In 2020, St. Paul Mayor Melvin Carter used federal, state and philanthropic dollars to launch one of the nation’s first municipal guaranteed income projects — $500 per month for 150 low-income families with newborn children.

The funds, issued across 18 months on a pre-paid debit card, carried no spending restrictions, and results were tracked by academic researchers through voluntary, compensated surveys and interviews.

The University of Pennsylvania’s Center for Guaranteed Income Research has completed a 59-page report on its findings, coming to the conclusion that St. Paul’s “People’s Prosperity Guaranteed Income Pilot” worked “protectively,” offering some financial breathing room during the worst of the pandemic, though that soon disappeared after the cash ended.

One of the most elusive goals for participating families? Building up cash savings.

18-month pilot study

Individual financial situations improved during the 18-month pilot study but tended to remain stable or drop afterward. Unemployment, on the other hand, declined for some participants, and still remained lower six months after the last payments, possibly reflecting the shifting pandemic-era job market.

Participants spent more time with family during the payment period, and household stability remained relatively steady even as the stresses of the pandemic upended other young low-income families. There was an uptick in physical health and some families switched to better housing.

“It’s about trusting even very low-income people to make responsible decisions with their money,” said Carter on Monday. “We’re more than 60 years into the war on poverty, and we’re not winning because we’ve been fighting the wrong battles. We see low-income families who feed six children on minimum wage. I don’t know any CEO who could manage money better than that.”

“This research,” added the mayor, “says even more about the false narratives we have about poverty.”

Other, less tangible effects were noted, including decreased isolation: “Participants still held improved attitudes towards life and its purpose as well as some aspects of hope and mattering six months after cash disbursements had stopped, suggesting an enduring power … on participants’ sense of self.”

The participants were all chosen from the city’s CollegeBound St. Paul program, which sets up college savings accounts for the families of newborns born throughout the city. All participants had a child born in 2020. Each of the 150 families said they had been impacted by the pandemic and had incomes at or below 300% of the federal poverty level.

Results from a high poverty city

The University of Pennsylvania researchers noted that St. Paul’s guaranteed income project was one of the first municipal experiments in the nation, and the first to use public dollars for cash transfers since the Seattle-Denver income maintenance experiment of the 1970s and 1980s.

They also noted that St. Paul has a poverty rate — 17.6% — well above the national average and roughly twice the statewide average, and the city is home to the largest population of Hmong and Somali refugees in the nation.

Each participating family was offered optional benefits counseling throughout the program.

Of roughly 100 participants surveyed, 89 were female. About 60 were married or partnered. About a fourth were white, a fourth were Black, 20 were Hmong and 30 were of other backgrounds or mixed race. The average age was 31. The average household size was four members, with a median family income of $32,000. About half the participants had not completed high school, though 34 had an associate’s degree or bachelor’s degree.

The researchers noted that while participants talked of hoping to use the cash payments to build up savings for themselves and their children, debts such as student loans, credit cards and mortgages — as well as surprise expenses — tended to get in the way.

Referencing an interview with a woman named Mary, they wrote: “Many expressed plans for using the GI to pay down debt and enable saving for larger goals, but this proved difficult as emergencies and other urgent needs cropped up. Mary described saving the cash as competing with life happening, like a car breaking down, repairs being needed on their home, or caring for her elderly father.”

Carter said that given the city’s limited property tax base, he did not foresee the city creating a large, permanent guaranteed income program. Still, the results of the St. Paul study — and another on the horizon covering a second phase — will likely be combined with results from similar projects across the country, better informing national efforts to fight poverty.

“We implemented at the local level an intervention that was wildly successful at bringing people into the workforce, improving people’s sense of self and helping people with unexpected expenses,” the mayor said. “It’s pretty predictable that when you pull that resource away — as we saw when the federal government allowed the child tax credit to expire — that some of those benefits will lapse, as well.”

Key findings

Among the study’s particular findings:

• During the pilot project, between 40% to 47% of participants said they could cover a surprise $400 expense if they incurred it, but that dropped to 33% of participants six months after the cash payments ended.

• During the project, between 39% to 41% of participants had more than $500 in savings, but that fell to 27% six months after payments ended.

• Income volatility, a measure of quickly changing income, varied between 3% to 6% during the payment period and increased to 10% afterward. Overall, median household income stayed flat at about $32,000.

• Participants reported spending more time with family and experienced relative household stability throughout the payment period, decreasing isolation.

• The percentage of participants reporting feelings of “high hope” increased throughout the study from 15% toward the beginning, 21% at the end of the last payment period and 22% six months after payments ended.

• During the project, 49% of participants were employed, compared to 63% six months after the program ended. Some of that increase could have reflected more jobs opening up after sudden work closures during the early days of the pandemic, and the role of the cash payments in supporting job-seeking activities such as childcare.

“I never heard anybody quit their day job for $500 per month,” Carter said. “One of the most powerful findings we had, not only did families did not quit their jobs, but this relatively modest resource allowed families to step up and realize their economic potential.”

Programs across the country

The study results, according to researchers, build on findings from a similar guaranteed income program in Stockton, Calif., where a study showed general improvements in positive outlook and greater economic gains as some recipients were able to afford to take time off from work, buy a suit and attend a job interview, bettering their financial condition.

The St. Paul experiment was the first launched under the auspices of “Mayors for a Guaranteed Income,” a coalition of mayors across the nation. More than 50 city-driven guaranteed income projects have since unfolded across the country, with some focused on new mothers, primary family caregivers or working parents enrolled in community college.

A program in New Orleans took a somewhat different approach, issuing payments to youth age 16 to 24 who are not in school and not working.

Other groups are also experimenting with guaranteed income, including Counties for a Guaranteed Income. Springboard for the Arts, a St. Paul-based arts organization, created a similar program in 2021 focused on 25 artists in the Frogtown and old Rondo neighborhoods.

Five of the artists described their experience with creative works, including a podcast that featured various families enrolled in the program, in a reflection called “Artists Respond: People, Place, and Prosperity.”

In June 2022, Carter’s office announced that it would embark on a second phase of the People’s Prosperity Guaranteed Income Pilot, offering 333 families a $1,000 deposit into their child’s college savings account, on top of two full years of monthly $500 checks.

A University of Michigan researcher plans to compare results to those of 333 families who were granted the $1,000 toward college savings but no monthly benefit, and 333 families who were granted college savings accounts without an additional deposit.

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