March 19, 2020  |  Insights

Why We Need Cash Transfers in Response to COVID-19

Discussions about giving people cash in response to COVID-19 is happening more and more these days. Just days ago, Treasury Secretary Steven Mnuchin announced that the federal government is “looking at sending checks to Americans immediately.” While we’re happy to see bipartisan support for this proposal, we recognize the scale of the problem calls for more action. That’s why we’re calling on state and local governments, and philanthropy to step up immediately and provide funds to families facing financial hardship because of this pandemic.

Unconditional and unrestricted cash transfers are the best way to do this. Here’s why:

1. Cash transfers are proven to protect people’s standards of living during crises. After natural disasters, people receiving cash are quicker to recover their assets than those who don’t. Cash helps people buy exactly what they need, whether that’s food or other essential items. And we know they’re not going to blow the money on frivolous things because study after study shows that they won’t.

2. Cash transfers have a significant long-term impact on people’s livelihoods and communities after the immediate crisis ends. Money injected into households can stimulate demand for goods and services in local economies, leading to quicker recovery and spill-over effects.

3. From an implementation perspective, giving money without strings attached is more efficient than other forms of assistance. Unlike in-kind aid, it’s possible to deploy lump-sum cash transfers quickly during emergencies. New digital tools for rapid disbursements on mobile phones further reduces delivery costs (and respects the social distancing needed to fight COVID-19). Cash transfers with minimal eligibility requirements and reporting obligations are also cost-effective because of lower transaction costs. Some experts advocate transfers go to everyone, making them quicker to disperse because they do away with means-testing.

For years, legal and public health experts have been recommending income-replacement policies to guard against the very scenario working people face now. At Family Independence Initiative, we believe the key to sustainable economic mobility to mitigate situations like this one requires both financial and social capital. Communities recognize this already. Across the nation, they are organizing mutual aid groups and neighborhood pods to support one another and stay connected amid social distancing. 

The debate over whether to more broadly adopt our strength-based cash + social approach will continue long after this. But we have to do something now to help the millions of hardworking people whose livelihoods have been disrupted and who are trying to find ways to pay their bills, feed their children and keep their loved ones safe. Cash transfers delivered digitally are the most responsive and impactful tool at our disposal right now. It’s time to use them. 

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