Sunday April 26, 2015

Study examines parents' "beer and popcorn" spending

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A new study looked at how money given to parents as family subsidies gets spent. (CBC)

A controversial statement landed a Canadian political strategist in hot water some years ago. He later apologized, but the implication was that parents who get social transfer funding for childcare would just spend it on "beer and popcorn."

A new economic study for the University of Toronto has found just the opposite.

Mark Stabile is a Professor of Economics at the School of Public Policy at the University of Toronto. He and his colleagues, Kevin Milligan at the University of British Columbia, and Lauren Jones, also at the University of Toronto found that the more transfer funding that goes to low-income families, the less is spent on things like alcohol and cigarettes.

Previous research shows that payments to low-income families, such as the Child Tax Benefit and the National Child Benefit, help improve children's performance in school, as well as the mental and physical health of the family.

The most recent research examines how those families spend their money.

The findings show that, with cash transfers to families, there are increases in spending directly related to children's education and health, but also significant increases in spending on food and recreation.

Stabile says he doesn't know why recreation spending might go up, and spending on alcohol and tobacco might go down, but the team has some hypotheses.

It's stressful to be a low-income family. You don't know where the next dollar is coming from. As benefits increase, we hypothesize that stress levels in the household may go down. And as you're lessed stressed out, you might feel it's less necessary to drink and smoke as much.  - Mark Stabile, Professor of Economics at the School of Public Policy at the University of Toronto

Stabile says the main conclusions are, while some worry that simply giving cash to low-income families might lead to poor spending decisions, the opposite is true. 

It doesn't really matter what they spend it on. If it's improving their lives and reducing their stress and allowing them to make sure they pay their rent and put food on the table, it's going to improve the lives of everybody involved. - Mark Stabile, Professor of Economics at the School of Public Policy at the University of Toronto

The summary of the research concludes that, while there is debate over the best policy approaches to alleviate poverty and provide benefits to low-income families, if you simply give money to families, it's well spent.