A new study (view below) shows that giving Americans $1,000 a month makes them work less and earn less over time. The research, which tracked 3,000 people for three years, found that while recipients enjoyed more leisure time, their overall income dropped because they worked fewer hours and didn’t improve their job skills or pursue better employment. Surprisingly, despite more entrepreneurial intentions, there wasn’t a significant increase in new businesses. The study challenges the idea that free money boosts productivity and raises questions about the effectiveness of Universal Basic Income compared to existing welfare programs.

According to a new study, paying Americans $1,000 a month does exactly what common sense would have predicted: it disincentivizes them from working, which leads to them working less and earning less over time.

A three-year study conducted by the National Bureau of Economic Research with 3,000 participants found that providing people $1,000 a month resulted in more leisure time because the beneficiaries spent less time sleeping, taking care of children, volunteering, caring for others, and improving themselves reports the Center Square.

Furthermore, the study discovered that the recipients’ incomes were drastically reduced when the free money was subtracted from them; specifically, “for every dollar received, total household income excluding the transfers fell by at least 21 cents, and total individual income fell by at least 12 cents.”

“The takeaway from the best study done so far about UBI in the United States is that handing out money isn’t the solution to all our problems,” Daniel Di Martino, an economics researcher and graduate fellow at the Manhattan Institute, told The Center Square. “In fact, sometimes it makes things worse.”

The study’s authors noted mean-tested welfare encourages recipients to cut hours “to preserve benefits,” leading to advocacy for “unconditional cash transfer programs” without these distortions that would also allow individuals either to look for and secure higher-quality work or spend extra time on “productive non-work activities.” 

Participants’ individual incomes declined $1,500 per year relative to the control group, excluding transfers, participants’ labor force participation was two percentage points lower, participants and their partners worked approximately 1.4 hours less per week. Participants spent their extra time on leisure, did not improve their quality of employment, and did not improve human capital investments such as training. 

The report mentions how 2020 Democratic primary contender Andrew Yang suggested a $1,000 monthly “Freedom Dividend,” arguing that it “encourages people to find work” and “increases entrepreneurship.”

The research discovered that despite “participants exhibited more entrepreneurial orientation and intentions,” the “this did not translate into significantly more entrepreneurial activity,” since “very few people have the inclination to become entrepreneurs in general.”

Di Martino claims that the report left open the possibility of accepting unconditional cash transfers in place of some welfare programs and did not address inflation issues.

“It’s important to remark that this study doesn’t look at the macroeconomic impact of UBI which would raise inflation and affect interest rates if implemented nationwide,” he said. “Now the question that’s more interesting is if the almost null effects of UBI are better (or less bad) than those of our existing welfare programs and whether it might be a good idea to replace them.”

Recently, GreatGameInternational reported that a recent survey reveals that, after initial pessimism during the pandemic and war, many Americans are now feeling more positive about their finances.

Read the study below: