions” some parents make, and point to this as the cause of the poverty, the much more universal explanation is that us humans tend to respond in very similar ways when place under specific stressful and limiting conditions. It is not about low-income families, it is about all families and what happens to us when the conditions line up. In other words, it is likely that you or I would respond in the same way if exposed to persistent poverty.

What the research on unconditional cash shows us is if we look for ways to lift this financial stress then families and their children respond positively.

Families are more than their financial struggles

The policy we propose puts trust in low-income parents to make their own decisions for their families while giving them the financial resources to be able to make good ones.

When additional cash was given to low income families in the UK what did parents spend it on? Their children of course. Parents also reduced their spending on those crutches many of us lean on when we are stressed (alcohol and tobacco).

Work matters – the work of parenting

While paid employment is one way to improve the economic situation of families, evidence shows us that it is not often an effective approach for low-income parents with young children. In the US welfare-to-work programmes (where like here sanctions are used to move parents off welfare) have failed to improve the economic wellbeing of families or outcomes for children.

Moving parents into work is a viable solution once children are older, when the work is rewarding, adequately paid and it is shown to improve the overall economic situation of the family once additional costs are taken into account (e.g. childcare).

The current work-focused solutions for parents of young children should be de-prioritised. It may have short-term gain for government targets, but is likely to increase long-term costs.

Can we afford to pay parents?

Imagine if we properly invested in all the children in New Zealand? The potential they have is limitless, and hence the benefit to our society also. Investing in the amazing potential of all children will lead to a thriving and prosperous society where all children have a fair chance to fully participate.

We currently have an imbalance between the unconditional support we offer the elderly (who in the main are not responsible for children) and the support we offer families who are raising children during the vital brain and physical development years. We could redress this imbalance.

We also have many tax loopholes that could be closed (e.g. taxes on wealth) to help us invest in children.

Based on our calculations positive social outcomes as a result of such payments would benefit New Zealand $1.9b more than it would cost. It would save on the cost of child poverty and deliver positive outcomes for families and children.

Some may find the idea of giving low-income families with young children unconditional cash challenging. Yet achieving a thriving, inclusive, and fair New Zealand is what many of us genuinely want no matter where on the political spectrum we sit.

Read the research behind the policy in Pennies From Heaven, why cash works best to ensure all children thrive – by Jess Berentson-Shaw and Gareth Morgan, available in all good Bookstores from today and online.


Pennies from Heaven – Why cash works best to ensure all children thrive was last modified: March 2nd, 2017 by Jess Berentson-Shaw
About the Author

Jess Berentson-Shaw

Dr Jess Berentson-Shaw is a science researcher working for the Morgan Foundation. Jess holds a PhD in Health Psychology from Victoria University. Jess has over 10 years’ experience working on applying science and evidence to public policy. She worked on improving the use of science in public health practice in NZ, before working as a Research Fellow at University College in London, where she researched how doctors and clinicians translate scientific evidence into their clinical practice. While in the UK she also developed a national data collection system, which was used to determine what factors contribute to poor outcomes for women and babies during pregnancy and birth. On her return to New Zealand she directed a research group that specialised in the independent evaluation and application of research and science to health policy and practice. Jess loves science and what it can do to make the world a fairer place.