Household Responses to Guaranteed Income: Experimental Evidence from Compton, California

Overview

This study examines the effects of a two-year unconditional cash transfer program, the Compton Pledge, on low-income households in Compton, California. Between 2021 and 2023, 695 households received cash transfers averaging $500 per month, while 1,402 households formed a control group. The research evaluates the program’s impact on labor supply, income, debt, and psychological well-being, with a focus on differences between households receiving frequent (twice-monthly) versus lump-sum (quarterly) payments.

Key Findings

• Labor Supply: The program did not significantly affect labor supply among full-time workers but led to a 13-percentage point reduction in participation for part-time workers.
• Income and Expenditure: Recipients reported reductions in labor income and expenditures, but experienced improved housing security and a modest reduction in non-housing debt.
• Transfer Frequency Effects: Twice-monthly transfers were associated with higher food security, reduced credit card debt, and increased vehicle ownership compared to quarterly transfers.
• Gender Disparities: Female recipients reported greater increases in financial security compared to males, who experienced larger reductions in income and expenditures.

Implications for Policy and Practice

• Guaranteed income programs can provide critical financial stability but may lead to complex adjustments in household behavior.
• The frequency of payments may play a role in shaping household outcomes, influencing savings, consumption patterns, and financial security.
• Policymakers should consider the interplay between guaranteed income, labor market behavior, and debt reduction when designing future cash transfer initiatives.