A California City Gave Some Residents $500 a Month, No Strings Attached. Here’s How They Spent It.
What would a needy person do if you gave them $500 a month, no strings attached?
Stockton, California, is finding out. The city is eight months into an 18-month experiment with basic income, the idea that the government should give citizens a regular infusion of unconditional free cash. And it just released the first batch of data about how recipients are spending the money.
It turns out, they’re mostly spending it on food, clothes, and utility bills.
The data is provisional — the basic income experiment still has 10 months to go — and the number of participants is small: 125 people (out of an estimated 311,000 Stockton residents) who live at or below the median income line (around $46,000), nearly half of whom are working full- or part-time.
But it offers a counter to critics of basic income, who often claim that people getting free money will blow it on frivolous things or addictive substances, and that they won’t bother to find work. The evidence does not support that belief.
“In this country, we have an issue with associating people who are struggling economically and people of color with vices like drug use, alcohol use, gambling,” said Stockton Mayor Michael Tubbs. “I thought it was important to illustrate folks aren’t using this money for things like that. They are using it for literal necessities.”
In other words, Tubbs wants to destroy a myth — one that persists despite findings to the contrary — that people who become poor get that way because they’re bad at rational decision-making and self-control, and are thus intrinsically to blame for their situation. (If anything, evidence suggests it’s the other way around: Poverty itself hurts people’s decision-making abilities by imposing a terrible cognitive burden.)
Stockton was the largest city in the US to declare bankruptcy at the time it announced in 2012. It has an unemployment rate of about 7.5 percent (the state average is 4.3 percent), and it’s ranked 18th for child poverty out of all American cities.
The early results of Stockton’s trial — one of the first in the country — come at a moment when the idea of a basic income is enjoying a surge of mainstream attention. In addition to being endorsed by tech billionaires like Mark Zuckerberg and Elon Musk, it’s a centerpiece of Democratic presidential candidate Andrew Yang’s platform. Yang says that if he becomes president, the government will send a check for $1,000 per month ($12,000 annually) to every American adult over 18. He calls it the Freedom Dividend.
Given the idea’s high profile, many will be watching Stockton closely to see how the trial there turns out. That makes it especially important to understand what its data can — and cannot — tell us.
The limitations of the Stockton data
Stockton’s basic income initiative is a passion project for the 29-year-old Tubbs, the city’s first black mayor. When he started kicking around the idea, he hoped the experiment would run for at least three years. As Vox’s Dylan Matthews wrote in 2017:
The first $1 million in funding comes from the Economic Security Project, a pro-basic income advocacy and research group co-chaired by Facebook co-founder and former New Republic publisher Chris Hughes and activists Natalie Foster and Dorian Warren; Hughes provided the group’s initial funding.
Tubbs says his goal with the Stockton experiment is to see the myriad ways recipients invest the money, whether that’s toward taking more time off work to spend on other activities, or going back to school, or volunteering. “I’m excited about just showing what people do with increased economic opportunity,” he says. “Being able to devote their time full time as a parent or caregiver, going back to school to reskill, investing in a new business. I know the ingenuity of some of the folks in my city.”
But Tubbs also made clear this experiment is about a lot more than just his city. “Stockton is a proxy for America: its diversity, its people,” he said. “It’s a place that’s emerging and has big bold ideas.”
In the Stockton trial so far, recipients are making financial decisions that are “really rational,” according to Stacia Martin-West, a University of Tennessee professor acting as co-principal investigator on the experiment.
Recipients have spent almost 40 percent of their basic income on food, 24 percent on sales and merchandise, 11 percent on utility bills, and 9 percent on car repairs and gas. This information is a useful corrective to the myth that people become poor because they’re irrational agents. As one of the Stockton recipients, 48-year-old Zohna Everett, put it, “A poor person knows how to budget.”
But from a social scientific perspective, the Stockton trial — with its short duration and small number of participants — may not necessarily be very instructive. It’s “really more about storytelling than it is about social science,” according to Matt Zwolinski, director of the University of San Diego’s Center for Ethics, Economics, and Public Policy.
“What you get out of a program like this is some fairly compelling anecdotes from people,” Zwolinski told the Associated Press. “That makes for good public relations if you are trying to drum up interest in a basic income program, but it doesn’t really tell you much about what a basic income program would do if implemented on a long-term and large-scale basis.”
For example, if you know you’re going to be receiving a guaranteed income for the next several years, you might change your behavior dramatically by choosing to get a college degree. But you may not do that if you’re told the money will dry up after 18 months.
Here’s another wrinkle in the Stockton basic income trial: Each participant was given $500 per month on a debit card, so that researchers would be able to see how they were using the money. However, 40 percent of it was withdrawn as cash, so researchers had to rely on participants to tell them where the money went.
Although the experiment clearly has limitations in ascertaining how a basic income changes behavior, the researchers say their main goal is actually to measure something else: how the income affects participants’ physical and mental health. Its impact on human suffering is an important metric in itself, and that data will be released in the coming months.
In basic income trials conducted elsewhere, recipients have demonstrated improved health. Finland’s recipients reported feeling happier and less stressed after getting free money; they also reported increased trust in social institutions. In Dauphin, a town in Manitoba, Canada, a basic income scheme in the 1970s saw a decline in doctor visits and an 8.5 percent reduction in the rate of hospitalization.
Feeling less of the pernicious kind of stress that often results from economic insecurity is not just an inherent good — it’s also an instrumental good for any government looking to decrease the money it’ll later have to spend on citizens who develop the serious health problems that excessive stress can cause.
But there’s still a lot to be learned about how basic income affects a society. That’s why the Economic Security Project, the nonprofit that sponsored Stockton’s guaranteed income trial, funds a lot of research to better understand the promise and perils of unconditional cash stipends. It has provided funding for, or sponsored research on, basic income projects in places ranging from Oakland, California (through Y Combinator) to Kenya (through GiveDirectly) to Alaska (through the Alaska Permanent Fund Dividend).
Basic income policies have yielded some expected benefits — and taken some unexpected turns. In Alaska’s case, for example, the promise of a sizable monthly stipend has warped the state’s politics, though it has reduced poverty in the state.
Meanwhile, the Canadian province of Ontario has shown that basic income projects are very vulnerable to the shifting winds of politics (which is, to be clear, not the fault of the idea itself). In 2017, the former Liberal government launched a basic income pilot project in three cities. It was supposed to help 4,000 low-income people and last for three years. But then a new Progressive Conservative government came to power, and in 2018 it canceled the project. Now, a handful of participants in the pilot are filing a class-action lawsuit against the government.
Stockton’s basic income program, then, is both an investment in, and a bet on, its residents. As the data continues to roll in, we’ll see how well the program pays off in terms of the participants’ physical and mental health. If it significantly decreases their suffering, that will be a takeaway well worth paying attention to.
Sigal Samuel is a Staff Writer for Vox's Future Perfect. She writes about artificial intelligence, neuroscience, and the intersection of technology and religion.