Stockton – Sheila Kennedy

This Is Encouraging

Regular readers of this blog are aware that I favor a UBI–a universal basic income. I’m certainly familiar with the arguments against it, and even more aware of the “devil in the details” that can make or break most policies. What I find encouraging is the slow but steady spread of pilot programs testing the concept.

The New York Times article at the link reports that at least twenty U.S. cities are currently conducting pilot programs meant to test the idea.

More than 48 guaranteed income programs have been started in cities nationwide since 2020, according to Mayors for a Guaranteed Income, a network of leaders supporting such efforts at the local, state and federal levels. Some efforts are publicly funded, and others have nongovernmental support. Jack Dorsey, the former chief executive of Twitter, donated $18 million to help the initiative.

At its essence, a Universal Basic Income (UBI) is a stipend that would be sent to every U.S. adult citizen, with no strings attached– no requirement to work, or to spend the money on certain items and not others. It’s a cash grant sufficient to insure basic sustenance. (A number of proponents advocate $1000 per month).

Andy Stern, former President of the Service Employee’s International Union, points out that a UBI is simple to administer, treats all people equally, rewards hard work and entrepreneurship, and trusts the poor to make their own decisions about what to do with their money. “Because it only offers a floor, people are encouraged to make additional income through their own efforts… Welfare, on the other hand, discourages people from working because, if your income increases, you lose benefits.”

With a UBI, in contrast to welfare, there’s no phase-out, no marriage penalties, no people falsifying information–and no costly bureaucracy. My more extended arguments for a UBI can be accessed here and here.

For obvious reasons, the programs described in the Times article focus on impoverished Americans, rather than testing universal payments.

Damon Jones, an economics professor at the University of Chicago, who has studied such programs, noted that unrestricted cash — including stimulus payments — was used broadly by the federal government to stem the economic devastation of Covid-19.

“Policymakers were surprisingly open to this idea following the onset of the pandemic,” Mr. Jones said. Now the emergency aid programs have largely lapsed, ending what for some was a lifeline.

A number of conservatives argue against a UBI, asserting that it would dis-incentivize work and/or that it would make more sense to reform programs already in place–something easier said than done. But support for a universal income has not been limited to progressives. Milton Friedman famously proposed a “negative income tax,” and F.A. Hayek, the libertarian economist, wrote “There is no reason why in a free society government should not assure to all, protection against severe deprivation in the form of an assured minimum income, or a floor below which nobody need descend.”

More recently, In 2016, Samuel Hammond of the libertarian Niskanen Center wrote about the “ideal” features of a UBI: its unconditional structure avoids creating poverty traps; it sets a minimum income floor, which raises worker bargaining power without wage or price controls; it decouples benefits from a particular workplace or jurisdiction; since it’s cash, it respects a diversity of needs and values; and it simplifies and streamlines bureaucracy, eliminating rent seeking and other sources of inefficiency.

One of the earliest of the pilot programs was in Stockton, California, and analysis of its results confirmed several of Hammond’s points.

Preliminary research from a pair of college professors, based on the first year of Stockton’s two-year program, found that giving families $500 each month reduced those households’ income fluctuations, enabling recipients to find full-time employment.

Researchers, for example, found that 28 percent of recipients had full-time employment when the program started in February 2019; a year later, the figure was 40 percent.

In one case, a participant had been studying to get his real estate license for more than a year — a pathway to more consistent, higher-paying work — but could not find time to study while piecing together an income doing gig jobs. The money from the pilot program, researchers found, gave him the time to study and get his license.

California–unsurprisingly–has most of the pilot programs currently underway, and the Times reports that Governor Newsom is an advocate of the UBI.

As I’ve previously noted, pilot projects to date have debunked predictions that poor folks would spend the money on drugs and liquor. Instead, most has gone for items like food, medicine, diapers and education.

It will be interesting to see the results of these current pilot programs–and assuming they continue to be positive, even more interesting to see how the nay-sayers respond.

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Ideology, Meet Evidence

A few days ago, I shared a talk I gave to the Indianapolis Council on Women about the UBI–the theory behind efforts to replace much of America’s dysfunctional safety net with a Universal Basic Income.

There is, as I noted in that discussion, hysterical resistance to such a drastic change. We are, after all, a country that is politically unable to provide even universal access to healthcare. The cost of such a benefit would require us to look critically at America’s multiple wasteful subsidies and it would require the Uber-rich to pay their share of taxes.

Cost is a legitimate concern. Less legitimate–and far more potent–is the belief that poor people are “takers” who would cease productive labor, neglect their kids, and spend their stipends on booze and drugs. I realize that most of the ideologues who subscribe to this theory are impervious to evidence, but evidence contrary to that belief continues to accumulate. I cited the results of previous pilot projects in the talk I referenced, and subsequently, additional evidence has emerged.

After getting $500 per month for two years without rules on how to spend it, 125 people in California paid off debt, got full-time jobs and had “statistically significant improvements” in emotional health, according to a study released Wednesday.

The program was the nation’s highest-profile experiment in decades of universal basic income, an idea that was revived as a major part of Andrew Yang’s 2020 campaign for president.

Cynics had predicted that free money would eliminate the incentive to work, creating a population dependent on the state. The experiment in Stockton, California that yielded these results was an effort to test that thesis. It was funded by private donations, including a nonprofit led by Facebook co-founder Chris Hughes who has been a longtime supporter of the UBI.

Run by a nonprofit founded by former Stockton Mayor Michael Tubbs, the program included people who lived in census tracts at or below the city’s median household income of $46,033.

A pair of independent researchers at the University of Tennessee and the University of Pennsylvania reviewed data from the first year of the study, which did not overlap with the pandemic. A second study looking at year two is scheduled to be released next year.

When the program started in February 2019, 28% of the people slated to get the free money had full-time jobs. One year later, 40% of those people had full-time jobs. A control group of people who did not get the money saw a 5 percentage point increase in full-time employment over that same time period, from 32% to 37%.

“These numbers were incredible. I hardly believed them myself,” said Stacia West, a researcher at the University of Tennessee who analyzed the data along with Amy Castro Baker at the University of Pennsylvania.

The money came once a month, and was distributed via a debit card. That allowed the researchers to track how people spent it. The largest expense each month was for food, followed by sales and merchandise, which included purchases at places like Walmart and Target, which also sell groceries. The next highest categories were utilities, automobile (gas and repairs) and services. Less than 1% of the money went to tobacco and alcohol.

Given America’s political culture, which valorizes individualism and looks askance at any suggestion that social support might increase–rather than disincentivize–individual ambition, the prospects for a UBI are pretty dim. But there are some signs that opposition may be softening.

Still, guaranteed income programs seem to be gaining momentum across the country. More than 40 mayors have joined Mayors for a Guaranteed Income, with many planning projects of their own. A proposal in the California Legislature would offer $1,000 per month for three years to people who age out of the state’s foster care system. And in Congress, Republican U.S. Sen. Mitt Romney of Utah has proposed expanding the child tax credit to send most parents at least $250 per month.

We’ll see how the evidence accumulates…..

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Yang Was Right

The Guardian recently ran a headline that made me chuckle: “California Mayor Has Tried Universal Basic Income. His advice to Trump: Go Big.” The chuckle wasn’t due to the California Mayor’s conclusions about Universal Basic Income (UBI); it was a response to the demonstrably ridiculous idea that Trump would take advice from anyone about anything.

As federal lawmakers continued to squabble over the form of the zillion-dollar intervention(s) that are clearly required if we are to have any chance at all to avert a depression, the Mayor of Stockton, California was the latest to sing the praises of a UBI–the proposal that formed the centerpiece of Andrew Yang’s Presidential campaign.

Stockton launched a basic income experiment last year, and Michael Tubbs, Stockton’s mayor, has become an ardent advocate of providing direct cash assistance to people.

The idea of providing a universal basic income to citizens is not new, but it has found new supporters in recent years, as some tech industry leaders have embraced “UBI” as a possible response to rising inequality and a growing number of American jobs lost to automation. The Facebook co-founder Chris Hughes is among the proponents of the policy; the Economic Security Project, which he co-chairs, is helping fund basic income experiments in Stockton and elsewhere.

Stockton is just the latest in a global string of experiments with no-strings cash assistance. Results of those experiments have been extremely positive, as is the early data from this one, according to the academic researchers running the evaluation of the program.

“If you give people free cash, how do they spend it? They’re very rational about it, and they make great decisions,” said Stacia Martin-West, an assistant professor at the University of Tennessee College of Social Work and one of the lead researchers.

Labor leader Andrew Stern has pointed out that, with a UBI, in contrast to welfare, there’s no phase-out, no marriage penalties, no people falsifying information. And support for the concept isn’t limited to progressives. Milton Friedman famously proposed a “negative income tax,” and F.A. Hayek, the libertarian economist, wrote “There is no reason why in a free society government should not assure to all, protection against severe deprivation in the form of an assured minimum income, or a floor below which nobody need descend.”

In 2016, Samuel Hammond of the libertarian Niskanen Center, noted the “ideal” key features of a UBI: its unconditional structure avoids creating poverty traps; it sets a minimum income floor, it raises worker bargaining power without wage or price controls; it decouples benefits from a particular workplace or jurisdiction; since it’s cash, it respects a diversity of needs and values; and it simplifies and streamlines a complex web of bureaucracy, eliminating rent seeking and other sources of inefficiency.

Hammond’s point about worker bargaining power is especially important. Today’s work
environment is characterized by vestigial unions and the growth of the “gig economy.” Employee bargaining power has eroded; wages have been effectively stagnant for years, despite significant growth in productivity. In 2018, Pew Research reported that “today’s real average wage (that is, the wage after accounting for inflation) has about the same purchasing power it did 40 years ago. And what wage gains there have been have mostly flowed to the highest-paid tier of workers.”

If the U.S. had a UBI and single payer health coverage, workers would have the freedom to leave abusive employers, unsafe work conditions, and uncompetitive pay scales. A UBI might not level the playing field–but it would sure reduce the tilt.

It is also worth noting that a UBI would have much the same positive effect on economic growth as a higher minimum wage. When poor people get money, they spend it, increasing demand.

This is all, of course, pie in the sky so long as we have a self-absorbed, monumentally ignorant, mentally-ill President, and a Republican Senate led by the irredeemably corrupt Mitch McConnell. It remains to be seen how the Coronavirus pandemic will affect November’s election, but if these men–representing the utter detritus of humanity–are still in office in January, the lack of a rational social-safety net will be the least of our problems.

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