Guaranteed income programs could offer hope in poverty fight
Universal income programs became popular during the presidential campaign of Andrew Yang, who promised to give each American adult a “freedom dividend” of $1,000 a month. Yang’s campaign ended early, but the interest on guaranteed income programs grew. Conversations promoting guaranteed income have been informed by the socalled robot apocalypse, which prophesizes that workers will be displaced into a Malthusian cycle of poverty. Others have argued for guaranteed income programs as a way to slow down raising income inequality and enhanced poverty.
Guaranteed basic income is not a new idea. As early as the 18th Century an unconditional basic income program was established in the village of Speenhamland, England, that gave every family a large transfer to subsist regardless of whether they worked. Since then, politicians and economists on the left and the right have argued for different experiments that promote a basic income transfer among the most vulnerable. In fact, Richard Nixon in 1973 proposed the Family Assistance Plan, which offered the poorest U.S. households a cash transfer of $1,600 annually plus food stamps.
What exactly is a guaranteed income program, and how does it differs from universal guaranteed basic income? “Universal” refers to transfers that do not focus on one group, but are paid to the whole population. “Guaranteed” means the payments are unconditional, with no strings attached. “Basic” indicates the income is large enough to satisfy basic needs. Thus, as Hilary Hoynes and Jesse Rothstein argue, a national universal guaranteed basic income is expensive, and would be even more costly than our current safety net system including expenses in health and social security. From a policy perspective it makes more sense to talk about guaranteed income: No strings attached and unconditional transfers directed to vulnerable populations.
Perhaps the most highprofile guaranteed income program in the United States so far is Stockton’s Economic Empowerment Demonstration pilot. This program gave $500 a month to 250 households for two years. The evaluation of it suggests that programs targeted at vulnerable households are an effective means to reduce poverty. The program resulted in lower month-tomonth income volatility, a higher opportunity of finding full-time employment, and better health and emotional outcomes for those who received the guaranteed income.
In fact, the group Mayors for a Guaranteed Income point out that there are at least nine different guaranteed income programs in California, and there is interest in developing more. These programs are different in their scope, size and population of interest. For example, the city of West Hollywood has a proposal to give 25 LGBTQIA youths a no-strings payment of $1,000 a month for 18 months. The city of Alameda and Community Works have received seed funding to pay $500 a month for 12 months to individuals reentering the community post-incarceration. Another program, and the largest in the U.S. until now, is Los Angeles’ BIG:LEAP that will pay 3,000 single-parent households in Los Angeles $1,000 a month for one year. Until now these programs have been geographically concentrated in scope and restricted in their population of interest.
Thankfully, a more important and ambitious program is on the horizon. The state legislature recently approved the California Guaranteed Income Pilot Program. This plan is to allocate $35 million to counties and cities that channel guaranteed income towards the most vulnerable Californians. It will prioritize youths who are aging out of the fostercare system and pregnant women. This is encouraging news. Guaranteed income programs have been shown to alleviate poverty, improve labor market outcomes and improve mental and physical welfare in the U.S. and elsewhere.
Perhaps the most visible guaranteed income program abroad was piloted in Finland, where 2,000 unemployed individuals received a monthly guaranteed income of €560. Some called it a flop, mostly because comparing the probability of employment by individuals in the program with a control group of those not in the program yields small differences. Yet, the program successfully decreased levels of stress and anxiety among participants.
A different program was administered by the Canadian province of Ontario. Instead of supporting the unemployed, it focused on giving 4,000 individuals a no-strings attached payment of roughly C$17,000 for individuals or C$24,000 for couples over three years, regardless of employment status. Participants reported higher levels of self-confidence and lower stress. Unfortunately, the program was terminated early as the government deemed it insufficient to end poverty.
Can we predict what a large-scale guaranteed income program looks like? The most encouraging indirect evidence from unconditional GI transfers comes from stimulus payments during the coronavirus pandemic. In late December 2020, during the height of the pandemic, one in eight American households reported to the Household Pulse Survey that they had experienced some kind of food insufficiency, defined as not having enough food to eat in the past seven days. Introduction of the second stimulus payment reduced the proportion of food insecurity by more than 50%.
The Speenhamland experiment died after public figures such as David Ricardo and Thomas Malthus spoke against it. Nixon’s Family Assistance Plan was terminated by Congress after opposition by Republicans and Democrats. Even the Stockton, Finland and Ontario experiments ended early or were discontinued. Yet, good ideas are resilient and hard to forget. The recent interest in targeted guaranteed income programs raises hope that these ideas will finally get a fair chance and alleviate the vulnerabilities of those most in economic need.