Canada's 'beautifully surprising' basic income study shows how business needs to reconsider human nature

• For 12 months, a select group of homeless people in Canada received a total of $7,500 in cash payments, no strings attached.
• The initiative was part of the New Leaf project, a joint study into the effects of giving people in poverty a "basic income" as a means of rehabilitation.
• One researcher called the results of the study "beautifully surprising," as participants could finally purchase higher-quality food and find stable housing.
• Leaders should take these findings seriously, and reflect on how they can better serve their employees' needs through direct, humanistic action.

Free money, it seems, pays off.

On October 7, researchers from the Foundations for Social Change, in Vancouver, and the University of British Columbia announced the findings of a 12-month experiment. The premise: give 50 people who had recently become homeless one-time cash payments in the amount of $7,500 — no strings attached.

The project was a variant of "basic income," a fast-growing proposal to reduce poverty (and even uplift middle-class households) around the world. With basic income, the thinking goes, governments can spend less time debating complicated solutions to poverty and just give people the money they need to help themselves however they see fit.

The new joint study, known as the New Leaf Project, yielded "beautifully surprising" findings, said Claire Williams, CEO of Foundations for Social Change.

Not only did 67% of recipients become food secure in one month, but spending overall showed signs of rehabilitation. According to the study, the typical recipient spent 52% of their money on rent and food; 15% on other necessities, such as medications and bills; and 16% on clothes and transportation.

Bolstering past findings into recipients' spending on so-called "temptation goods," there was also a 39% reduction in spending on alcohol, cigarettes, and drugs. The average participant also ended up with $1,000 in savings by the trial's end.

These findings alone should make us optimistic that basic income, with the right approach, can raise people's standard of living. But the findings also highlight a few other important truths about the way powerful institutions, and the people who run them, can best treat those in need.

Takeaway #1: Poverty isn't a lack of character; it's a lack of cash

Dutch historian Rutger Bregman introduced a version of that phrase in his 2017 Ted Talk, and it's become a go-to mantra for advocates of basic income.

The core idea is that people who have fallen on hard times aren't in those circumstances because they've somehow failed at life, and are therefore undeserving of basic necessities. Often, "falling on hard times" simply means being born into a life of poverty, as is the case for nearly 10% of the world's population, or 770 million people, who are currently living on less than $1.90 a day.

Even in the US, one in seven children are born poor, and millions of Americans are just one paycheck or one unexpected hospital bill away from poverty. As Williams wrote in the new study's impact statement, "While the economic impact of homelessness costs everyone, ultimately it is the human cost that is so devastating."

As Bregman and other proponents argue, any solution to poverty ought to begin by addressing the circumstances in which poverty flourishes — not correcting the character of those experiencing it.

Takeaway #2: People know how to best help themselves

Barring intervening mental-health issues, people in poverty — or those experiencing homelessness, as the recent study found — are intimately aware of the challenges they face. When your roof is leaking or your belly is empty, it's no mystery. You know that an influx of cash would allow you to make a repair and buy some food.

When recipients in GiveDirectly's basic income experiment in Kenya began receiving mobile payments several years ago, researchers found that the money immediately went to bigger-ticket expenses like food and milk, education fees, and new clothes for growing children. Some even used the money to invest in starting small businesses.

True, when I visited the villages as a reporter I did meet a man who used the money to bet on local soccer matches, but that outcome was rare. Most of the people I spoke with couldn't imagine using the money on anything except purchases that would help themselves and their families prosper.

Takeaway #3: The costs of inaction often surpass the costs of action

As loss-averse humans, who tend to agonize over losing $5 more than we delight in gaining $10, it's all too easy for us to defer to how things have been done in the past. Generally speaking, we over-index on the downsides of new, bold ideas more than we consider the downsides of doing what we've always done.

Consider the recent study, which found that the $7,500 cash payments saved shelters an average of $8,100 per person. Across the 50 participants, that amounted to $405,000 in savings.

"The common belief is that the status quo is cheap," Williams told the CBC. "In fact, it is incredibly expensive."

From a public-policy standpoint, these findings are quite sobering. But they shouldn't only raise the eyebrows of academics and politicians; they should give every leader pause, especially those whose organizations have felt the effects of COVID-19 most deeply.

Leaders should pay close attention to consider how they can serve the needs of their employees

Organizational leaders don't need to start rethinking their payroll structures to better support their employees. But during periods of intense disruption, such as the ongoing pandemic and resulting recession, the new findings are instructive. They should remind people in positions of influence how much power there is in simple, direct action.

If parents are struggling to balance work and childcare, see how you can create opportunities and resources for parents to share their wisdom with one another. If people say they're feeling burned out, reflect on ways to offer flexibility in people's schedules to better accommodate personal needs. If you are forced to lay people off, take a page from Airbnb, Allstate, and other companies that have been helping exiting employees find new jobs.

Such recommendations aren't just the right thing to do; they lead to better business. A recent Gallup study of more than 2.7 million employees across 112,000 teams found that boosting employee engagement created a whole host of better outcomes. The most-engaged firms, for example, showed 18% greater productivity and 23% better profitability than the least-engaged. Absenteeism, the study found, was down 81% when engagement was at its highest.

In other words, be sensitive to people's needs, but don't let overthinking how to meet them get in the way of making a difference. Sometimes in business, as in life, the simplest solution really is the right one.