A California City Gave People $500 A Month, No Strings Attached. Here’s What Happened.
For millions of Americans, an unexpected expense ― a broken down car, a sudden rent increase, an illness ― can be financially crippling. Forty percent would struggle to cover a $400 emergency expense. For many on low incomes, it’s a constant cycle of anxiety.
The city of Stockton, California, has been experimenting with an idea – called the Stockton Economic Empowerment Demonstration (SEED) – that could help alleviate this financial vulnerability for some of its residents and ultimately improve their physical and mental health.
Since February, the city has given $500 a month, no strings attached, to 125 residents, all of whom live at or below the city’s median income level of about $46,000. It’s a form of universal basic income (UBI): the idea that people receive regular payments, which they are free to spend however they wish.
Eight months into the 18 month-long pilot project, which is being funded by a $1 million grant from the Economic Security Project, a network promoting UBI, along with other private funders – the first set of preliminary results has been released.
Of the 125 people taking part, 43% are working, 20% have disabilities and are not employed, and 11% care for children or elderly relatives. Fewer than 2% are unemployed.
Their $500 monthly stipend is loaded onto debit cards, which makes is possible for researchers to track how the money was spent. Researchers found that the biggest slice of the payouts (40%) was for food, 24% was spent on merchandise, including at places like Walmart and dollar stores, nearly 12% on utility bills and 9% on car-related expenses, such as fuel and repairs. Other money went toward insurance, medical expenses and recreation.
Researchers noted that about 40% of the money was taken out as cash or moved to other accounts, meaning they had to rely on anecdotal reports as to how that money was spent.
Stockton makes sense as a testing ground for universal basic income. The racially diverse city of 300,000 people is just a few hours commute from Silicon Valley but a world away from its wealth. In 2012, battered by the financial crash and the housing crisis, with city authorities accused of years of ill-considered spending, Stockton became the largest city in the U.S. to file for bankruptcy.
The city is recovering, but its poverty rate of 22.4% is double the national rate of 11.4% and the city’s median income is more than $10,000 below the national median income.
Stockton’s mayor, Michael Tubbs, who has led the program, said the results of the pilot project help fracture the myth that poverty is caused by poor people’s irresponsibility.
“In this country, we have an issue with associating people who are struggling economically and people of color with vices like drug use, alcohol use, gambling,” Tubbs said. “I thought it was important to illustrate folks aren’t using this money for things like that. They are using it for literal necessities.”
Stockton Mayor Michael Tubbs initiated the program to give $500 a month to 125 residents. Tubbs says the privately funded program could be a solution to the city’s poverty problem.
Lorrine Paradela, who works with children with autism and is one of the participants in Stockton’s pilot project, told CityLab that her first $500 payment came “just in time” because she needed to replace her car battery. The money has helped her save for the downpayment on a new car and pay for her insurance. But, Paradela said, people can still be judgmental about cash handouts: “They think that people that get that money don’t work. They use it on drugs and alcohol; to buy themselves nice clothes and stuff … But I use that money for my family.”
This is a familiar trope, said Stacia Martin-West, an assistant professor at the University of Tennessee College of Social Work and one of the researchers overseeing the program. “There’s a broader idea that people are financially struggling because they make bad financial choices. But I think if we look at these data… we see a sample of folks that are financially struggling but are prioritizing and making really rational decisions about how to put this money to work.”
There’s a lot of interest in how Stockton’s project unfolds as the concept of universal basic income increases in popularity.
UBI might be an old idea but it has been propelled into the mainstream with high-profile pilots in countries around the world ― from Finland to Kenya ― and powerful advocates, including tech billionaires like Mark Zuckerberg and Democratic presidential hopeful Andrew Yang, who is campaigning on a platform of UBI, promising to give every American $1,000 a month.
What’s happening in Stockton is a more limited version of UBI. First, only 125 people are taking part, a pretty small number, and they were selected because they have lower incomes. Second, the monthly payments are small, even if they can make a big difference for the Stockton participants whose monthly incomes average around $1,800. The money is a potentially crucial lifeline rather than a guarantee that all the basics of human need will be covered.
Stockton, California, has been targeted for redevelopment as it continues to recover from the Great Recession, when it was known as the foreclosure capital of the country.
It will be a while before there is fuller information on whether the guaranteed income can help boost Stockton’s financially vulnerable residents. Results will be released at intervals during the project in an effort to make it transparent, especially to Stockton’s residents. But the final results are not expected until December 2020. These will dig into the effects not just on people’s financial and job situations but also on their physical and mental health.
“We all know that American families are just struggling piecing together multiple jobs, the jobs that they have have incredible volatility,” said Martin-West. This causes anxiety that builds up over months and years, she added, helping cause high blood pressure, and a higher risk of diabetes, heart disease and other negative health outcomes.
“The question here is that if we can use guaranteed income to at least have a floor, do we see changes in people’s anxiety and their stress levels and their physical and mental health? And their ability to spend time with their family and ultimately be happier and well-rounded people capable of realizing their full potential?” she said.
Researchers will look at the participants’ lives five years before the experiment and then over the following five years to get a decade-long snapshot of the difference the guaranteed income had on their lives.
Whether Stockton’s pilot project can serve as a test case for other American cities when it comes to UBI is debated. Jesse Rothstein, professor of public policy and economics at the University of California, Berkeley, has doubts. Rothstein, who has written a paper on the potential role of UBI in countries like the U.S., believes Stockton’s SEED project will almost certainly show that guaranteed income will help reduce the monthly volatility of household incomes.
But, he told HuffPost, “I don’t think the SEED demonstration will provide answers to the questions that we identified as the important questions about UBIs — relating to the effects of universality, of the knowledge that the program will be available for the long term, or of the taxes needed to pay for the program.”
For Amy Castro Baker, an assistant professor at the University of Pennsylvania and a lead researcher on Stockton’s program, the results will be valuable as part of a growing body of research into how a guaranteed income could be rolled out and tailored for diverse demographics. But, she said, it must fit with a broader national conversation about dignity, deservedness and what kind of economy we want.
“It took us well over 100 years of exclusion from markets and exclusion from upward mobility and locking people out of safe investments to bring us to this point,” she said. “There is no one policy solution that will dig us out of systemic injustice when it comes to this economy.”
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