Results From The City That Just Gave Away Cash

A new study looks at the UBI experiment in Stockton, California Was this forwarded to you? Subscribe to [this newsletter]( and to [our podcasts](. No Strings Cash --------------------------------------------------------------- by Emma Peaslee In 2012, when Michael Tubbs was a city council member in Stockton, Calif., the city was going through a tough time. It was dealing with the fallout from the financial crisis. It was working its way through a bankruptcy. It was also regularly featured in [Forbes Magazine]( as one of “[America’s Most Miserable Cities]( For Tubbs, the Forbes jab was personal. He was raised in Stockton and grew up in poverty. He was elected to the city council at the age of 22, and went on to run for mayor. He won in 2016, becoming — at age 26 — one of the youngest mayors in the country. Michael Tubbs (Photo by Nick Otto/Getty Images) Tubbs says he came to the mayor’s office ready to enact some transformative change in Stockton. “I decided that we would call into question the very structure that produces poverty in the first place,” [he told NPR]( in an interview in 2020. In 2019, he founded the Stockton Economic Empowerment Distribution, or [SEED](. Funded by philanthropic donations, SEED gave 125 individuals $500 a month for two years. The individuals were randomly selected from neighborhoods with a median income at or below $46,033, which is Stockton’s median household income. There were no strings attached. No drug tests. No work requirements. Just $500 every month for people to spend as they saw fit. A team of independent researchers saw an opportunity to conduct a parallel experiment. Stacia West of the University of Tennessee and Amy Castro Baker of the University of Pennsylvania collected data from those who received $500 a month, and also from people in a control group, who received nothing. [They found]( that the income reduced recipients’ income volatility — that is, the income fluctuations a household faces month-to-month — compared to people in the control group. The researchers say the money created opportunities for self-determination and choice. It left recipients better positioned to handle a $400 unexpected expense compared to the control group. And it had a significant impact on recipients’ mental health. One said before receiving the money, “I had regular panic attacks and anxiety. I was at the point where I had to take a pill for it.” Since receiving the checks, the recipient said, “I haven’t even touched [the pills] in a while. I used to carry them on me all the time.” Critics of programs that hand out money with no strings attached argue that recipients might squander the cash. Or that people who receive a guaranteed income don’t have an incentive to find work. The Stockton study found that families who received the money were most likely to spend it on essential items like food, home goods, utilities and gas. As for the effect on job seeking, the study found that after one year, the percentage of recipients who had full-time employment grew from 28% to 40%. That was more than twice the rate for the control group, which rose by only 5%. Baker says it comes down to risk. The idea of being able to make a risky decision that might not pay off — for example interviewing for another job — is often inconceivable for people in poverty. But sometimes people need to take risks in order to succeed. Baker said that in the SEED experiment, $500 a month allowed them to do exactly that. “People were able to apply for jobs they knew they were eligible for but just literally could not take a shift off of work to do so.” The researchers noted that financial scarcity leads to time scarcity. “When you live in constant scarcity your entire day is taken up with battling poverty and trying to make ends meet. You literally don't have the capacity, or the time to even breathe and reset and think about what a different goal might be,” said Baker. The money offset that pressure. One recipient described being able to finally take time off work to study and complete his real estate license and even pursue an associate degree: “I have more time and net worth to study… to achieve my goals.” The SEED experiment contributes to a growing number of studies around the world exploring ways to alleviate poverty. One example, the concept of universal basic income, gained widespread attention during the 2020 election, when former presidential candidate Andrew Yang campaigned on the idea of giving every American adult $1000 a month, every month, for the rest of their lives. Many lawmakers recoiled, but ideas like UBI are gaining traction. The 2020 stimulus checks are one example. A new policy championed by Democrats, to give low- and middle-income parents money based on the age and number of their children is another. Members of Congress, rather than relying on means-testing or vouchers to delineate financial support, appear increasingly willing to simply give people money and let them decide how to spend it. The full analysis from the Stockton study will be finalized in 2022, but the researchers are already evaluating several other similar studies in cities across the country. These studies target a variety of different populations, for example, Black women caregivers, teenagers in New Orleans, and survivors of domestic violence. “I think in the next couple of years, we're going to have this knowledge base to really build good policy off of,” said West. --------------------------------------------------------------- Newsletter continues after sponsor message --------------------------------------------------------------- On Our Podcasts --------------------------------------------------------------- The Marriage Pact — They say true love is hard to find. Whoever says that isn't an economist. [Listen here]( Happy Fed Independence Day (Update) — The story of the day the Federal Reserve got its independence and the fight — an actual physical fight — to keep it. [Listen here]( The Biden Relief Bill: Who Gets What — President Biden's Covid relief plan calls for about $1.9 trillion in government spending. Where is all that money going? 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