When One City Gave People Cash, They Went Out and Got Jobs

Stockton, California has gotten a lot of press for its experiment in providing a basic income to its residents, but it wasn’t until a recent study looked at the first year of results that we saw proven evidence of what impacts the experimental program was having. 

Besides feeling less pain and anxiety about their lives and their financial situations, a surprising percentage of the program’s recipients got jobs. By the end of the first year of the study (2019, before the pandemic began) full-time employment in the recipient group had risen from 28 percent to 40 percent — double the increase found among folks who didn’t receive the money. 

This runs counter to some conventional wisdom, which says that free money disincentivizes work. Rather, the report, along with anecdotal evidence, seems to say the opposite: it is the uncertainty that low-income folks live with that makes it harder for them to find the jobs they desire. Providing this modest monetary cushion allows folks to realize their potential, which benefits the entire community.

How does it work?

This project in Stockton was an experiment to see how low-income folks’ lives would be affected if they received $500 a month with no strings attached. Called the Stockton Economic Empowerment Demonstration (SEED), the initiative was privately funded — by, among others, Facebook co-founder Chris Hughes — so taxpayers couldn’t complain about their tax money being sent to strangers. (They actually did complain, not realizing this.)

It was launched in 2019 by former Stockton Mayor Michael Tubbs (there’s an HBO documentary about Tubbs’s various efforts to bring Stockton back — highly recommended — what a story!) 4,200 letters were sent to randomly chosen folks who lived in neighborhoods where the average income was below the local $46,000 yearly average. 

The letters invited their recipients to participate in the SEED experiment, but it seems a lot of folks either didn’t believe the offer or never opened the letters. This might skew the “random sample” to folks who open their mail, but okay.

Ultimately, 125 recipients signed up to participate and got a debit card loaded with $500. Every month, another $500 was added. They could spend it any way they wanted. Not all of this spending was tracked, but some of it was — folks spent almost 40 percent of the money on food (this went up to 46 percent during the pandemic), and about two percent on “recreation.” Less than one percent was spent on tobacco and booze. People used the money to get out of debt, open checking accounts, buy clothes for job interviews and take out loans for classes and job training. This was not party time — this was money for getting one’s life on track.

Previous experiments

The idea of providing a basic income is not new. In 1796 the political writer Thomas Paine proposed a “national fund” from which everyone would get a lump sum when they turned 21, and folks over 50 would get a payout every year. Lyndon Johnson’s advisors proposed a “basic income support system,” though Johnson ended up opting for programs that emphasized work skills and education instead. Richard Nixon’s “negative income tax” was tried in a number of U.S. states. (It was Milton Friedman’s idea — not exactly a socialist!) The employment impacts of the negative income tax were less than definitive, but a lot of younger recipients went back to school. 

Then the political tide turned. Reaganomics took hold, “welfare” became a dirty word and basic income experiments all but dried up in the United States. Until Stockton. 

To be clear, the Stockton experiment is not true universal basic income — the “universal” part of UBI stipulates that everyone, regardless of income, rich or poor, gets a check. The Stockton program is only for people living in low-income neighborhoods. So, in that sense, it’s not “universal” — rather, it aims to focus on where it can do the most good.

What’s next

Ex-Mayor Tubbs did not get re-elected, but he didn’t give up on the idea — he wants other cities to try similar projects, so he founded Mayors for a Guaranteed Income in June 2020 and now over 40 mayors have signed on. Though the coalition is an advocacy group, it is attracting funding — for example, from Jack Dorsey, CEO of Twitter, who promised $15 million to the project. (It does seem tech bros are enamored of this approach, perhaps because they foresee a day when we’ve all lost our jobs to robots and the pitchforks will come out — Elon Musk thinks it’s inevitable.) 

Other cities have now begun their own pilot programs, such as St. Paul, Minnesota and Compton, California. There’s a $24 million program in the current L.A. mayor’s budget proposal — the largest city to try this so far. Oakland has begun a pilot disbursing privately funded $500 monthly payments to residents who are Black, Indigenous or of color (they must also have a child under 18) because in Oakland these folks’ incomes average about one-third that of whites. Oakland was where the Black Panther Party was founded in the ‘60s, and that group had proposed a similar program. Now it is being tried.

Even knowing it works, how to pay for it?

Though the Stockton study shows that the “financial vaccine,” as the authors refer to it, does indeed give folks a means to rise up and find steady employment (after which they presumably won’t need the financial cushion) it has, as noted, been paid for by philanthropists and private money. Could anything like this become policy? Could it be sustainable? How would it be paid for?

Obviously, increasing taxes would help pay for such policies, but that’s not an easy sell. The existing and successful earned income tax credit could be expanded — this is a program that gives working low-income folks a significant break on their taxes. But it’s not cash in hand and it only applies to folks who already have a job. The assumption in designing it was that giving a boost to folks without a job discourages working. The Stockton study seems to say that assumption is not true.

For those who view these things through a purely financial cost/benefit lens, the cost of doing universal basic income on a national level — even just for low-income folks — might seem too high. In my opinion, however, that kind of purely financial analysis doesn’t take everything into account. For one thing, reducing poverty and unemployment reduces the need for social services. For another, not all in our lives can be reduced to dollars and cents. A Canadian trial in the ‘70s found that there was a drop in crime, hospital attendance and mental illness as well as poverty. The cost savings of all of that must count as a benefit.

So while the answer to how we would pay for this isn’t right in front of us, knowing that, if done right, people will sort themselves out and often get jobs is significant. The idea that people might know what’s best for themselves is radical, but these results seem to support that. That is encouraging, and it’s good news about us as humans.