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