Stockton starts $500 no-strings payments
SACRAMENTO — After months of planning, Stockton is sending debit cards loaded with $500 to a select group of residents starting Friday as part of a closely watched experiment in universal basic income, the first led by a U.S. city.
Stockton, once dubbed “America’s foreclosure capital,” was the largest city to seek bankruptcy protection before Detroit’s 2013 filing. During the recession, unemployment soared toward 20 percent, and violent crime rose. Today, one in four residents lives below the poverty line, according to the U.S. Census Bureau.
Now, as the city slowly recovers from financial disarray, officials and advocates look to the Stockton Economic Empowerment Demonstration, or SEED, to provide insight on whether a long-term basic income program is a viable creative approach to lifting residents out of poverty.
“The need has only been reiterated” in the last few weeks of preparation, SEED director Sukhi Samra said. “Folks are ready to use this money to pay bills, to save for the future, to pay off debt and pay for medicine.”
Each month for 18 months, 130 adults living in the city’s lower-income neighborhood will receive $500 to spend however they want. Researchers with SEED will track, study and analyze how the income boost affects residents’ spending and saving habits, and how it influences other factors such as quality of life and financial stability.
The money for the program comes from a $1 million grant from the Economic Security Project, a network organization that has raised $10 million to fund and explore universal basic income programs and their viability.
“I think (the program) will make people work better and smarter and harder,” Mayor Michael Tubbs told NPR last year. “We’re not just designed just to work all day and run a rat race. We’re designed to be in community, to volunteer, to vote, to raise our kids. And I think the more inputs and investments we can give in people to do those things, the better off we are as a community.”
Last year, 4,200 letters were randomly sent to individuals living in areas with a median household income at or below $46,033, the city’s median at the time.
That approach let the program target poorer communities while allowing selection of a diverse pool of participants, Samra said. The only other eligibility requirement was that participants be at least 18 years old.
From the respondents, SEED selected a group of 130 recipients taking into account the city’s gender, age and racial diversity, Samra said.
Researchers will regularly check in with recipients to conduct quantitative surveys and qualitative interviews — “How are people feeling? How are people spending money? Are people spending more time with families? How are health outcomes changing?” Samra said.
The idea of universal basic income is simple — giving money to everyone, regardless of income level or employment status, with no restrictions on the expenditures.
As wages, particularly for low-skilled workers, have failed to keep up with inflation, and experts warn technological developments in nearby Silicon Valley herald an artificial intelligence revolution that could make many lowwage jobs obsolete, universal basic income has gained attention as a policy idea to address wealth inequality.
In California, U.S. Sen. Kamala Harris proposed a bill last year what would provide middle class and working families a tax credit of up to $6,000 a year that could be accessed as a monthly check of up to $500. Gov. Gavin Newsom has said he supports pilot universal basic income programs.
Several other countries conducted similar cash-transfer experiments, including Finland and Canada. Tech incubator Y Combinator conducted a feasibility study in Oakland that gave a few dozen residents between $1,500 and $2,000 beginning in 2016, and will soon conduct an expanded trial involving 1,000 people across two U.S. states.
But UC Berkeley public policy and economics professor Hilary Hoynes said interpretations of what constitutes success for a universal basic income pilot program vary. Will more individuals be able to shift toward jobs pursuing their interests with fewer worries about living paycheck to paycheck, or will fewer people work in the labor market all together — and is that a good thing?
Both programs in Finland and Canada have ended, with no plans to continue or expand.
Moreover, to implement a feasible universal basic income program, Hoynes said, policymakers and advocates would need to grapple with whether payments should be pegged to income levels – whether, when “you earn $20,000 or $60,000 or $100,000, (governments) start tapering out benefits,” for example.
“A universal payment of $12,000 per year to each adult U.S. resident over age 18 would cost roughly $3 trillion per year,” reads a new National Bureau of Economic Research working paper by Hoynes and UC Berkeley professor Jesse Rothstein.
Still, Hoynes said, there could be benefits to a pilot program such as SEED to better understand what recipients spend their money on, and the long-term effects of modest income increases on educational or employment decisions, in spite of its sample size and short duration.
Hoynes isn’t convinced universal basic income will be the solution to mass unemployment spurred by an artificial intelligence revolution, but she does believe the concepts are helpful in discussions about wage stagnation among low-skilled workers.