2021 marked a year of rapid growth for guaranteed income and direct giving programs across the United States. Local programs that facilitate direct payments to low-income community members have sprouted up in cities around the country, funded by local governments as well as non-profit organizations. Bloomberg CityLab reports that at least 20 guaranteed income pilots have launched in cities and counties across the U.S., with more than 5,400 families receiving between $300 and $1,000 a month.
Many service-oriented nonprofit programs are implementing mutual aid initiatives and expanding their mission to include direct financial assistance to community members in crisis. When basic needs are met, individuals are free to benefit from the supplemental social services provided by these charities.
Let’s break down some of the macro global trends that contribute to the growing need for direct aid programs, and why direct giving is a critical solution to the unique challenges these trends create.
Lasting Effects of the COVID-19 Pandemic
The COVID-19 pandemic, along with the subsequent economic downturn in 2020, caused a dramatic shift in how the world views basic income programs. The pandemic caused unprecedented unemployment and income losses, especially among lower-income population groups. The unique circumstances of the pandemic caused nonprofits and governments alike to embrace new methods of social assistance, such as direct financial aid.
In addition to exacerbating national income inequality, the pandemic also exposed the shortcomings of the American social “safety net” in the face of large-scale crises. As COVID-19 triggered unprecedented job loss, social assistance programs (e.g. SNAP) and unemployment insurance were entirely overwhelmed, forcing non-profit organizations to fill in the gaps and cover the basic needs of many low-income families in crisis.
Finally, the federal government’s 2020 stimulus package that delivered stimulus checks to millions of individuals brought direct giving further into the mainstream. Today, many cities are allocating their American Rescue Plan Act (ARPA) funds directly to individuals and families to address the persistent negative economic effects caused by the pandemic.
The Rise of Automation
Recent conversations around universal basic income (UBI) have been heavily tied to the rise of automation and its projected impact on jobs in the U.S. in the coming years. Experts anticipate automation could replace nearly one-third of the U.S. workforce by 2030. As a recent report from the World Bank explains, “the changing nature of work in higher-income countries demands that social protection systems co-evolve with it.”
In anticipation of this massive economic transition (which has already begun), a growing number of policymakers are advocating for basic income programs to counter the job and income loss that workers will suffer. During his 2020 campaign to become the Democratic nominee for President of the United States, candidate Andrew Yang advocated strongly for UBI: “A universal basic income would enable millions of Americans to meaningfully transition in the time of economic transformation, including that brought by AI.”
The Growing Digital Divide
Beyond the looming threat of automation, technological innovation has contributed to the growing wealth gap in the U.S. and continues to reinforce generational poverty in low-income communities. The so-called “digital divide” refers to the gap between populations that have unrestricted access to modern information and communications technology (ICT) and those that don’t.
Over the past several decades, advances in technology have driven revolutionary productivity and efficiency gains, but increases in living standards and median income have been far from uniform. Americans on the lower end of the income spectrum experience limited effects of these advances, preventing them from accessing higher-productivity activities and building human capital.
Direct giving and guaranteed income programs invest directly in these communities and offset the impact of the digital divide. Receiving funds to cover basic necessities, such as food and shelter, promotes autonomy for low-income families and empowers them to invest in their family’s future and escape the all-consuming poverty cycle.
Urbanization & Globalization
Finally, the universal patterns of urbanization and globalization worsen income inequality and contribute to growing poverty rates. Because urban wages are generally higher than those in rural areas, increased urbanization drives inequality and exacerbates the wealth gap.
Globalization also increases wage inequality by increasing reliance on foreign manufacturing and imports of goods by using predominantly low-skilled labor from developing countries. Low-income communities suffer the burden of this outsourcing, and experience job and income loss as globalization consolidates wealth into higher-income populations.
Direct giving is one of the most immediate, impactful ways that organizations can support struggling communities and sustainably lift families out of the poverty trap. As urbanization and globalization continue to spread in the coming years, direct aid is more important than ever in combating the growing wealth gap.
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Many non-profit organizations that we speak to are overwhelmed by the financial need of their service recipients. Without basic needs coverage, the populations they serve are unable to make use of services, like mental health support and professional development programs.
These four societal trends have increased the need for direct giving and guaranteed income programs. From the rise of automation to increased urbanization, these challenges will only grow in the coming years. If you’re interested in discovering how ESTHER can help your organization get crisis aid efficiently and securely into the hands of recipients, learn more about our FinTech giving platform or connect with our team today!