A new study from Stanford University explores the effects of giving regular cash payments to low-income households in Compton, California. The program, launched during the COVID-19 pandemic, helped families feel more secure about their housing and reduced their overall spending. Many households seem to have used the extra money to pay down debt.
Called the Compton Pledge, the program began in late 2020 as a partnership between then-Mayor Aja Brown and the nonprofit Fund for Guaranteed Income. Over two years, it gave 698 households an average of $500 a month—boosting their income by about 20%. A control group of 1,402 similar households received nothing. Unlike universal basic income, which aims to provide money to everyone regardless of need, guaranteed income targets the poorest, giving them regular payments they can spend however they like.
Easing stress
Supporters of guaranteed income believe it could reduce poverty and, in some cases, protect the environment. By easing financial stress, they argue, communities might avoid activities like logging or overgrazing that damage ecosystems. Critics, however, worry that handing out cash could increase consumption and the pollution that comes with it.
In America, low-income families are among the hardest hit by crises like climate change and pandemics. Cash payments, which give people flexibility to respond to challenges, could help make them more resilient. Research from poorer countries shows that unconditional cash transfers can improve food security, reduce debt, and even boost mental health. But there is less evidence about their effects in wealthier places like the U.S.
This study also asked a new question: does the timing of payments matter? Half the recipients got $500 split into two payments each month, while the other half received a lump sum every three months. Eighteen months into the program, researchers found that those receiving bi-monthly payments reduced their credit card debt more than those getting quarterly payments.
Still going to work
The study also challenged the idea that cash aid discourages work. Recipients who had full-time jobs didn’t work less. However, those working fewer than 20 hours a week did reduce their hours slightly. Single mothers, a group at high risk of poverty, bucked the trend. Their incomes rose, and they worked more hours—countering fears that aid would make people stop working.
The findings contained some surprises. Recipients spent less overall—unusual, as earlier studies found that cash transfers often lead to more spending. The researchers think this might reflect the heavy debt many families were carrying before the program started. On average, recipients reduced their non-housing debt by nearly $2,200, though this result wasn’t statistically significant.
The program also revealed differences between men and women. Male recipients reported feeling less financially secure and saw bigger declines in spending and savings. Women, on the other hand, generally felt more secure. Single mothers, in particular, benefited the most.
Accepting limitations
Still, the program’s impact had limits. While recipients worried less about being evicted, the payments didn’t significantly improve their overall mental or financial well-being. The timing of the payments—whether frequent or sporadic—made little difference overall.
Running from February 2021 to April 2023, the Compton Pledge provided relief during a tough period of high unemployment and slow economic recovery. The study suggests that guaranteed income can help families without reducing work effort. Whether it could succeed at a larger scale, however, remains an open question.
