Stockton’s Awesome Public Experiment

Stockton will soon begin a pilot project, experimenting with a universal basic income. But could this be the beginning of something bigger?

BY JEFF SPROSS

 

A universal basic income is coming to the town of Stockton, California—or a limited version of one, anyway.

What can we learn from this experiment and others like it? Or, more specifically, what do we need to learn?

In its ideal form, a universal basic income (or UBI, for short) is a regular income for every last person, provided by the government, with no conditions, and no income thresholds. It would avoid the perverse economic incentives and political resentments sometimes created by means-testing, and would likely develop the same popularity as other broadly shared programs like Medicare and Social Security. A sufficiently generous UBI—say, $10,000 a year per adult, and $6,000 per child—could virtually eliminate poverty, free people to reject oppressive and degrading labor, and put a basic floor under everyone’s living standards.

Stockton’s UBI will be a more limited pilot program: $500 a month, or $6,000 per year. The city’s mayor, Michael Tubbs, hopes the experiment will launch in August, involve at least 100 people, and last about one to three years.

But making this happen requires clearing a few important obstacles, the first of which is financing.

One million dollars will be provided by the Silicon-Valley-backed Economic Security Project. How many more donations the city can bring in will determine if the program lasts the full three years. None of the money will come from city taxpayers.

That’s because Stockton’s finances and economy were decimated by the Great Recession, leaving it unable to shoulder the experiment itself. It’s certainly conceivable that wealthier city and state governments could run similar experiments under their own power. But running a full-blown UBI through a local or state government budget would be impossible. Even for a major economy like California, a modest $6,000-a-year UBI for the entire population would almost triple the annual state budget.

But at the national level, that aforementioned $10,000-per-adult, $6,000-per-child UBI would require a bit less than $3 trillion a year. And only the federal government has the central bank, and the legal power to issue the currency, which protects it from the vicissitudes of the financial markets.

So there will almost certainly be no city- or state-level UBIs. This means that in the absence of a nationwide program, what we’ll get are focused experiments like Stockton’s. Some broader questions they will not be able to answer, therefore, include: How would people respond to a more generous UBI, or one that doesn’t have a known end date? Stockton is heavily nonwhite and grapples with much lower incomes and higher poverty than nearby San Francisco. And it suffers spillover effects from its neighbor’s sky-high inequality and housing prices. Would a population of different demographics and circumstances react differently to the same program?

The questions the experiment can answer are thus of a more individual and sociological nature: What do people do with the money? How does their labor market participation change? How do their life circumstances change? Tubbs himself does not know what specific questions they will investigate just yet. But the city has a request out for research proposals, and Tubbs told me they plan to select one by the end of March.

The UBI is sometimes cast as a rival to a federal job guarantee, which would provide work—with decent pay, benefits, and conditions—to anyone who wants it. In fact, Tubbs says he actually considered some sort of jobs program beforehand. And he takes many of his cues from the legacy of the civil rights struggle; Martin Luther King Jr. stumped for both a UBI and a job guarantee.

But more to the point: The UBI could function as a de facto jobs program as well. Despite worries about mass joblessness brought on by technological advancement—which seems to underlie Silicon Valley’s enthusiasm for the UBI—there’s no evidence it’s actually happening. The future could always bring something new. But for the moment, America’s persistent wage stagnation, rising inequality, job insecurity, and low labor force participation all have a far more banal explanation: Economic policy has failed for decades to generate enough aggregate demand (i.e. consumer spending), which is the raw fuel for more jobs and really tight labor markets.

And a national UBI would be an excellent way to pump hundreds of billions in additional aggregate demand into the economy. Whether the policy could deliver full employment ultimately depends on other factors, like taxation and Federal Reserve policy. (A job guarantee’s effect is cleaner and more surefire in this respect.) But it’s a live possibility. Since much of that money would go to outlying suburbs, small towns, and rural areas, a national UBI could help reverse the geographic inequity of where jobs and wages currently grow, and where they don’t. By giving each individual more breathing room to take less work, a UBI could also spread access to work more broadly.

Stockton, of course, is not running a full UBI, so it won’t be a decisive demonstration of the macroeconomic effects. But $600,000 in a year would be 2.3 percent of the annual economic activity in the Stockton-Lodi area. That’s hardly peanuts: An equivalent stimulus to the national economy would be $425 billion in a year. And if the city can find enough additional donations beyond the Economic Security Project’s contribution, Stockton will get that annual shot in the arm for three consecutive years. Researchers would be wise to pay attention to the experiment’s effects on consumer spending and the supply of jobs in the Stockton area.

As for those more individual and sociological questions about a UBI’s effect, in many cases we already have answers.

Vox’s Dylan Matthews has diligently documented recent pilot programs of various designs, focusing on small populations in Canada, Finland, Kenya, and elsewhere. The tech startup Y Combinator is planning another UBI pilot in nearby Oakland, California. The United States has also seen several natural experiments, such as Alaska’s Permanent Fund, and even some official government test runs in the 1970s. (That decade, the federal government actually flirted with passing a UBI.)

The results are remarkably positive: There is little noticeable effect on the amount people work, and when work does drop, it’s because people are choosing to care for children, go to school, or hold out longer for a better job with a better wage. Health and life outcomes improve for children in families receiving the checks. People invest in all sorts of useful endeavors, from business supplies to schooling to housing.

For Tubbs, it was this very research, and his confidence Stockton could replicate the results, that inspired his decision to take on the UBI experiment. (There’s also the relative bureaucratic simplicity of sending people checks, versus organizing a massive work program.) It sounds like he wants to take an individual, narrative-based approach to sharing Stockton’s results. “It’s one thing to read about outcomes,” he said. “It’s another thing to meet and see the person, and see that they did good things with the dollars.”

“I want to be able to amplify and lift up stories of the incredibly brilliant and resilient people in the city of Stockton,” he continued. “Whether it’s the mom who’s able to go back to work because she can afford child care, or the student who’s able to stay in school, or someone who’s a caregiver and able to spend time with their family, or someone who’s an entrepreneur with an idea.”

In this sense, these pilot programs don’t just defend the utopian ambition of a universal basic income. They defend programs like traditional welfare before the 1990s “reform,” or housing vouchers, or even proposals for a universal child allowance. They defend no-strings cash transfers of any sort; and really, the whole idea of a robust and generous social safety net.

According to Tubbs, there’s plenty of enthusiasm for the idea out there: “We get postcards every day from people throughout the nation who are excited, and a lot of people locally.” Despite the research, though, fears that a UBI will tempt people into self-destructive idleness still loom large among commentators, journalists, and other observers; “People feeling that if they received the money, they would do good things. But some unknown other wouldn’t,” as Tubbs put it.

Perhaps the ultimate point of Tubbs’ experiment is to prove that, no, everyone else really is just like you.

READ MORE ABOUT CALIFORNIAINEQUALITYUNIVERSAL BASIC INCOME

JEFF SPROSS is the economics and business correspondent for The Week, and previously worked as a climate and economics reporter for ThinkProgress.

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