Silicon Valley Is Helping Cities Test a Radical Anti-Poverty Idea
What if everyone got a paycheck that they didn't work for? It's called universal basic income, and with the help of tech entrepreneurs, Stockton, Calif., is the latest city to test it.
Six years ago, facing housing foreclosures and a corruption investigation by the state, Stockton, Calif., became the largest city at that time in U.S. history to file for bankruptcy.
Now, the diverse, working-class community is out of bankruptcy, and the city’s 27-year-old mayor, Michael Tubbs, has a radical plan he's testing to reinvent his hometown: Give every resident $500 a month.
The idea is called universal basic income (UBI). It can be traced back to the 16th century but has only started to be tested in the 20th century -- and largely outside of the United States. Several California cities -- Stockton being the latest -- are getting in the game, thanks to financial backing from Silicon Valley entrepreneurs.
Mayor Tubbs’ office has partnered with the Reinvent South Stockton Coalition and the Economic Security Project -- co-chaired by Facebook co-founder Chris Hughes -- to launch the Stockton Economic Empowerment Demonstration (SEED). Starting in early 2019, 100 Stockton residents will receive $500 a month for 18 months. The goal is to document the effect of a guaranteed income on their quality of life.
Natalie Foster, co-chair of the Economic Security Project, first met Mayor Tubbs at a conference last year, where he told her that he had been interested in universal basic income since reading Dr. Martin Luther King Jr.’s book, Where Do We Go From Here: Chaos or Community?, in which the civil rights leader advocated for guaranteed income as a solution to poverty.
SEED is supported by a $1 million grant from the Economic Security Project and about $200,000 more in private donations. In Oakland, a UBI trial was funded by Sam Altman, the president of Silicon Valley accelerator Y Combinator. There, a group of about 100 families received $1,500 a month from September 2016 to September 2017. Soon after, Altman’s company announced plans to expand the program to include 3,000 people across two states who will receive money for up to five years. San Francisco is also working to develop and raise funding for a universal basic income pilot.
Foster says that the tech community's interest in universal basic income "started with people worried about robots and the rise of automation and the impact of artificial intelligence on the workforce."
“But we realized one doesn’t need to look to the future to make a case for radically rethinking our economy and guaranteeing everyone an income floor," she says. "One needs to just look at today where you have a quarter of the American workforce on public assistance.”
The common criticism of universal basic income is that it will incentivize citizens to stop working, and that the cost is not financially feasible.
Economist Ioana Marinescu of the University of Pennsylvania has researched the effects of universal basic income and said “many studies find no statistically significant effect of an unconditional cash transfer [or universal basic income] on the probability of working.”
“The evidence shows that an unconditional cash transfer can improve health and educational outcomes, and decrease criminality and drug and alcohol use, especially among the most disadvantaged youths,” she says.
As for the cost concerns, a study from the left-leaning Roosevelt Institute last year determined a "full universal basic income" system that gives every citizen $1,000 a month or $12,000 a year would grow the economy by $2.5 trillion by 2025.
Similarly, political scientist Charles Murray argues that a UBI system would just re-allocate the current funds we use for welfare services.
On the other side, however, a study this year by the investment management firm Bridgewater Associates reported that a basic income program paying every American citizen $12,000 a year would cost taxpayers $3.8 trillion.
A widespread UBI system is likely a while away, but SEED Director Lori Ospina says projects like the one in Stockton -- even if they are small -- help to build a body of evidence that can be used to support the idea and make it more viable.
Interest is already growing: Foster says she has spoken with a number of mayors who might want to test the concept. And last year, Hawaii became the first state to pass a bill in favor of basic income. It requires state agencies to convene a working group that will "identify and analyze options to ensure economic security, including a partial universal basic income, full universal basic income and other mechanisms."
Meanwhile, Stockton is still in the development phase, according to Ospina. They are finalizing the selection criteria for applicants and hope to pick the participants by the end of the year and begin the disbursement by early 2019.
Recognizing that universal basic income is a radical shift, Foster and other UBI supporters also advocate for states to expand eligibility for the Earned Income Tax Credit (EITC), which already exists on the federal level and in 29 states plus the District of Columbia. They want to give a $1,200 to $2,500 annual tax credit to people earning $75,000 a year or less. They also advocate for broadening the EITC definition of “work” to include students, caregivers and others who may be outside the workforce for reasons beyond their control.
*CORRECTION: A previous version of this misstated that San Francisco is working with the Economic Security Project (ESP) to develop a UBI pilot. The city has talked to ESP but does not have any official partnership.