A California city gave some residents $500 per month. After a year, their unemployment rate had dropped, while the control group’s rose.

stockton basic income experiment
Lorrine Paradela, a recipient of basic income in Stockton, California, walks with Sukhi Samra, the pilot program’s executive director, on February 7, 2020.

It’s a decades-old debate: Does paying someone simply for being alive make it easier for them to find a job or discourage them from seeking work? 

One city got its answer on Wednesday: A new report evaluated a basic-income pilot in Stockton, California, that gave 125 residents $500 monthly stipends for two years. The results showed that unemployment among the recipients dropped during the program’s first year, from 12% in February 2019 to 8% in February 2020.

The experiment’s control group – residents who didn’t receive monthly stipends – saw unemployment rise from 14% to 15% during that year.

The results challenge one of the most common criticisms of universal basic income: that unconditional cash reduces the incentive for people to find jobs. 

“I remember telling people, ‘I think that $500 will allow people to work more if they choose to do so,'” Michael Tubbs, the city’s former mayor, told Insider. “And that playing out in the data – it makes me so proud.”

Tubbs launched the pilot program, officially known as the Stockton Economic Empowerment Demonstration (SEED), in February 2019. The experiment ended in January, so there’s still a year’s worth of data left to analyze, but so far, the trial seems to have been a success.

In addition to a decline in unemployment, SEED recipients also saw a rise in full-time employment, from 28% to 40% during the program’s first year. Full-time employment increased less dramatically in the control group, from 32% to 37%.

A test of basic income

Stockton basic income debit card
SEED participants received their monthly payments on a debit card.

Basic-income experiments are hard to compare, since they often evaluate different types of outcomes – such as participants’ happiness, wellbeing, life satisfaction, or unemployment. Groups enrolled in such programs also differ in size or socioeconomic status.

Still, for the most part, studies have shown that cash benefits don’t keep people from entering the workforce.

A 2018 report found that the Alaska Permanent Fund, which has been distributing cash to state residents since 1982, increased part-time work by 17%. But the cash transfers had no effect on overall employment numbers (the share of people who had jobs), according to the researchers. This might be because more people assuming part-time work for the first time, but the number of available jobs climbed.

Finland’s basic-income trial, conducted from January 2017 to December 2018, also found that employment rates between stipend recipients and those in the control group were about even. But the results were complicated by the fact that participants had to give up part of their standard conditional benefits – things like housing allowances and illness compensation – to receive their monthly stipends. 

For Stockton’s experiment, the qualifications were simple: Participants had to be adults living in a neighborhood where the median household income was the same as or lower than the city’s overall, about $46,000.

“We were the first city to do it,” Tubbs said. “We announced we were doing it before my good friend Andrew Yang even announced that he was running for president, much less talking about a universal basic income.”

Yang, a 2020 Democratic presidential candidate, made basic income a prominent part of his campaign platform, pledging to give $1,000 a month to every US citizen over 18.

‘Now we have data’

Michael Tubbs
Michael Tubbs discusses his basic income program in Stockton, California.

Tubbs said he wasn’t surprised to see unemployment decline among Stockton’s basic-income recipients. 

“The big change was how it helped me see myself,” Tomas Vargas, a SEED recipient, told The Atlantic. “It was dead positive: I am an entrepreneur, I think of business ideas, I make business choices, I want to be financially stable.” 

Tubbs has a theory for why full-time employment increased as well: Before the stipends, residents who held part-time gigs may not have been able to afford time off work to apply for full-time jobs. 

“It’s hard when you’re on the wheel to get off the wheel,” Tubbs said. “And that’s what people were saying: ‘We work part-time, we need money today, but if I had the opportunity to apply full-time, I would take it.'”

Stockton’s trial bolsters decades of research on guaranteed income, so Tubbs thinks it could help bolster a case for a national basic-income policy

“People said they wanted data,” he said. “Now we have data.”

Read the original article on Business Insider

A California city gave some residents $500 per month. After a year, the group wound up with more full-time jobs and less depression.

stockton basic income
Lorrine Paradela, a 45-year-old single mother, participated in a basic-income pilot in Stockton, California.

Michael Tubbs didn’t see much risk in giving money to his city’s poorest residents, no strings attached. The former mayor of Stockton, a city in California’s Central Valley, is a strong proponent of universal basic income, a policy that essentially pays people for being alive as a way to alleviate poverty.

“My belief in it came from being raised by three amazing women, including my single mom,” Tubbs told Insider. “The issue wasn’t that they couldn’t manage money. The issue was they never had enough money to manage.”

As mayor, Tubbs spearheaded the Stockton Economic Empowerment Demonstration, a pilot program that gave 125 residents debit cards loaded with $500 each month. The program launched in February 2019 and ended in January.

Its critics argued that cash stipends would reduce the incentive for people to find jobs. But the SEED program met its goal of improving the quality of life of 125 residents struggling to make ends meet. To qualify for the pilot, residents had to live in a neighborhood where the median household income was the same as or lower than the city’s overall, about $46,000.

A new report from a team of independent researchers found that Stockton’s program reduced unemployment among participants during its first year and helped many of them pay off debt. The report studied the effects of the payments from February 2019 through February 2020. SEED participants also reported improvements in their emotional well-being and decreases in anxiety or depression.

“It’s really made a huge impact on my quality of life and being able to go do just normal things that a lot of people take for granted,” one participant said in the report, “whether it’s go out to eat once every two weeks and sit down for a nice dinner, or whether it’s, you know, my mom’s birthday and I just want to get her a birthday present.”

Tubbs said it was likely that the $500 monthly payments helped in other ways during the pandemic, such as tiding people over until their stimulus checks arrived or allowing them to take days off work if they got COVID-19.

“We know anecdotally that the $500 allowed some members of the program to stay at home and not go to work because they don’t have paid time off,” Tubbs said. “They were able to listen to the doctor because they knew that the two weeks off work wouldn’t be catastrophic.”

Michael Tubbs
Mayor Michael Tubbs discussing basic income in Stockton.

Most of the money went toward food and merchandise

Participants in Stockton’s basic-income program spent most of their stipends on essential items. Nearly 37% of the recipients’ payments went toward food, while 22% went toward sales and merchandise, such as trips to Walmart or dollar stores. Another 11% was spent on utilities, and 10% was spent on auto costs. Less than 1% of the money went toward alcohol or tobacco.

By February 2020, more than half of the participants said they had enough cash to cover an unexpected expense, compared with 25% of participants at the start of the program. The portion of participants who were making payments on their debts rose to 62% from 52% during the program’s first year.

Unemployment among basic-income recipients dropped to 8% in February 2020 from 12% in February 2019. In the experiment’s control group – those who didn’t receive monthly stipends – unemployment rose to 15% from 14%.

Stockton basic income recipient
Susie Garza, a participant in Stockton’s basic-income trial, used some of the extra cash to finance her dog’s surgery.

Full-time employment among basic-income recipients rose to 40% from 28% during the program’s first year. In the control group, full-time employment increased as well, though less dramatically: to 37% from 32%.

“Everything I thought would happen, I said would happen – I argued with Sarah Palin and Chuck Woolery and talked to ‘CBS This Morning’ and Bill Maher about – actually happened,” Tubbs said. “I remember telling people, ‘I think that $500 will allow people to work more if they choose to do so.’ And that playing out in the data, it makes me so proud.”

The researchers also found that decreases in anxiety, depression, and extreme financial stress encouraged participants to set goals and helped them better cope with unexpected financial setbacks.

“I had panic attacks and anxiety,” one participant said in the report. “I was at the point where I had to take a pill for it, and I haven’t even touched them in a while.”

Basic income faces an uphill political battle

Tubbs lost his reelection bid in November, but his departure didn’t affect the SEED program, since it was always designed to be temporary.

stockton california
A pedestrian walks through downtown Stockton on February 7, 2020.

Tubbs’ vision is to make basic income a national policy. In June, he launched Mayors for a Guaranteed Income, a coalition of mayors interested in starting similar basic-income pilots across the US. At least 40 mayors, including Eric Garcetti of Los Angeles, Keisha Lance Bottoms of Atlanta, and Jenny Durkan of Seattle, have joined the group. Twitter CEO Jack Dorsey donated $18 million to the cause.

Inspired by Stockton’s trial, Saint Paul, Minnesota, started a basic-income pilot in the fall, giving $500 a month to 150 low-income families for up to 18 months. Richmond, Virginia, is distributing $500 per month to 18 working families. And Compton, California, is giving 800 residents a guaranteed income of $300 to $600 a month for two years.

No Republican mayor has joined Mayors for a Guaranteed Income – and interest in a basic-income policy skews heavily Democratic. Andrew Yang, a 2020 Democratic presidential candidate, made basic income a prominent part of his campaign platform, pledging to give $1,000 a month to every US citizen over 18.

Tubbs said there was more than enough research to suggest that a federal basic-income policy would improve Americans’ quality of life.

“I am so proud of all the pilots, but I’m ready for policy,” Tubbs said. “I’ve got all the evidence I need.”

Read the original article on Business Insider