Direct Cash as a Tool to Build Economic Stability

Introduction

Our deepening understanding of the connection between health and wealth informed the Foundation’s decision to make economic stability a core goal of our current Pathways to Health Equity strategic plan.

St. David’s Foundation’s interest in direct cash support began with our introduction to UpTogether (previously Family Independence Initiative or FII), whose approach combines community, choice, and capital to support families on their path to economic stability.

In 2018, the Foundation partnered with the Michael & Susan Dell Foundation and Google.org to fund UpTogether to bring their model to Austin. UpTogether’s work in Central Texas and sites across the country demonstrated the power of combining direct cash with choice and social connection to foster economic progress. Through this initial investment, we saw families increase savings, reduce debt, build social connections, and advance a host of goals that they defined. This investment also attracted interest from local government to use direct cash as a tool to achieve economic and social goals.

Learning with Local Government Partners

When we first encountered the concept of direct cash support, it seemed radical. It has now become a tool that local governments across the country—including Austin—are exploring to build economic stability and combat poverty. In 2022, the City of Austin partnered with UpTogether to launch a direct cash pilot, building on UpTogether’s existing infrastructure in Central Texas. Through collaboration with 10 community-based partners and the City’s Equity Office, 135 households were enrolled in the pilot, each receiving $1,000 per month for one year.

St. David’s Foundation helped fund the pilot as well as an evaluation conducted by the Urban Institute to help funders and policy makers apply learnings from this pilot to future efforts to build economic stability in our region.

Key findings from the evaluation by Urban Institute are summarized below.

Participant Goals: The evaluation found that participants applied their additional cash to the following goals and purposes:

• Participants’ most common goals for the cash payments were to achieve financial stability, stay healthy, support their families, and find stable housing; around 83 percent of participants said that the cash helped them achieve their goals.
• Participants reported spending, on average, more than 50 percent of their pilot cash to cover financially burdensome housing costs. The average share participants spent on housing was more than twice as much as spending in any other category.
• Around 34 percent of participants reported using the cash for investments in their future, including skills building, expanding their professional networks, and pursuing additional education.

Outcomes: The evaluation found the following outcomes related to participants’ health and economic security:

• Participants’ housing security improved substantially over the course of the 12-month pilot, and positive outcomes continued to grow or were sustained after the cash disbursements ended. Six months after the pilot, the share of participants who reported being caught up on rent had increased 19 percent over baseline, from 48 percent to 67 percent.
• Median household incomes increased overall over time, even six months after the pilot period ended. This outcome could be due to investments in upskilling and education.
• Although labor market participation did not change notably during the pilot period, 30 percent of participants said they had secured better employment or a higher salary.
• Mental health outcomes were mixed and changed over time. Participants’ mental health reached notable levels of improvement at six months into the one-year pilot, but six months after the pilot ended, more participants reported feeling anxious than before the pilot began.
• Food security improved, with participant’s food security rates highest at the end of the pilot, and some improvement over baseline continued six months after the pilot.

Applying Lesson Learned to Future Investments and Action 

St. David’s Foundation believes that communities with the greatest health needs should be trusted with the resources to drive change for themselves. UpTogether’s model has proven that direct cash assistance is an effective tool – allowing families to meet their unique needs in ways traditional benefits or programs do not. Many of the principles behind direct cash can be applied to the Foundation’s future investments and actions:

• Flexibility to support families in addressing their needs. Most forms of public assistance have strict and narrow rules: SNAP can only be used for specific types of groceries; Medicaid can only be used for certain health care services by a limited set of providers. These rules ensure that public benefits are only used for their intended purpose (and often require expensive compliance infrastructure).  This means that families may have benefits that don’t address their most pressing needs: You can’t use a housing voucher to repair your car which allows you to work. Direct cash allows families to address their most urgent priorities, often in creative ways.
• Benefits alone leave gaps that derail goals. The public benefits that make up our safety net are critical. That said, they often leave holes that undermine the benefit’s intended outcomes. For example, housing vouchers (when recipients can find a unit that meets the voucher’s requirements) can only be used for rent – not application fees, moving expenses, or security deposits, which can lead to vouchers going unused. Cash, combined with a voucher, could make the goal of the voucher – quality, stable housing – more likely to be achieved.
• Choice fuels motivation.  Cash support offers people control and choice – families can set their own priorities about what is most important and what they are willing to forgo. Decades of scientific research on human motivation have shown that self-direction leads to better performance than carrots or stick rewards. A core insight from our work is that “help” is most effective when it syncs with basic tenets of human motivation. Direct cash support can harness initiative, allowing people to create their own solutions.   

As we continue to explore solutions to some of our region’s long-standing challenges (e.g., housing insecurity, childcare, maternal health), we see potential for direct cash as a tool in efforts to build economic stability.  We’re also mindful that while direct cash can be part of the answer to economic stability; it is not the only answer. We look forward to continuing to learn and share with the community.

Acknowledgements

These insights would not be possible without the thought partnership and hands-on work of leaders in this field.  We’re indebted to the team at UpTogether, who continually expand our thinking, the thoughtful evaluation approach applied by the Urban Institute, the leaders and staff at City of Austin who have shown true commitment to improving the well-being and self-sufficiency of our neighbors, and inspiration from FII Founder, Mauricio Lim Miller, who helped us understand that: “People truly need the welfare system when they are in crisis. But we need a totally different and separate approach if we want people to build full, independent lives.”

Full evaluation by Urban Institute can be found here: https://www.urban.org/research/publication/evaluation-austin-guaranteed-income-pilot