There’s Nothing Wrong with a Handout

The other week, a colleague came to tell me about an idea he had to provide shelter for homeless families in our area. The backbone of the idea was providing shelter. The responsibility to provide overnight housing for these families would be rotated among the churches in the area. There would also be a central location where parents could get help finding a job and other services while their children were in school.

And, while there are a lot of details to figure out, I thought it was a good idea. I’m going to take it to my community outreach committee to see what they think and what we can do.

But when my colleague ended his pitch, he used an old trope: it’s not a handout… it’s a hand up.

And I thought two things.

First, it’s totally a handout. We’re talking about giving people a place to stay overnight and help connecting to jobs and services. I think we should also help them with food, clothing, and other needs. All of these things are handouts.

Second, there’s nothing wrong with that.

At this point, the research is clear that handouts work. Countless studies of direct cash transfers from around the world show three important things:

Cash transfers have an array of positive impacts on the people who receive them. Transfers are associated with increased birthweight, reduction in HIV infections and psychological distress, increased schooling, and decreased child labor

Cash transfers have long-term effects. People who receive transfers invest the money in ways that lead to increased income in the years that follow (like getting vocational training or investing in a business) and that increase future savings and flexibility (like replacing a thatched roof with a metal one).

People who receive cash transfers don’t tend to abuse them. Recipients don’t spend the money on temptation goods or reduce their work hours. Some studies even show that transfer recipients are less likely to spend money on temptation goods and more likely to work more hours (especially as they move into skilled work).

Cash transfers have an array of positive effects, including long-term effects. And people who receive them don't tend to abuse them. Click To Tweet

Obviously, the low-income families that researchers studied in countries like Uganda,1Christopher Blattman, Nathan Fiala, Sebastian Martinez, “The Economic and Social Returns to Cash Transfers” Kenya,2Innovations for Poverty Action, “The Impact of Unconditional Cash Transfers in Kenya” and Morocco,3Najy Benhassine, Florencia Devoto, Esther Duflo, Pascaline Dupas, and Victor Pouliquen, “Turning a Shove into a Nudge? A ‘Labeled Cash Transfer’ for Education,” American Economic Journal: Economic Policy 2015, 7(3): 86–125 aren’t the same as homeless families in Iowa. But the research gives us good reason to believe that the right gift — the right handout — at the right time can help people begin their journeys out of poverty. For some people, that might mean a large cash payment. For others, it might be a place to stay for a few nights, a warm meal, and some help finding a job. For others, it might be a few hundred dollars to help them avoid a late mortgage payment. Those are all handouts, and they can all help people.

So let’s ditch the idea that help for people living in poverty needs to be in the form of a hand up instead of a handout. Sometimes — maybe even most of the time — the right handout is exactly the hand up someone needs.

Let's ditch the idea that help for people living in poverty needs to be in the form of a hand up instead of a handout. Sometimes — maybe even most of the time — the right handout is exactly the hand up someone needs. Click To Tweet

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