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Is universal income closer to reality? Cities from Stockton to St. Paul are already testing monthly checks for residents

Is universal income closer to reality? Cities from Stockton to St. Paul are already testing monthly checks for residents

FINANCIAL NEWS

Is universal income closer to reality? Cities from Stockton to St. Paul are already testing monthly checks for residents

Despite working two jobs, Lorrine Paradela, 46, of Stockton, California, endured unrelenting stress over whether she could pay her bills every month.“Sometimes you get child support, sometimes you don’t,” says Paradela, who lives with her 17-year-old son and 11-year-old daughter and doesn’t qualify for public assistance. “My mind kept going all the time. It wouldn’t stop. I didn’t sleep right.”In early 2019, she began receiving $500 a month as part of a Stockton pilot program that gave a similar amount to 125 residents for two years. She used the money to pay bills, buy her kids gifts, fix her 2003 Chevy Trailblazer and ultimately buy a 2015 Honda Accord that allowed her to keep working.“I was able to breathe better,” she says. “I was able to sleep.”Andrew Yang’s call for a universal basic income – handing every American adult $1,000 a month — was deemed a fanciful curiosity when he made the idea the linchpin of his 2020 Democratic presidential run.Yet his vision is playing out in a growing number of cities, such as Stockton, that are conducting “guaranteed income” pilot programs, giving groups of mostly lower-income residents a few hundred dollars to $1,000 monthly with no strings attached for up to two years. It’s also taking shape in Congress through a variety of proposed tax credits or allowances.The movement, started by Stockton, has gained currency amid the economic carnage wrought by the COVID-19 pandemic, which has left 10 million Americans unemployed despite a solid jobs recovery, and heightened awareness of racial inequities following the death of George Floyd in police custody.“I think COVID made it more urgent and more politically feasible,” says Jonathan Morduch, an economist and professor of public policy at New York University who helped design a pilot in Compton, California.Guaranteed income has become more critical in the longer-term as the nation’s gig economy spawns a growing population of freelance and contract workers who don’t receive benefits and whose income fluctuates from week to week, Morduch says.Proponents say the initiatives provide households financial stability during sharp economic swings, alleviate stress and broaden recipients’ horizons. They also come without the scrutiny and work requirements of programs such as welfare and food stamps.“The social safety net is frayed,” says Halah Ahmad, vice president of the Jain Family Institute, which helps design guaranteed income programs and researches their effects. “It’s not meeting people’s needs and people are falling through the cracks.” Ultimately, she says, those failings exact a huge cost on society.Guaranteed income supporters say it can fill the gap for people who don’t qualify for public assistance because they earn too much. It also serves as a supplement for those who do meet the requirements for assistance, because many of those individuals are barely scraping by.   Critics say the current social safety net is the proper remedy for poverty, which afflicts 10.5% of Americans. Guaranteed income, they say, offers a disincentive to work and, since there are no strings attached, opens the door to misuse of the money for drugs or alcohol.“If there’s a crack (in existing programs) we can fill the crack without giving away free money,” says Jon Coupal, head of the Howard Jarvis Taxpayers Association.Findings from the Stockton trial, released Wednesday, appear to bolster the case for guaranteed income.The $500 monthly stipend allowed more participants to find jobs, reduced income volatility, eased stress, and helped them pay unexpected expenses and meet basic needs. Less than 1% of the money was spent on alcohol or tobacco, according to the results of the two-year pilot, which ended in January.About a half-dozen cities such as Compton; St. Paul, Minnesota; and Richmond, Virginia recently launched guaranteed income pilots while a similar number – including Oakland, California; Pittsburgh and Patterson, New Jersey – are planning trials this year.  Los Angeles, Atlanta and Newark, New Jersey are among more than 25 other cities that are seriously weighing programs as part of a coalition called Mayors for a Guaranteed Income. The initiatives are funded by private donations or a mix of private and public dollars.Leaders of the efforts say the goal is a national guaranteed income for low- and even middle-income Americans that would be funded by the federal government, which has the finances and infrastructure to dole out monthly payments.The stimulus checks sent to most Americans as part of COVID relief packages paved the way for a broader public acceptance of unconditional government money, Ahmad of the Jain Family Institute says. Their drawback, some Democratic lawmakers say, is that they’re one-time windfalls even as many households continue to suffer from COVID-induced unemployment or reduced hours.Proposals in Congress would provide some form of recurring guaranteed income that does away with work mandates, which can pose an undue burden when parents are taking care of kids or sick relatives, supporters say. The $1.9 trillion stimulus, passed by the House late last week, increases the child tax credit from $2,000 to up to $3,600 for a year, but Democrats will likely seek to make the change permanent. Even Americans with little or no income can get a refund, and the credit can also be drawn in monthly installments of $250 to $300.Bills by Rep. Rashida Tlaib and Vice President Kamala Harris would give tax credits of $3,000 yearly to individuals and $6,000 to married couples even if they don’t have children and aren’t working. The Harris proposal would cost about $3 trillion over a decade. Sen. Mitt Romney, R-Utah, wants to provide a $3,000 to $4,200 yearly per-child benefit, even for stay-at-home parents, offsetting the cost by scrapping other programs and tax deductions.Matt Weidinger, a research fellow in poverty studies at the conservative American Enterprise Institute, says the proposals largely reverse 1990s-era welfare reform that imposed work requirements on recipients and shrank welfare rolls.“It’s paying people a check to not be working,” says Weidinger, who worked on the reform for a Republican-controlled House committee.That may be just the ticket to a more just society, argues Stephen Nunez, lead researcher on guaranteed income for the Jain institute. Estimates show the Romney bill, for example, would cost $230 billion but cut child poverty by a third, generating $267 billion to $367 billion in benefits, Nunez says.Paine, MLK sought guaranteed incomeGuaranteed income, or universal basic income, isn’t new.  Philosopher Thomas Paine called for a basic income in the U.S. in the late 1770s. Martin Luther King Jr. backed the idea to wipe out poverty in the 1960s. Negative income tax trials were conducted in places like Seattle and New Jersey starting in the 1960s. And in recent years, countries such as Iran, Kenya and Finland have rolled out basic-income programs.Former Stockton Mayor Michael Tubbs says he was inspired by King to launch his city’s pilot to address its 22% poverty rate.“It makes so much sense that if the issue is cash, the solution is cash, not legislating how to use the cash,” as do federal programs such as food stamps, he says.Many households that receive public aid have no leeway for unexpected expenses, like a car repair, a rent increase or making up for a late COVID unemployment check, Morduch and Ahmad say.’People should be trusted’Even more critical, Morduch says, is that guaranteed income accepts that “people should be trusted to use the money efficiently and be smart and thoughtful,” adding they know how best to meet their needs.By contrast, Ahmad says, public assistance programs are rooted in distrust and racism that have hurt Black Americans, in particular. Doling out the money unconditionally relieves stress and affords recipients the money and time to forge a better life, seek higher-paying jobs or train for a new career, Morduch says.Nunez says studies show guaranteed income recipients work less but just modestly so and the additional time is typically spent with their families. And, he says, there’s no evidence they spend the money on drugs or alcohol.In the Stockton trial, 37% of the funds were spent on basic needs such as food; 22% on merchandise such as clothing and home goods; and 11% on utilities.A year into the trial, 40% of the participants were employed full-time, up from 28% when the trial started. And more than half were able to pay for unexpected expenses with cash or cash equivalents, up from 25% a year earlier.Before she got her stipend, Paradela, the Stockton participant, says she sometimes paid only part of her bills to leave more cash for food, and occasionally sought payday loans. After she received the money, she bought her son video games and paid for both her children to visit their uncle in Seattle.And if she got sick, Paradela, who works full-time with autistic adults and delivers food part-time, says the money allowed her to take time off. Paradela says she has applied for subsidized housing but was turned down because her $33,000 salary exceeded the $28,000 cap. With the Stockton program, “You don’t have no one looking over your shoulder and into your personal business. You do what you need to do.”She now plans to earn a bachelor’s degree in business so she can help her brother run a home for the disabled.Since Stockton residents simply had to live in neighborhoods whose median income was below the city’s median to qualify, some middle-income residents with salaries as high as $80,000 took part, Tubbs says. Middle-class families are also struggling to pay bills, he says, especially in pricey cities like San Francisco, and should be included in guaranteed income initiatives.That makes the pilot look a bit more like Yang’s universal basic income idea. Morduch, however, believes programs should be geared to lower-income people, with more affluent families paying higher taxes to fund them.’One emergency away’In December, Compton, which has a 20% poverty rate, launched the nation’s largest guaranteed income pilot, giving 800 residents varying amounts of money. Ex-offenders and undocumented immigrants were eligible. “Like most Americans, my family was only one emergency away from financial disaster, and, now, I am working to ensure this is no longer the case,” says Compton Mayor Aja Brown. The money, she says, also lets participants “take more risks, tailor government assistance to their needs, and ultimately accumulate wealth.”Georgia Horton, a Compton resident who was formerly incarcerated, couldn’t find a job when she left prison but then began speaking to groups about her experiences for hefty fees. The pandemic temporarily squashed her budding career, leaving her struggling to pay bills. The $3,000 annual payment she received from the city a month ago has allowed her to buy materials for her new cleaning business as well as a laptop so she could revive her speaking tours online.“It puts you out of the panic mode so you can start making decisions,” Horton says.Some programs target certain demographic groups. In Jackson, Mississippi, Springboard to Opportunities, a nonprofit, has provided 130 Black mothers $1,000 a month in two trials since 2018, with a third set to begin. “Those who have been harmed the most (by discrimination) are Black mothers,” says Springboard CEO Aisha Nyandoro.During the first round, the number of participants with a high school equivalency education rose from 63% to 85%. And some participants have moved out of subsidized housing.“If (public assistance) isn’t working, why not try something different?” Nyandoro asks.


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