Just Pay People: Income Supplements Work

Image by 401(k)2012, published under Creative Commons license.

Two years ago, Stockton, California began a “basic income” experiment. The privately funded Stockton Economic Empowerment Demonstration (SEED) gave 125 randomly selected residents of poor neighborhoods $500 per month—no strings attached—for two years. A just-completed study of SEED’s first year showed dramatic results:

• “Guaranteed income reduced income volatility, or the month-to-month income fluctuations that households face. 

• “Unconditional cash enabled recipients to find full-time employment. 

• “Recipients of guaranteed income were healthier, showing less depression and anxiety and enhanced wellbeing. 

• “The guaranteed income alleviated financial scarcity creating new opportunities for self-determination, choice, goal-setting, and risk-taking.” 

Some of the benefits were intangible: “I can breathe,” said one participant who, like others, said she could now spend more, and calmer, less anxious time with her children. For program participants overall, more than one-third of the monthly $500 was spent on food. 

Contradicting predictions that “free” money would make people less ambitious or less likely to work, SEED participants used the increased security to find full-time jobs. 

“In February 2019, 28% of recipients had full-time employment. One year later, 40% of recipients were employed full- time. In contrast, the control group saw only a 5% increase in full-time employment over the same one-year period ….

“As reflected in the spending data, financial scarcity generates time scarcity. Simply put, when every dollar of wage work is allocated for bills before it is earned, most cannot afford to skip work or take necessary steps toward better employment structurally trapping them regardless of individual effort.” 

Proposals for a basic income, guaranteed income, or child allowances have been around a long time. Stockton’s experiment confirms that they work to improve people’s lives and boost them to a more secure future. The success of SEED may soon grow in other communities. 

St. Paul is beginning a similar experiment, the People’s Prosperity Guaranteed Income Pilot. This program, with $300,000 from federal CARES Act funding, will enroll 150 low-income families financially impacted by COVID. The pilot program will pay them $500 per month for up to 18 months. As the city describes the program

“The goal of our guaranteed income pilot is simple: get cash to families in our community with no strings attached so they can buy the things they need like food, housing, and other essentials. For far too long, too many programs that provide support have focused on telling families on how much, where and what to spend resources on. Because families know best what they need, our program gives them the flexibility to determine how to spend these resources.” 

Mayors in 25 cities across the country are preparing to launch similar programs.  

While it is not called a basic income, the just-passed American Rescue Plan offers similar assistance to families with children. Expanding on the existing child tax credit, the American Rescue Plan will temporarily expand the credit to provide monthly support

“The American Rescue Plan would temporarily expand the child tax credit for 2021. First, the plan would allow 17-year-old children to qualify. Second, it would increase the credit to $3,000 per child ($3,600 per child under age 6) for many families. Third, it would remove the $2,500 earnings floor. Fourth, it would make the credit fully refundable. And fifth, it would allow half of the credit to be paid in advance by having the IRS send periodic payments to families from July 2021 to December 2021.

“Not all families with children would get the higher child credit. The enhanced tax break would begin to phase out at AGIs of $75,000 on single returns, $112,500 on head-of-household returns and $150,000 on joint returns.”

The New York Times describes this move as revolutionary:

“[T]he child benefit has the makings of a policy revolution. Though framed in technocratic terms as an expansion of an existing tax credit, it is essentially a guaranteed income for families with children, akin to children’s allowances that are common in other rich countries.

“The plan establishes the benefit for a single year. But if it becomes permanent, as Democrats intend, it will greatly enlarge the safety net for the poor and the middle class at a time when the volatile modern economy often leaves families moving between those groups. More than 93 percent of children — 69 million — would receive benefits under the plan, at a one-year cost of more than $100 billion.”

Columbia University analysis estimates that the program will cut child poverty by 45 percent overall, and by 52 percent for African American families and 61 percent for Native American families. 

While neither child benefits nor a guaranteed income can solve all of our social and economic problems, giving people financial support and breathing room accomplishes far more good than blaming, shaming, and punishing. 

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