What Might $500 Do?
Lessons from Stockton, California Part 1
Those of you who have been reading my blog know that I’ve been calling for a new social contract, one that puts more people on a lifelong pathway to success, aimed at realizing as a country population-level change and reduced disparities from healthy birth, to quality education, to a well-paying job, to secure and healthy aging. So I was heartened to read these words, highlighted in a box, as part of the executive summary of Our Vision for SEED: In sum, we believe that SEED provides an opportunity to imagine a more fair and inclusive social contract that provides dignity for all.
SEED is the Stockton Economic Empowerment Demonstration, a universal basic income (UBI)-like experiment in Stockton, California. In my recent conversation with Erin Coltrera, SEEDs research, and program officer, I asked her about the genesis of using the term social contract. Her answer turned my interest in the UBI concept up several notches.
I think one of the most important things SEED is looking at is what the social contract ultimately is, what it means to be part of society and interact, and what you can expect from society, both for yourself and for others, she explained. Erin offered a striking example to make her point.
One thing guaranteed income challenges is that are you entitled to help only if you are struggling so much that it is visible, that it is recognizable. The alternative way of looking at society [is to say] everyone is entitled to this help. Regardless of whether we think they need it, everyone gets it. That is something guaranteed income, universal basic income, is aimed directly at in terms of conversation. This is the antithesis of means-tested or group-based interventions where you have to be a member of a specific group or you have to make a certain amount or not make a certain amount, where you have to struggle in some way to be recognized and quantify on paper.
She summed up this way: I think one of the things SEED is challenging is what if simply by being a member of the society, you were entitled to that? I think that’s pretty radical.
It certainly is, and as I said to Erin, Something as radical as universal or guaranteed income seems like as good an idea as I’ve heard, for sure. How we execute on it, though, is complex for sure.
I first raised UBI in my June 17 post, where I characterized it as a potentially transformative approach that could help more people get on and stay on a lifelong pathway to success although I do not support the universal part of it. In my post after that, I gave that some further context namely, my growing realization that access to and continuation on that pathway is first and foremost about making sure people’s basic needs are met. That post began to set out what those needs are, to provoke a discussion. And it ended with a promise of more discussion of UBI to come.
In a nutshell, UBI is some set amount of money that would be distributed to every adult, perhaps with some modifications according to age, and could be used without conditions but, ostensibly, is meant to raise income levels to enable people to meet their needs more successfully. Of course, there are lots of variations, but that’s the basic premise.
I’m particularly impressed with how SEED has been set up as an experiment to answer key questions about the role UBI can play in a person’s daily life and to help create a national discourse.
Let’s start with Stockton, a city of about 325,000 people in the states Central Valley, some 80 miles east of Silicon Valley, where a lot of residents struggle mightily to meet their basic needs. The city’s overall poverty rate is about 22%, and for African Americans, it’s 35%. The annual median income is $46,000 in a state that has a median income of nearly $72,000!
SEED began in mid-February to distribute $500 every month on debit cards to some 125 residents with no strings attached, including no requirement to have or find a job and no requirement for sobriety (drugs or alcohol). The experiment will go on for 18 months.
What so fascinates me about the Stockton experiment is that while it gets lumped in with UBI, it’s actually something different or perhaps more is a better word. Erin describes it as a pretty novel guaranteed income experiment.
First off, I like that change in terminology to a guaranteed income. As Erin explains, UBI is generally referred to as hitting a level that meets all of an individual’s basic needs, but SEED recognizes that 500 dollars aren’t enough for that. The experiment, then, is to see whether $500 can impact income volatility.
Erin identified several publications that underpin the $500 figure, including a 2017 study by the Roosevelt Institute that discusses the overall economic benefits of a hypothetical monthly cash transfer of that amount, as well as Facebook co-founder Chris Hughes 2018 book Fair Shot, on income inequality. A 2018 report by the Federal Reserve that came out after SEED settled on that amount provided additional evidence; it cited the staggering number of adults in America who are financially vulnerable and would have difficulty handling an emergency expense as small as $400.
As Erin put it, SEED wants to contribute to the discourse around several key questions: What would it be like if you could come up with that money? What would it be like if you didn’t have to worry just that much more? How does that change people’s lives, or not?
Then there is the fact that this is a serious, scientific experiment randomized controlled trial that is measuring a cohort of recipients against a known cohort of people who are not receiving the SEED money but have agreed to participate. All the data are coming from a representative sample of people from Stockton neighborhoods at or below the city’s median income level. SEED can track in real-time how recipients use the money that is reloaded each month on debit cards. A full report with data and analysis will be released when the experiment concludes in July 2020.
Some stories of recipients have begun to emerge. Annie Lowrey wrote in The Atlantic about two who show the different kinds of impact SEED is having. One is to help meet basic needs: a recipient’s husband had a stroke and lost his job income the couple was having to get by on a combined $1,094.00 monthly in combined state and federal disability payments. They were falling below the poverty line, but with the $500 from SEED they were able to cover their bills and even make a plan for her to become his caregiver.
The other story is about advancing along the pathway: a father using the SEED money to pay for summer tutoring for his children. He’s also planning to get another degree and create investments that would spin off passive income for the family The extra $500 has made more family time available since he’s been able to give up gigs he had taken to keep bills paid. Now he gets to read bedtime stories [and] find out what the kids did at school what he calls the really important stuff.
There’s so much more to the Stockton story; I’ll be discussing it further in my next blog post. One of the really impressive aspects Ill describe is how SEED has handled the issue of recipients who are already receiving other government benefits. I’ll also take up more about some of the key arguments against UBI and how SEED is addressing them.
Annie Lowrey’s full article in The Atlantic article, The City That’s Giving People Money