Nearly three years ago I wrote about how the city of Stockton, CA was undertaking the first U.S. experiment on using Universal Basic Income (UBI) as a way of alleviating the effects of poverty.
In February 2019, using donated funds, Stockton launched a small demonstration program, sending payments of $500 a month, for 18 months, to 125 randomly selected individuals living in neighborhoods with average incomes lower than the city median of $46,000 a year. The recipients were allowed to spend the money however they saw fit, and they were not obligated to complete any drug tests, interviews, means or asset tests, or work requirements. They just got the money, no strings attached.
I have been a fan of UBI since I first heard about it and have written about it a couple of times.
The basic premise goes like this – as people are phased out of jobs, why not just give everyone a paycheck? Imagine the government sending each adult about $1,000 a month (or whatever the right number might be), about enough to cover housing, food, health care and other basic needs for many Americans. UBI would be aimed at easing the dislocation caused by technological progress, but it would also be bigger than that.
Supporters argue machine intelligence will produce so much economic surplus that we could collectively afford to liberate much of humanity from both labor and suffering. Others see this as an opportunity to provide people the freedom to become artists, scholars, entrepreneurs or otherwise engage their passions in a society no longer centered on the drudgery of daily labor.
The results of the experiment are starting to be revealed, and thanks to Fred Wilson for making me aware o these results,
In the United States, poverty is used as a cudgel to get people to work. We got rid of welfare for poor families’ and poor individuals’ own good, the argument goes. Give people money, and they stop working. They become dependent on welfare. They never sort out the problems in their life. The best route out of poverty is a hand up, not a handout.
Stockton has now proved this false. An exclusive new analysis of data from the demonstration project shows that a lack of resources is its own miserable trap. The best way to get people out of poverty is just to get them out of poverty; the best way to offer families more resources is just to offer them more resources.
Here are some specific results:
- The cash transfer reduced income volatility, for one: Households getting the cash saw their month-to-month earnings fluctuate 46 percent, versus the control group’s 68 percent.
- The families receiving the $500 a month tended to spend the money on essentials, including food, home goods, utilities, and gas. (Less than 1 percent went to cigarettes and alcohol.)
- The cash also doubled the households’ capacity to pay unexpected bills, and allowed recipient families to pay down their debts. Individuals getting the cash were also better able to help their families and friends, providing financial stability to the broader community.
- the share of participants with a full-time job rose 12 percentage points, versus five percentage points in the control group. (this goes against the belief that such programs reduce the incentive for people to work.)
- In an interview, the researchers suggested that the money created capacity for goal setting, risk taking, and personal investment.
- the cash recipients were healthier, happier, and less anxious than their counterparts in the control group.
I was happy to read about so many positive benefits from the program.
And in even better news, a group founded by Michael Tubbs a former mayor of Stockton, who spearheaded the Stockton experiment has formed a group called Mayors for a Guaranteed Income. The goal of the program is to extend the initiative nationwide, with cities from Compton to Gary to Newark making plans to send low-income residents cash.
I’m certainly hoping that this program is a big success.
It will also be interesting to see how Andrew Yang, a strong proponent of SBU, fares in the race for Mayor of New York City. If such a program were to work in NYC, can you imagine the impact it would have across the U.S.?