{"id":10645,"date":"2023-05-18T19:18:45","date_gmt":"2023-05-18T23:18:45","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/would-reparations-lead-to-irresponsible-spending-studies-on-other-cash-windfalls-suggest-not-new-report-says\/"},"modified":"2023-05-18T19:18:47","modified_gmt":"2023-05-18T23:18:47","slug":"would-reparations-lead-to-irresponsible-spending-studies-on-other-cash-windfalls-suggest-not-new-report-says","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=10645","title":{"rendered":"Would reparations lead to irresponsible spending? Studies on other cash windfalls suggest not, new report says."},"content":{"rendered":"

The perception that people often succumb to misfortune and bad decision-making after suddenly receiving large amounts of cash isn\u2019t based in fact, researchers said in a report published Thursday by the Roosevelt Institute, a progressive think tank.<\/p>\n

That means potential reparations payouts to Black Americans are unlikely to result in reckless spending, financial ruin and reduced labor productivity, the report\u2019s authors wrote after undertaking a review of prior research concerning consumer behavior after lottery windfalls and inheritances, as well as more minor cash transfers through tax refunds and guaranteed-income programs.\u00a0<\/p>\n

\n

\u201cThere\u2019s what we really describe as kind of an urban myth \u2026 that people who receive lottery winnings squander the money very quickly,\u201d reparations scholar William \u201cSandy\u201d Darity, a Duke University professor of public policy and economist who co-authored the report, said in an interview. \u201cThe best available evidence indicates that that\u2019s not the case.\u201d<\/p>\n

Whether Black residents and descendants of enslaved people in the U.S. are owed reparative payments has been debated for centuries. But as the country has grown more economically unequal while a stubborn racial wealth gap persists, the reparations movement has picked up traction. <\/p>\n

In California, a first-of-its-kind state task force on reparations approved a slate of recommendations for lawmakers this month that, if implemented through legislation, would potentially provide hundreds of billions of dollars in reparative monetary payments to Black Californians to address harms caused by factors including racial health disparities, housing discrimination and mass incarceration. San Francisco, which has its own reparations task force, is also considering one-time reparative payments of $5 million for eligible people.<\/p>\n

Read more:<\/strong> California task force approves sweeping reparations potentially worth billions of dollars<\/p>\n

Still, detractors say that granting reparations to Black Americans \u2014 as was done for Japanese Americans incarcerated in internment camps during World War II and, on a state level, for survivors who owned property in the town of Rosewood, Fla., before a race massacre destroyed it \u2014\u00a0is unwise. <\/p>\n

Some argue that giving people reparative payments without requiring certain parameters or personal-finance courses could\u00a0result in irresponsible spending behavior, or that reparations proposals are themselves racist in\u00a0suggesting that Black people need \u201chandouts.\u201d<\/p>\n

<\/p>\n
\n

\n \u201c<\/span>\u2018One of the important things that lottery winners do with the money is that they frequently set up trust accounts or the equivalent for their children or their grandchildren.\u2019\u201d<\/span>\n <\/p>\n


\n \u2014 William \u2018Sandy\u2019 Darity, a leading reparations scholar<\/span>
\n <\/small><\/p><\/div>\n<\/p><\/div>\n

The authors of the Roosevelt Institute report, for their part, said the assumption that Black Americans would be unable to handle sudden windfalls is rooted in racism \u2014 noting the racial wealth gap wasn\u2019t created through \u201cdefective\u201d spending habits but through policies that pumped money into white households, including unequal land distribution and subsidies for homebuyers.<\/p>\n

\u201cWidely held, inaccurate, and racist beliefs about dysfunctional financial behavior of Black Americans as the foundation for racial economic inequality leads to a conclusion that monetary reparations will be ineffective in eliminating the gap,\u201d they wrote. \u201cAccording to this perspective, if eligible Black Americans do not change their financial mindset and behavior after receiving financial reparations, the act of restitution will be empty.\u201d<\/p>\n

How people spend lottery winnings and inheritances<\/h2>\n

Even so, there\u2019s not really \u201cany carefully drawn-out study of what has happened to folks who have received reparations payments,\u201d Darity said. It\u2019s \u201cimpossible to understand\u201d the impacts of such programs, because there haven\u2019t historically been \u201csystems in place that give money directly to individuals\u201d \u2014 allowing \u201canecdotal cynicism and urban mythology\u201d to drive the narrative, the report\u2019s authors wrote.<\/p>\n

\u201cThe best that we could do is try to think about other types of instances in which people have received windfalls where there has been some follow-up on what the consequences have been,\u201d Darity said. <\/p>\n

To see how people really react when they\u2019re granted new amounts of money, the authors examined outcomes both from people who had received \u201cmajor\u201d windfalls \u2014\u00a0ones that immediately and majorly change a person\u2019s wealth status, like winning the lottery \u2014\u00a0and \u201cminor\u201d windfalls, or those that affect a person\u2019s income but don\u2019t meaningfully shift their wealth status, like the stimulus checks doled out earlier in the COVID-19 pandemic.\u00a0<\/p>\n

Darity, who directs Duke University\u2019s Samuel DuBois Cook Center on Social Equity, worked alongside the report\u2019s lead author, Katherine Rodgers, a former research assistant at the Cook Center who currently works as a senior associate at the consulting firm Kroll, as well as Sydney A. Grissom, an analyst for BlackRock. Lucas Hubbard, an associate in research at the Cook Center, was also an author of the report.\u00a0<\/p>\n

They found that while a person\u2019s behavior can vary based on the windfall amount and how it\u2019s framed to the recipient, as well as their previous economic status, their reactions tend to buck stereotypes.\u00a0<\/p>\n

For example, only 11% of lottery winners quit their job in the findings of one 1987 study that examined 576 lottery winners across 12 states \u2014 and none of the people who got less than $50,000 left work, according to the Roosevelt Institute report. However, people were more likely to quit their jobs if they won a sum worth $1 million, had less education, were making under $100,000 a year, and hadn\u2019t been in their job for more than four years.<\/p>\n

Studies of lottery winners in other countries have found similarly muted labor responses, the report said. A separate U.S. study from 1993 of the labor effects on people who had received inheritances ranging from $25,000 to $150,000 or more also found that only a \u201csmall but statistically significant percentage of heirs left their jobs after receiving their inheritance,\u201d with workers most likely to leave their jobs if they got a big payout.\u00a0<\/p>\n

But it\u2019s still \u201cless than what the stereotype would say,\u201d Hubbard said in an interview: 4.6% of individuals quit their jobs after receiving a small inheritance of less than $25,000, compared to 18.2% of workers who got an inheritance of more than $150,000, he noted.<\/p>\n

Instead, studies have shown that people who get windfalls may be more likely to become self-employed, participate in financial markets, save, and spend money on necessary goods like housing and transportation, the report\u2019s authors wrote.\u00a0<\/p>\n

\u201cOne of the important things that lottery winners do with the money,\u201d Darity said, \u201cis that they frequently set up trust accounts or the equivalent for their children or their grandchildren.\u201d<\/p>\n

Small windfalls, including those offered through monthly checks from guaranteed-income pilot programs, have also been shown to be used for essentials like food and utilities without negative effects on employment. The framing of the money received can also have an effect on how it\u2019s spent, the authors said: People who get a payout from bequests or life insurance tend to have more negative emotions about the money and will use it for more \u201cutilitarian\u201d purposes, according to one 2009 study.\u00a0<\/p>\n

From the archives (March 2021):<\/strong> Employment rose among those in California universal-income experiment, study finds<\/p>\n

Reparations wouldn\u2019t unleash \u2018flagrant spending,\u2019 researchers say<\/h2>\n

Despite their findings, \u201cwindfalls are not magical panaceas for all financial woes,\u201d the authors emphasized. <\/p>\n

For example, a 2011 study cited in the report found that among people who were already in precarious financial positions, lottery winnings delayed, rather than prevented, an eventual bankruptcy filing. Another report from 2006 found that \u201clarge inheritances led to disproportionately less saving,\u201d the researchers noted in the Roosevelt Institute report.<\/p>\n

\u201cResearch over the past two decades has demonstrated that their bounties are not limitless, and, crucially, that informed stewardship of received assets is still necessary (albeit, not always sufficient) to achieve and maximize long-term financial success,\u201d the authors wrote.<\/p>\n

But they added that reparations, particularly if \u201cframed not as handouts but rather as reparative payments\u201d to Black Americans, would not unleash \u201cflagrant spending on nonessential goods\u201d based on studies on windfalls, and could instead improve recipients\u2019 emotional well-being and financial stability.\u00a0<\/p>\n

\u201cOf course, the merits of making such payments should not be assessed solely on the basis of the anticipated economic effects,\u201d the authors said. \u201cMoreover, using the absence of evidence of this type as a justification for delaying reparative payments, such as those to Black descendants of American slavery, is inconsistent with the fact that other groups previously have received similar payments in the wake of atrocities and tragedies.\u201d<\/p>\n

From the archives (January 2023):<\/strong> How to pay for reparations in California? \u2018Swollen\u2019 wealth could replace \u2018stolen\u2019 wealth through taxes.<\/p>\n<\/p><\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The perception that people often succumb to misfortune and bad decision-making after suddenly receiving large amounts of cash isn\u2019t based in fact, researchers said in a report published Thursday by the Roosevelt Institute, a progressive think tank. That means potential reparations payouts to Black Americans are unlikely to result in reckless spending, financial ruin and […]<\/p>\n","protected":false},"author":1,"featured_media":10646,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[236],"tags":[83],"class_list":["post-10645","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-news","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nWould reparations lead to irresponsible spending? Studies on other cash windfalls suggest not, new report says. | iFintechWorld<\/title>\n<meta name=\"description\" content=\"The perception that people often succumb to misfortune and bad decision-making after suddenly receiving large amounts of cash isn\u2019t based in fact,\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/ifintechworld.com\/?p=10645\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Would reparations lead to irresponsible spending? Studies on other cash windfalls suggest not, new report says. | iFintechWorld\" \/>\n<meta property=\"og:description\" content=\"The perception that people often succumb to misfortune and bad decision-making after suddenly receiving large amounts of cash isn\u2019t based in fact,\" \/>\n<meta property=\"og:url\" content=\"https:\/\/ifintechworld.com\/?p=10645\" \/>\n<meta property=\"og:site_name\" content=\"iFintechWorld\" \/>\n<meta property=\"article:published_time\" content=\"2023-05-18T23:18:45+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-05-18T23:18:47+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/1684451926_social.jpeg\" \/>\n\t<meta property=\"og:image:width\" content=\"1280\" \/>\n\t<meta property=\"og:image:height\" content=\"640\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"News Room\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"News Room\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"7 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/ifintechworld.com\/?p=10645#article\",\"isPartOf\":{\"@id\":\"https:\/\/ifintechworld.com\/?p=10645\"},\"author\":{\"name\":\"News Room\",\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/person\/6224724fd4116361255b179dc5c70b61\"},\"headline\":\"Would reparations lead to irresponsible spending? Studies on other cash windfalls suggest not, new report says.\",\"datePublished\":\"2023-05-18T23:18:45+00:00\",\"dateModified\":\"2023-05-18T23:18:47+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/ifintechworld.com\/?p=10645\"},\"wordCount\":1404,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/ifintechworld.com\/#organization\"},\"keywords\":[\"Featured\"],\"articleSection\":[\"News\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/ifintechworld.com\/?p=10645#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/ifintechworld.com\/?p=10645\",\"url\":\"https:\/\/ifintechworld.com\/?p=10645\",\"name\":\"Would reparations lead to irresponsible spending? Studies on other cash windfalls suggest not, new report says. | iFintechWorld\",\"isPartOf\":{\"@id\":\"https:\/\/ifintechworld.com\/#website\"},\"datePublished\":\"2023-05-18T23:18:45+00:00\",\"dateModified\":\"2023-05-18T23:18:47+00:00\",\"description\":\"The perception that people often succumb to misfortune and bad decision-making after suddenly receiving large amounts of cash isn\u2019t based in fact,\",\"breadcrumb\":{\"@id\":\"https:\/\/ifintechworld.com\/?p=10645#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/ifintechworld.com\/?p=10645\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/ifintechworld.com\/?p=10645#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/ifintechworld.com\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Would reparations lead to irresponsible spending? Studies on other cash windfalls suggest not, new report says.\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/ifintechworld.com\/#website\",\"url\":\"https:\/\/ifintechworld.com\/\",\"name\":\"Repay Down\",\"description\":\"Latest Personal Finance News, Tips and Updates\",\"publisher\":{\"@id\":\"https:\/\/ifintechworld.com\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/ifintechworld.com\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/ifintechworld.com\/#organization\",\"name\":\"Repay Down\",\"url\":\"https:\/\/ifintechworld.com\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/rep-logo-dark.png\",\"contentUrl\":\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/rep-logo-dark.png\",\"width\":558,\"height\":90,\"caption\":\"Repay Down\"},\"image\":{\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/logo\/image\/\"}},{\"@type\":\"Person\",\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/person\/6224724fd4116361255b179dc5c70b61\",\"name\":\"News Room\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/avatar_user_1_1682606986-96x96.png\",\"contentUrl\":\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/avatar_user_1_1682606986-96x96.png\",\"caption\":\"News Room\"},\"sameAs\":[\"https:\/\/ifintechworld.com\"],\"url\":\"https:\/\/ifintechworld.com\/?author=1\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Would reparations lead to irresponsible spending? Studies on other cash windfalls suggest not, new report says. | iFintechWorld","description":"The perception that people often succumb to misfortune and bad decision-making after suddenly receiving large amounts of cash isn\u2019t based in fact,","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/ifintechworld.com\/?p=10645","og_locale":"en_US","og_type":"article","og_title":"Would reparations lead to irresponsible spending? Studies on other cash windfalls suggest not, new report says. | iFintechWorld","og_description":"The perception that people often succumb to misfortune and bad decision-making after suddenly receiving large amounts of cash isn\u2019t based in fact,","og_url":"https:\/\/ifintechworld.com\/?p=10645","og_site_name":"iFintechWorld","article_published_time":"2023-05-18T23:18:45+00:00","article_modified_time":"2023-05-18T23:18:47+00:00","og_image":[{"width":1280,"height":640,"url":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/1684451926_social.jpeg","type":"image\/jpeg"}],"author":"News Room","twitter_card":"summary_large_image","twitter_misc":{"Written by":"News Room","Est. reading time":"7 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/ifintechworld.com\/?p=10645#article","isPartOf":{"@id":"https:\/\/ifintechworld.com\/?p=10645"},"author":{"name":"News Room","@id":"https:\/\/ifintechworld.com\/#\/schema\/person\/6224724fd4116361255b179dc5c70b61"},"headline":"Would reparations lead to irresponsible spending? Studies on other cash windfalls suggest not, new report says.","datePublished":"2023-05-18T23:18:45+00:00","dateModified":"2023-05-18T23:18:47+00:00","mainEntityOfPage":{"@id":"https:\/\/ifintechworld.com\/?p=10645"},"wordCount":1404,"commentCount":0,"publisher":{"@id":"https:\/\/ifintechworld.com\/#organization"},"keywords":["Featured"],"articleSection":["News"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/ifintechworld.com\/?p=10645#respond"]}]},{"@type":"WebPage","@id":"https:\/\/ifintechworld.com\/?p=10645","url":"https:\/\/ifintechworld.com\/?p=10645","name":"Would reparations lead to irresponsible spending? Studies on other cash windfalls suggest not, new report says. | iFintechWorld","isPartOf":{"@id":"https:\/\/ifintechworld.com\/#website"},"datePublished":"2023-05-18T23:18:45+00:00","dateModified":"2023-05-18T23:18:47+00:00","description":"The perception that people often succumb to misfortune and bad decision-making after suddenly receiving large amounts of cash isn\u2019t based in fact,","breadcrumb":{"@id":"https:\/\/ifintechworld.com\/?p=10645#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/ifintechworld.com\/?p=10645"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/ifintechworld.com\/?p=10645#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/ifintechworld.com\/"},{"@type":"ListItem","position":2,"name":"Would reparations lead to irresponsible spending? Studies on other cash windfalls suggest not, new report says."}]},{"@type":"WebSite","@id":"https:\/\/ifintechworld.com\/#website","url":"https:\/\/ifintechworld.com\/","name":"Repay Down","description":"Latest Personal Finance News, Tips and Updates","publisher":{"@id":"https:\/\/ifintechworld.com\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/ifintechworld.com\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/ifintechworld.com\/#organization","name":"Repay Down","url":"https:\/\/ifintechworld.com\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/ifintechworld.com\/#\/schema\/logo\/image\/","url":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/rep-logo-dark.png","contentUrl":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/rep-logo-dark.png","width":558,"height":90,"caption":"Repay Down"},"image":{"@id":"https:\/\/ifintechworld.com\/#\/schema\/logo\/image\/"}},{"@type":"Person","@id":"https:\/\/ifintechworld.com\/#\/schema\/person\/6224724fd4116361255b179dc5c70b61","name":"News Room","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/ifintechworld.com\/#\/schema\/person\/image\/","url":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/avatar_user_1_1682606986-96x96.png","contentUrl":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/avatar_user_1_1682606986-96x96.png","caption":"News Room"},"sameAs":["https:\/\/ifintechworld.com"],"url":"https:\/\/ifintechworld.com\/?author=1"}]}},"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/posts\/10645","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=10645"}],"version-history":[{"count":1,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/posts\/10645\/revisions"}],"predecessor-version":[{"id":10647,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/posts\/10645\/revisions\/10647"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/media\/10646"}],"wp:attachment":[{"href":"https:\/\/ifintechworld.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=10645"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=10645"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=10645"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}