Humanity forward Journal
What kinds of impacts could monthly cash have on mental health?
A recent guaranteed income study shows that no-strings-attached cash had a similar effect to clinical trials of Prozac.
Imagine you are driving to your second job to make ends meet.
Suddenly, your check engine light comes on. On top of your already busy schedule, you now have to set time aside to not only go to the mechanic, but even worse, possibly shell out hundreds of dollars to fix the issue.
The problem is, you only have $50 in your checking account – a savings account is non-existent – and you don’t get paid for another week. Not to mention that money is earmarked for next month’s rent. You are mentally, emotionally and physically exhausted. You can’t breathe.
But that’s not all. Your car frustrations start to bleed into every other avenue of your life. Since you are preoccupied with figuring out how to pay off this new bill, you can’t concentrate at work and make a few mistakes.
You have less patience with your family and are therefore less attentive to your children’s needs. You are chronically stressed, and as a result have difficulty sleeping. Your blood pressure rises by the day. Your outlook is negative, and everything reminds you of what you don’t have. Impactful personal progress is an unfeasible pipe dream at this stage.
You are trapped in an endless cycle and can’t seem to catch a break. Yet, society coldly reminds you to just “pull yourself up by your bootstraps,” assuming you even have boots. Hollow idioms like the aforementioned only help to make you feel worse about yourself and your situation.
However, it’s not your fault. You are living with a mindset of scarcity in a scarcity riddled world.
Sadly, this isn’t just a hypothetical scenario, but a reality for many people. Before the COVID-19 pandemic hit, 57% of Americans could not afford an unexpected $500 bill. These problems have now been exacerbated to the point that some individuals may never fully recover economically.
Erich Fromm, a social psychologist and author, stated:
“The principle prevailing throughout most of human history in the past and present is: ‘He who does not work shall not eat.’ This threat forced man not only to act in accordance with what was demanded of him but also to think and to feel in such a way that he would not even be tempted to act differently.
The shift from a psychology of scarcity to that of abundance is one of the most important steps in human development….Liberation from fear of starvation would mark the transition from a pre-human to a truly human society.”
In their 2013 book, Scarcity: Why Having Too Little Means So Much, psychologist Eldar Shafir and behavioral economist Sendhil Mullainathan explore this concept of scarcity further. Specifically, how individuals have limited “mental bandwidth,” and the more taxed our bandwidth is due to poverty and other stressors, the more inefficient our minds become.
When people think they are missing something in their lives (i.e., money), their cognitive faculties decline which leads to fragmented thinking and poor decision making. Beneficial activities such as problem solving and planning ahead, take a backseat since the focus is on surviving the now, as opposed to planning and saving for the future.
Conversely, when people have less financial pressure and their lives feel full, a mentality of abundance is achieved. Hence, they tend to be more open to new ideas, less biased in their views, and more positive overall. They essentially see the glass as half-full as opposed to half-empty.
For example, a study of sugarcane farmers in India found that IQ levels dropped an average of 13 points due to financial stress (scarcity) and returned to normal levels once that stress was alleviated (abundance).
This scarcity mindset isn’t just about how we see and interact with the world based on our circumstances or lack of resources, but also involves how we have been conditioned to receive, process, and respond to new ideas (i.e., being open to improving what isn’t working).
Scarcity exposes the economic problem that individuals have infinite wants and needs but finite resources. An abundance mindset reinforces the idea that there is plenty out there for everyone.
Matthew B. Gilbert, from The Harvard Crimson, aptly stated: “When we feel that money and goods are scarce, we start to think of our neighbors and fellow citizens as competitors rather than teammates, united by our shared humanity. When we believe that the economy is zero-sum, we also come to believe that helping another person comes at our own expense.”
So how do we transition from scarcity to abundance from a societal standpoint and address our nation’s rising poverty levels?
We adopt a Universal Basic Income (UBI).
UBI is the unconditional distribution of recurring cash payments to all adults that meets their most basic needs of survival – an income floor.
Having a safety cushion to draw upon when life’s unexpected moments occur or when daily survival is a constant challenge, helps reduce the mental scarcity that negatively impacts all areas of your life and pushes you to a place of abundance. A place where you can make better choices, take calculated risks, as well as improve your health, relationships, and livelihood.
SEED, Stockton, California’s guaranteed income pilot study showed that giving people a no strings attached monthly cash stipend - in this case, $500 a month for 24 months - was the equivalent of taking Prozac. One participant said she was able to breathe again.
Another recipient, Tomas Vargas Jr., stated that his health improved, and he had more time for his family. Thanks to the flexibility and options the recurring monthly payments gave him, he was even able to secure a full-time job.
Within months, he went from a classic scarcity mindset to one of abundance.
“It was a big change in my life,” Vargas said. “I was very depressed. I was down and out. I was at the bottom. SEED brought me back, gave me that chance, that opportunity.”
But scarcity isn’t purely an adult problem; it affects children too. Kids who grow up in poverty suffer long-term consequences, such as negative impacts on brain development that can lead to depression, anxiety, and substance abuse. In the U.S., children have lower standardized test scores, are more likely to drop out of school, and are less likely to go to college.
The expanded Child Tax Credit that goes into effect on July 15, 2021 is predicted to cut child poverty by 50%. A basic income can close the gap even further, as seen in a Canadian UBI study that found children’s school performance greatly improved with regular cash payments.
Participants also became richer, smarter, and healthier. Mental health complaints and domestic violence decreased while hospitalization rates declined by 8.5%. The ripple effects of abundance – from the individual to the community at large - were nothing short of extraordinary.
In the richest country in the world, we should all have a chance to breathe better. Direct cash policies can help us do just that. It is the vehicle that can take us from a mindset of scarcity to one of abundance.