Last month, as part of the sweeping American Rescue Plan Act (ARPA) passed by Congress, more than 156 million Americans received $1,400 stimulus checks, direct payments from the government designed to offset financial hardships caused by the COVID-19 pandemic.
For some recipients, these payments represented the opportunity to catch up on overdue bills, keep a business going or bolster a flagging bank account. For the nearly eight million Americans who have fallen into poverty since the pandemic began—as well as the nearly 30 million who were living below the poverty line already—the money represented a desperately needed lifeline out of poverty, a chance to provide basics like food and medical care for their families.
Direct-payment strategies like the ARPA and guaranteed-income initiatives like those launched in recent years in cities like San Francisco and Stockton, California, where residents were paid $500 a month for a two-year period, are becoming more popular, but they certainly aren’t without controversy. Critics often claim that the payments discourage recipients from seeking and maintaining steady work, or that recipients spend the money on luxuries rather than necessities.
Katherine Magnuson, the director of UW-Madison’s Institute for Research on Poverty, has a different view. Magnuson has been researching the idea of direct payments from a very specific social-science perspective. In 2019, she launched a research project designed to measure the impact on stress and early childhood development of providing monthly direct payments to 1,000 families in four urban centers: New York City, New Orleans, the Twin Cities and Omaha, Nebraska. Each family has been receiving $333 a month, up to a total of $4,000 per year, regardless of its size.
“What we are doing is giving money to families to see if it makes a difference,” says Magnuson. “Given the current landscape, it certainly seems like a policy-relevant strategy. We hope our findings are relevant to the current discussions around these types of policy issues.”
The project is currently wrapping up its second year of data collection. While the COVID-19 pandemic has slowed down the in-person data collection and postponed the study’s final assessment of children’s development, it has impacted other aspects of the project in positive ways. Nearly 94 percent of the mothers in the study have responded to phone surveys, and the additional time has allowed for additional fundraising, allowing the direct payments to be extended for another year. All the money is provided on a debit card, which allows for easy tracking of purchases.
“The good news is that we’re getting data that looks at a range of outcomes—including where are they are spending their money,” explains Magnuson.
Seth Pollak, a professor of psychology and the director of UW-Madison’s Child Emotion Lab, is not involved with Magnuson’s study, but he has studied the impact of stress on childhood development for decades. The science is clear: The less extreme stress a child experiences, the less their brain development is likely to be affected.
“When people talk about childhood poverty, what we’re often thinking about is the deprivation of things like stability and shelter,” Pollak explains. “But poverty isn’t just deprivation. It is also too many added stressors in children’s lives.”
One of the ways the brain responds to stress to is to increase the body’s production of a hormone called cortisol. When stress is high, the cortisol collects in an individual’s saliva, urine, and hair follicles, where it can be measured by scientists like Pollak.
“What happens in situations in which stress is chronic, the brain is soaking in it,” says Pollak of cortisol. “Too much actually has a negative effect. It wears the body down.”
Magnuson’s study incorporates several of these scientific techniques to measure the stress levels of the children in the families receiving the direct payments—and whether that stress is reduced when parents aren’t constantly worrying about money. Once in-person interactions are safe and possible again—likely next summer—her team will be measuring the children’s levels of stress based on the amount of cortisol in their hair follicles. The team is also interested in whether improvements in family environments will improve brain functioning that will be measured by electroencephalographs (EEGs).
“When parents know they can pay the rent, the changes in their behavior makes children feel safer,” says Pollak. “They sleep better. Their brains grow,”
Although the project didn’t start out this way, the goal is now to follow these families for as long as possible, through the early years of childhood development, to determine whether any effects from the early financial boost are likely to persist.
“It’s a longitudinal study for a really important population,” says Magnuson. “What will it look like when these kids start third grade? Have we set them on a different trajectory? Are they doing better in school? Is there less involvement with the criminal justice system?”
Assuming there are no further COVID-related delays, Magnuson expects to finish initial data collection by 2023. But no matter how long this project runs, she knows this is an issue she will be studying for many years to come.
“It’s clear there are lots of policy changes on the horizon,” says Magnuson. “IRP researchers are eager to see how these things work out.”