City’s Experiment With Universal Basic Income Showing Promise

STOCKTON, Calif. (CN) – It has been over nine months since 130 Stockton, California, residents started receiving a no-strings-attached $500 monthly payment as part of a pilot program to stem poverty, and the results so far are encouraging.

Downtown Stockton, California. (visitstockton.org)

The 18-month project, named the Stockton Economic Empowerment Demonstration (SEED), began this past February and was made possible through $3.1 million in private donations. It is the first of its kind on this scale in the nation.

Stockton, a city of over 310,000 in which 20% of its residents live below the poverty line, is fertile experimental ground for just that reason.

Sukhi Samra, director of SEED, is excited the program is already getting buzz from city officials in major metropolitan areas.

“They have come to us because they are interested on implementing guaranteed income locally,” Samra said in a phone interview. “Chicago actually launched a task force to explore the feasibility of a basic income, and in Milwaukee they are going to try a similar program next year and give $500 per month to 50 families, but they are inspired by our work.”

As of now, the closest the United States has to a guaranteed income is in Alaska, where the Alaska Permanent Fund Dividend has been giving eligible residents an annual lump sum payment from oil and gas revenues. Since 1982, the program has disbursed more than $23 billion in dividends.

That seems well and good for a state that already has its solution paid for, but in California getting the money is a dicey issue.

Samra said that if publicly funded, the money could come from a wealth tax, carbon tax or cap-and-trade. Other options could also include a value-added tax, so there a number of sources where the money would come from.

“I can’t give a definitive answer on what type of tax it could or should be,” she said. “But I think if we’re really committed to this idea of guaranteed income as a tool for equity, it’s really about looking at our tax system and making sure that we’re helping folks who aren’t benefitting from the economy in the same way others might be.”

Matthew Freedman, a professor of economics at the University of California, Irvine, said in an interview that the real value of this current experiment will be in what we learn from it.

“What is exciting about the Stockton program is that it will tell us about the merit of some of these concerns and whether or not problems arise with these benefits that might affect our willingness to adopt universal basic income on a broader scale or whether or not (these concerns) are overblown,” he said. “A lot of the resistance from universal basic income (UBI) comes from what people might spend the money on and how it might affect decisions about if and how much they’ll work.”

Critics have pointed to concerns that the money, which is disbursed through prepaid debit cards, can be withdrawn and the cash can be used without being tracked. But statistics from the SEED dashboard, which releases updates on tracked spending, proves that isn’t the case.

About 40% of disbursed funds have been transferred off of the debit card since February, mainly because people had trouble believing it wasn’t a scam and moved the money over to more trusted sources. They also routinely pulled out cash to handle transactions that cannot be paid for by card.

According to the monthly tracking, less than 1% of the money has been spent at stores that sell primarily alcohol and tobacco.

As of November, 39% of the money has been spent on food and 24% on merchandise. The rest went to utilities, auto care, medical and insurance services, recreation and transportation.

On the surface, the SEED project is a no-brainer for cities struggling with homelessness and poverty. But implementing a program like it on a large scale won’t be easy.

Freedman said a nationwide program would be very difficult because people are so mobile.

“If the program were to be made permanent, we would expect that over time more and more people would move to take advantage of UBI, which would drive up the cost of the program, necessitating higher local taxes and in turn make it difficult to sustain financially,” Freedman said.

But the Stockton program has already changed the lives of participants and buoyed their spirits to new heights.

One of the randomly selected participants is Cassandra Gonzalez, a 20-year-old mother of a young son. She fit the three criteria for the program – over age 18, a Stockton resident and and living in a neighborhood where the median income is at or below $46,000.

When she first got the notice from SEED saying she was eligible, she thought it was a scam. But her dad convinced her to go through with it.

“Before SEED, I was super anxious,” she said. “I was estimating how much our check would be, stressing out over every penny,” Gonzalez said, adding that even though she has medical insurance for her son, the coverage wasn’t always enough.

“Stuff has happened where we have had to pay an extra $500 in medical bills because our insurance wouldn’t cover it,” she said, calling the SEED money is definitely “a huge burden off of our shoulders.”

Lifting that burden has been one of the primary goals from the beginning of the SEED program.

“The project is helping everyday people and providing an income floor, which is exactly what it’s meant to do,” said Samra. “What we’re seeing is more than how the money is being spent. We’re seeing the biggest difference in how people are feeling. They’re happier, they have breathing space and they have time to spend with their kids, which is something people who aren’t struggling take for granted.”

Stockton native Rory Thatcher, a 20-something graduate of UC Santa Barbara, doesn’t seem at first glance like the ideal SEED candidate. He runs his family’s custom leather shop, has never really had any significant financial hardships, and acknowledges he “would have thought that many more other people in Stockton were in greater need and would put it to better use.”

But he also understands that in these experiments there must be diversity in the study and is grateful for the financial boost, which he says will help him pay off some student loans and give him more leisure time with his family.

When asked about concerns that participants will take out cash for use on items such as drugs and alcohol, Thatcher said he thinks the benefits outweigh the risks.

“It runs the risk, but ultimately you’re still trying to benefit the community and help people out, so anytime you’re trying to help people I think that there’s still hopefully more of a positive than a negative,” Thatcher said.

As for the future of SEED in Stockton and elsewhere, Samra remains confident of its merit.

“We’re really excited, over the course of the demonstration, to keep sharing the stories and data to keep making a case for why our economy needs to be more inclusive and why the solutions we take to fix our economy really need to be rooted in equity and an eye toward lifting up those who have been historically marginalized,” she said.

SEED participant interviews were conducted by Greg Kaufmann from The Nation and were taken from the SEED Media dashboard.

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