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We should give free money to the homeless

by Greg Bernhardt
Tags: free, homeless, money
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Greg Bernhardt
#1
Dec29-13, 07:43 PM
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Interesting thoughts. Certainly the sample size is far too small, but maybe there is something to take away from this study.

We tend to think that simply giving people money makes them lazy. Yet a wealth of scientific research proves the contrary: free money helps. It is time for a radical reform of the welfare state.
The Economist concluded:
‘The most efficient way to spend money on the homeless might be to give it to them.’
That spring, a local charity takes a radical decision. The street veterans are to become the beneficiaries of an innovative social experiment. No more food stamps, food kitchen dinners or sporadic shelter stays for them. The men will get a drastic bailout, financed by taxpayers. They'll each receive 3,000 pounds, cash, with no strings attached. The men are free to decide what to spend it on; counseling services are completely optional. No requirements, no hard questions. The only question they have to answer is:

What do you think is good for you?
Eradicating poverty in the United States would cost $175 billion – a quarter of the country’s $700 billion military budget.
Why we should give free money to everyone
https://decorrespondent.nl/541/why-w...39860-ec3a6c3e

Is It Nuts to Give to the Poor Without Strings Attached?
http://www.nytimes.com/2013/08/18/ma...tterfeed&_r=1&

PROVIDING PERSONALIZED SUPPORT TO ROUGH SLEEPERS
http://www.jrf.org.uk/publications/s...leepers-london
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Vanadium 50
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Dec29-13, 10:06 PM
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It will be interesting to see how this works out. There is an interesting article by Rossi and Wright on the demographics of the homeless. A large fraction is mentally ill, and another large fraction has substance abuse problems.

As far as ending poverty, there is an increasing tendency to define poverty in relative, rather than absolute terms. For example, the EU definition of poverty is earning less than 60% of the median income. A definition like that virtually ensures that poverty will never be eliminated.
Greg Bernhardt
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Dec30-13, 06:00 PM
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Quote Quote by Vanadium 50 View Post
A large fraction is mentally ill, and another large fraction has substance abuse problems.
Some mentally ill can get cheap housing and social security checks. They just need someone to help them figure it out and apply.

Vanadium 50
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Dec30-13, 07:43 PM
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We should give free money to the homeless

Ah, but will 3000GBP do that?

The Rossi/Wright article is very interesting on a number of levels. It's really very descriptive, whereas a lot of social science articles tend to be proposing some solution or other, and amazingly the data supports that. They acknowledge that studies in different places provide different results (not surprisingly - you have to be a lot tougher to be homeless in Minneapolis in January than Berkeley). But what I found most interesting is that there is a particular subpopulation that has a very common trajectory into homelessness, and this might need a different solution than the remainder.

It goes like this - a guy (most are male) loses his job and cannot find a new one. Mental illness, substance abuse and past criminality may play a role in this, as might simply a lack of skills. He moves in with relatives, often for years (typical was around 3), and then there is an event after which his relatives no longer feel safe so he is no longer welcome. These events may be related to mental illness, substance abuse and/or criminal behavior or associates.

Given a pattern, one has several lines of attack on how to break it.
SteamKing
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Dec30-13, 11:09 PM
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I would be interested to learn where all this 'free' money comes from.

Despite repeated attempts, no one has developed a money tree which you can grow and harvest in your back yard, geese stubbornly refuse to lay golden eggs, and no one has yet to find that pot o' gold at the end of the rainbow.

'Free' money is all-to-often extracted (extorted?) by government from the hard-working middle class through taxes, and then diverted up or down the income ladder, depending on the whims of those in the various legislative bodies around the world.
Greg Bernhardt
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Dec30-13, 11:21 PM
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Quote Quote by SteamKing View Post
I would be interested to learn where all this 'free' money comes from.
Ben Bernanke doesn't seem to have a problem finding the money tree :)

Quote Quote by SteamKing View Post
'Free' money is all-to-often extracted (extorted?) by government from the hard-working middle class through taxes, and then diverted up or down the income ladder, depending on the whims of those in the various legislative bodies around the world.
I think ending homelessness and putting a big dent in poverty should be a top priority. Plenty of money is wasted in far less worthy causes. I believe the article states we could hypothetically end poverty with $175B.
SteamKing
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Dec31-13, 05:21 AM
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BB has found the money tree like Ponce de Leon found the Fountain of Youth: sadly, neither exists, but I fear that when the QE tap is turned off, we will all suffer in one way or another, in terms of rampant inflation, a continuation or worsening of the current recession, or perhaps even a depression.

The government is busy wishing inflation away, carefully selecting the commodities which they track in order to say inflation is currently low, but anyone who shops for food and energy in particular knows that prices have risen significantly in recent years while purchasing power continues to decline.

And I would be particularly wary of anyone who claims, "And for the low, low price of $X billion, we can end poverty!" Since the 1960s in the US and Europe, trillions of dollars have been spent on various programs to end poverty, provide universal health care, subsidized education and housing, minimum incomes, job training programs, etc. And guess what? Poverty is still here, but it is living in more comfortable surroundings than before. The problem will only get worse, because the populations of western countries have been shifting markedly to an older mean age, which means that more resources have to be devoted to providing pensions and health care for the elderly and retired, but there are proportionally fewer younger workers to provide for each retired or elderly benefit recipient. Sure, governments can print money to make up the difference temporarily, but eventually, this catches up with you, and you start to suffer the ill-effects of inflation eating away at your economy.

It's been proven time and again that you can't spend your way to prosperity, but sadly, many have yet to learn this lesson and probably never will.
russ_watters
#8
Dec31-13, 05:38 AM
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Quote Quote by Greg Bernhardt View Post
I think ending homelessness and putting a big dent in poverty should be a top priority. Plenty of money is wasted in far less worthy causes. I believe the article states we could hypothetically end poverty with $175B.
Hypothetically, why would anyone currently below the poverty line not immediately quit their jobs if everyone below the poverty line were handed money to raise them to the poverty line?
Pythagorean
#9
Dec31-13, 10:03 AM
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Anecdotal, but it is consistent with the evidence: I have three friends that were given inheritance (on independent occasions). The first reduced his tech support job hours... and started an electronics recycling business and fabrication shop. The second continued to work as a cabbie half-time, and spent the other half of his time trading stocks (he has a business degree); he's also developing land to live on for a while, then sell once he develops it (raising its value). The third (who never had a real job in the first place) moved to a tropical location and started a business that removes invasive species for the state and also started a lab working on superconductors.

Between that and my own experiences, I'm left with the feeling that doing nothing is painfully boring and sometimes even shameful for the majority of the population.
Greg Bernhardt
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Dec31-13, 10:37 AM
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Russ the study in the first post has evidence that people generally don't behave that way.
turbo
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Dec31-13, 10:52 AM
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Quote Quote by Pythagorean View Post
Between that and my own experiences, I'm left with the feeling that doing nothing is painfully boring and sometimes even shameful for the majority of the population.
You are absolutely right. I was forced out of my last job due to a medical disability. I would gladly go right back to work at severely reduced salary, if I could tolerate being around people with their perfumes and fragrance chemicals. (Even laundry soap fragrances flare up my MCS and keeps me sick for days.) SSDI doesn't pay much, and I'm lucky that my wife has a decent manufacturing job with benefits.

According to the right-wing narrative, I'm a slacker riding on "entitlements" that I have paid for since I was 14. Since I'm 61 and in shaky health, it's not likely that I will ever consume more than a modest fraction of all the money that I paid in.
russ_watters
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Dec31-13, 11:43 AM
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Quote Quote by Greg Bernhardt View Post
Russ the study in the first post has evidence that people generally don't behave that way.
The way I read the article, none of the people involved had jobs to begin with and they were homeless, not just poor. Not the same as what you are suggesting.

From an economics perspective, quitting your job if the government will pay you the difference up to the poverty rate is actually the CORRECT action because such a program effectively causes every below poverty pay rate to equal zero, making people work for free.

Besides which, I doubt many people don't know anyone who has taken advantage of similar, but less drastic programs. One friend of mine once made no effort to find a job for months because unemployment compensation enabled it. Another calculated the effective pay rate of a job and turned down an offer because it didn't pay enough over unemployment.
Vanadium 50
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Dec31-13, 11:46 AM
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I hate to toss in facts, because that just enrages both sides, but the total amount of money required to lift all individuals in the US above the poverty line via direct aid (i.e. you get a check for the difference between the poverty level and what you made) is $1.4T additional (i.e. over and above the $1.3T Pythagorean calls 'doing nothing') per year.

This is from the latest tables from the US census, ignoring AK and HI's higher poverty line (which can only increase this number), counting individuals, not families or households.

I fully admit this is a simple model - anyone who criticizes it on that basis is free to do the work on a more complicated one and post it here.

To put this in context, $1.4T is twice what the Department of Defense gets. It is more than the entire discretionary budget (i.e. all cabinet agencies). It is a third again as large as the deficit, and if it were to be funded out of income tax, the rates would have to increase to 2.4x what they are today.

I have not calculated the effect of this on the putative recipients, but it could be substantial: people just at the poverty line would be taxed at the rate of someone making $400,000 a year after this change.
Greg Bernhardt
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Dec31-13, 11:55 AM
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Thanks for the data v50. I think we should stick strictly to homelessness as that was the study. My fault if I started to go off course.
russ_watters
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Dec31-13, 11:57 AM
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Are you sure about that, V50? Back of the envelope, the US ave household size is 3, the US population is 310 million and the poverty rate 16% at $20k/yr. Assuming assistance of half required to get above poverty would equal $165 B / yr.
Vanadium 50
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Dec31-13, 02:22 PM
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The numbers are available on the census website. I used individuals, not households, so a stay-at-home parent would be considered poor. Also, there is a big spike at $2500/year or less. Almost 100 million people. You might argue that many of these aren't really poor, and I might even agree with you - it shows the confusion between income and wealth I've complained about before. But if you want to end poverty by redistributive taxation, you are going to have a hard time distinguishing between Sue, who is a stay at home mom by choice, and Mary, who would leave her abusive husband and take the kids with her, if only she had an income of her own.

My larger point, though, is that this question started out as a 3000 GBP one-time payment to help the homeless, and immediately blossomed into massive wealth distribution to end poverty. Perhaps it would be valuable to see how this works out for the smaller problem before rolling it out countrywide and making its funding mandatory.

All homeless people are poor, but not all poor people are homeless. That suggests two different approaches to the problem: one is to look at the factors the distinguish the non-homeless poor from the homeless poor and work on those, and the other is to attack the poverty. Up to now, most activities have focused on the former, although some events (O'Connor v. Donaldson) have inadvertently pushed in the other direction. This is an interesting experiment - 3000 GBP won't make the difference between poor and not-poor on its face, but maybe for some fraction of the homeless population it will be enough.
Johninch
#17
Dec31-13, 04:47 PM
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Quote Quote by Vanadium 50 View Post
Perhaps it would be valuable to see how this works out for the smaller problem before rolling it out countrywide and making its funding mandatory.
Exactly. This is a constructive and imaginative experiment which should be followed through. I don’t believe any of those extrapolations of total cost to solve the country’s poverty problem. The initial sample was too small to be representative and I wouldn’t give the reporting of results to social workers either.

Just expand the experiment gradually and see what happens. It would be necessary to carefully define how to calculate the cost/benefit in advance and to have a firm of auditors keep close tabs on the experiment and report the financial results regularly. Otherwise you are surely going to get all sorts of cheating.

.
SteamKing
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Dec31-13, 05:10 PM
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I think one should be careful not to lump the homeless population in western countries in the same boat as those living in poverty in African villages.

In the first article, "Why we should give free money to everyone", the correspondent remarks on the great differences made in the lives of recipients of modest grants, which recipients are reportedly impoverished but apparently otherwise unimpaired physically or mentally. In the cases of these recipients in Africa, the granted funds were used with great alacrity because these individuals knew what they wanted to do with the funds to attempt to better their lives. This particular approach works with worthy individuals who, due to unfortunate circumstance, do not have the funds available to better their lives. Similar programs, like microloans from the Grameen Foundation, have proved effective in providing impoverished but motivated individuals with the tools to help them escape their poverty. The grants worked in Kenya and Uganda because the recipients there needed funds to continue their education or train to acquire a skill which they could use to provide for their well-being.

There are a variety of reasons why individuals wind up homeless in the US and other countries in the west. Mental disease and substance abuse are but two documented causes for homelessness, and I think that a blanket grant of 3000 pounds or $5000 per individual would do them a grave disservice if they are not capable of using the money effectively. It would be little better than dumping a pile of money in the street and stepping back to watch the free-for-all which would ensue.

Would such a program help get some homeless get off the streets of the US and other countries? Undoubtedly. But government programs have a nasty habit of becoming 'one size fits all' programs, where little attention is paid to diagnosing why someone may be on the street. Instead, you create another income redistribution scheme with little accountability for its effectiveness in solving the problems which originally brought about the program.

The problem with government spending these days isn't that it's too stingy, it's that it is so lavish that no distinction is made between the spending which is paid for through reasonable taxation and the spending which is paid for by borrowing the money from someone else. The 'someone else' usually expects to get paid back sometime.


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