Pro-social welfare

This month Michael Norton’s fantastic Tedx talk ‘How to buy happiness’ was posted on the Ted website. The central thesis of Norton’s talk was that money can indeed buy happiness, when you don’t spend it on yourself and he had research to show that ‘pro-social spending’ can benefit you, your work, and other people.

Norton cites a simple experiment done by the British Columbia University which neatly compared two randomly assigned college undergrad groups in Vancouver. Individuals in the first group were each given an envelope with money in it (either $5 or $20) and instructions to spend the money on themselves (i.e. gift for self, bill, expenses) by 5pm of that day. Individuals in the second group were each given an envelope with same amounts of money in it and instructions to spend the money on somebody else (i.e. charitable donation, gift for others) by 5pm.

The researchers phoned the participants at the end of the day to find out what they spent the money on and how happy they were now. Firstly they found that people who spent for themselves bought consumer goods (i.e. make-up) and drinks (i.e. coffee), and people who spent for other people either donated the money (i.e. homeless), or bought a gift for others (i.e. toy or coffee for others to enjoy). Most impressively though the researchers established that those who spent money on other people got happier, whilst those that spent money on themselves experienced no change in their happiness level. The other effect they found was that the amount of money doesn’t matter that much – it didn’t matter whether the individual spent $5 or $20, what really matters was the fact they actually spent it on someone else rather than on yourself.

California Work Opportunity and Responsibility to Kids (CalWORKs) welfare-to-work program serves all 58 counties in the state and is designed to assist welfare recipients to obtain or prepare for employment. We know that many (long term) welfare recipients of state benefits experience low levels of well-being and personal self-esteem and we know, from past studies in California by the nonpartisan Urban Institute act, that in itself is a major barrier to re-entering the labor market.

So, could CalWorks try using the State Aid card accounts (the same card accounts which between 2007 and 2010 were used by benefit claimants to draw $69m of welfare money from ATMs outside of the state – $11.8m alone in Las Vegas) to increase CalWorks recipients spending on other CalWorks recipients? For example CalWorks could partner with Starbucks so that say 2% of total monthly welfare put on that state aid card could only be used in a starbucks buying coffee for someone else. Perhaps this would fuel increased reciprocal exchanges (exactly the sort of actions that we know strengthen neighbourhoods) and help tackle the sort of social isolation / low self-esteem that really inhibits long-term welfare dependants from re-entering the labour market?

Of course there is the risk with such a ‘use it or lose it’ approach to spending public money on someone else that it could lead to both welfare recipients being happy just to lose it, and non-welfare recipients being anything but happy with their taxes going on coffee. However with a bit of imagination, the state could introduce a challenge so non-use of the allocated fund each month would have a negative consequence for all Californians. For example, it could be announced that all the unused funds each month will be transferred to Starbucks branches in Washington DC and be offered up as a subsidy for any Federal government bureaucrat based around Capitol Hill! So perhaps the state could galvanise all of society to support a ‘spend on others’ scheme on the West Coast?  Based on Norton’s research it really could be in all of society’s interest.

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