Universal Basic Income Works, According to This California Program

Photo of a young boy being homeschooled by his mother in his bedroom.
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A universal basic income is a payment sent by the government to ensure that everyone has some minimal financial support. It has gone under different names over the years, such as a negative income tax or a guaranteed annual wage. It is one of the theories behind the Earned Income Tax Credit.

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The Earned Income Tax Credit has strings attached, namely that recipients have jobs and children. In a world with increased income inequality, many have wondered if a universal basic income with no strings could make a difference.

The city of Stockton, California did an experiment, and Business Insider reports that it was successful. For two years, beginning in February 2019, 125 residents received $500 loaded on a debit card. The Stockton Economic Empowerment Demonstration had the primary goal of improving the quality of life for recipients. The secondary goal was to see if giving people cash made it easier for them to improve their lives for the long-term.

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Most of the spending went to food, general merchandise or utilities. Recipients were allowed to spend their cards on alcohol or tobacco, but only 1% of transactions were in these categories. With the additional funds, they could cover emergencies, pay down debt, cover child care and stay home from work if they were sick.

The program ended in January. The unemployment rate in the recipient group fell from 12% to 8%, while it increased from 14% to 15% in the control group. The study’s designers suspect that the recipients were more able to get and keep jobs because they had less anxiety and depression as well as greater resources to deal with unexpected setbacks.

Expect to see the experiment tried in other places and possibly expanded nationally if the trends are repeated.

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About the Author

Ann Logue is a writer specializing in business and finance. Her most recent book is The Complete Idiot’s Guide: Options Trading (Alpha 2016). She lives in Chicago.
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