First U.S. Test of Universal Basic Income Seems to Pass with Flying Colors

Blogging, family, lessons learned, social justice, Teaching and Education, United States 3 Minutes

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.?

Sources:

Published by Jim Borden

A 60-something guy trying to figure out the world, and his place in it. Happily married for 40-plus years, three wonderful sons. Accounting teacher, fitness enthusiast, blogger, reader.

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61 thoughts on “First U.S. Test of Universal Basic Income Seems to Pass with Flying Colors”

  1. That is great news about the UBI experiment in Stockton, CA and that it is expanding to other locations. Americans have been conditioned relentlessly to believe such a result is impossible. A lot of the brainwashing has been based on racial and ethnic stereotypes.

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  3. Isn’t this what the UK does with their benefits system? This is one article that shows positives, but there are many that show negatives about the long term impact of this type of system on people and their children. Not working is psychologically bad for a lot of people. The World Economic Forum has been punting this idea as a response to the Fourth Industrial Revolution but are they not saying that many people will be delegated to the unemployable pile because they lack the skills to transfer to the new state of the world. Maybe I am a drama queen but I’ve read Stephen King’s The Running Man and H.G. Wells’ The Time Machine which demonstrate their totally opposite thoughts on this point, and neither are situations I think work. Thanks for this interesting article, Jim. It’s set me thinking about this AGAIN. I dwell on this a lot.

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    1. I am not sure how the UK system works. I agree that people want to work, and the research so far seems to suggest that paying people UBI does not lessen their desire to do so. And I also agree what will happen to people who do not have the skills needed in the next several decades. Well, there is the possibility that more people can become artists, because the world could always use more artists, and they wouldn’t have to be starving…

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  4. An interesting program for sure. I’m guessing it would vary quite a bit from person to person. I think the average stereotype is “they’ll just spend it on alcohol and other drugs.” This study would beg to differ. I’m not sure I completely buy it, but I’m open to looking at it more closely.

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    1. I think that average stereotype is one of the biggest fears of a program like this, that’s why I was happy that at least this small study did not show that to be the case. We need a lot more studies, but this seems to be off to a good start…

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  5. I am a big fan of the idea and I am glad to see real data starting to be derived from the experiment. But this seems like such a hard sell to the American public who seem consumed about their own well being more than they care for another’s. Sometimes, lost in our own success, we forget what it is like to be in need and struggling.

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    1. I feel the same way. Plus some people will just think that such a program is for the lazy, or will make people lazy. I disagree, and the data so far does not seem to support such beliefs.

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  6. i am all for this initiative for many reasons. sometimes people in tough situations just need a positive boost to get them on their way, or to sustain them in the meantime without the stress of just getting through a day. wonderful

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    1. I agree that such programs can help to reduce a lot of the stress that people are under. You might argue that the recent stimulus bill is similar to UBI in that the government is just giving people money. But people need it, and I disagree with people who say that such programs just make people lazy. There is still a lot of work needed, but it is off to a promising start…

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  7. This Stockton news is offset by the failures on UBI abandoned experiments elsewhere such as in Finland and Ontario. Recipients were happier but the costs were found to exceed the benefits. British Columbia had results similar to Stockton.

    Another disappointment was that most recipients were not using their funding to become better suited for working on their own. The problem with UBI, aside from massive costs, is that there are so many chronic recipients in need who probably will never make it on their own without UBI or other forms of welfare due to physical illness (think obesity and addictions), mental illness, and need to care for dependents.

    Maybe I missed it, but I did not see Stockton raving about how recipients soon landed jobs that reduced their need for UBI and other forms of welfare like food stamps. Did it put people to work?

    Another problem is scale. Cities like Stockton can give UBI to relatively few long-term residents in need. If UBI
    is made available nationwide under the new Biden open borders policy poor people from everywhere in the world will soon be streaming in by the tens of millions monthly for UBI, free medical care, food stamps free education, etc.

    The very liberal NYT Paul Krugman is quoted as follows:

    “Open immigration can’t exist with a strong social safety net; if you’re going to assure healthcare and a decent income to everyone, you can’t make that offer global” —
    Paul Krugman
    https://www.goodreads.com/quotes/724654-open-immigration-can-t-exist-with-a-strong-social-safety-net

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    1. My vision (and others) of UBI is that society should reap the rewards of the increased productivity of technology and automation. It seems like that is the goal of many businesses – to increase productivity through technology, and enhanced productivity is often measured by reduced headcount. If productivity is up, and GDP is up, why shouldn’t that surplus be shared with society? And in the places that you mention where people were happier, but costs exceeded benefits, that seems like it is just a matter of tweaking things a bit, or again, using the learning curve phenomena and wait for the costs to become lower as a result of advances in technology. Thanks for the Krugman article, I’ll take a look at it.

      By the way, are you glad you are no longer in Texas right now?

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      11. What good is balancing the budget when you do it with printed money not raised from legitimate borrowing or taxation.

        The new $1.9 trillion covid “relief” bill is to be funded mostly by borrowing from the Federal Reserve, but the Federal Reserve will raise most of that money by simply printing it (in their wording it’s called Quantitative Easing). In the USA only the Federal government and counterfitters can raise money by printing that money. The Federal government does not even have to print it as long as it sends blank checks to Congress.

        On Thu, Mar 11, 2021 at 5:10 PM Borden’s Blather wrote:

        > Tippy Gnu commented: “Sure, what the hell. Just as long as they balance > the budget. That’s what matters to me.” >

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      12. If they balance the budget by printing the money right away, then they can flood the market with all that new money. I think this would increase inflation, resulting in the present generation paying for all the government spending, rather than passing the burden along to future generations.

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      13. Printing money to pay expenses is what Venezuela, Zimbabwe, and the Weimar Republic did.

        Eventually one egg cost a $2 million Zimbabwe dollars.

        You can be a millionaire in Venezuela with two U.S. quarters.

        In the Weimar Republic it took a wheelbarrow full of marks to buy a loaf of bread.

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      27. Good point, though the news keeps reporting on how it’s going to be running out of money pretty soon. But if that happens, I guess they can just print up some cash.

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  9. An interesting post, Jim, and I’m intrigued to see a move towards a little socialism happening over there. As Robbie said, it does sound a bit like our benefits system, which I believe to be beneficial. There are some, of course, who will see it as a way of scrounging off the state, but I think the majority welcome it as assistance for their families at times when this is needed. Looking forward to seeing how this progresses, in a country where nearly half of the population will fear this as the first step on the road to communism!

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    1. thanks for your insights, Clive. It’s probably no surprise that I like such a program, since my views have become more and more socialist over the years. I don’t think these programs will make people lazy, but as you point out, give them hope for a better future.

      And one of the premises behind UBI is that it could lead to more people pursuing the arts as a way of life, which seems like another good outcome…

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  10. I really do believe in programs such as these and it’s great to see these positive results. I am sure that there will be people who will take advantage, use it wrong, etc., etc. but how does this even compare to the vast wrong that is being done in the name of capitalism?

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  11. Very interesting post. In Canada we still have Welfare and there are many who abuse it. But also many who have no choice. It comes with a lot of rules and, of course, a stigma. For many, it can be difficult to get ahead while on it.

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