Our story starts in 1795 in the English village of Speenhamland. Because the price of grain was rising, the local magistrates decided to give each man enough to buy 8 1/2 pounds of bread a week and 1 1/2 more for everyone else in his household. (If you had three children and a wife, you got a lot of bread.)
From there, we can leap to 1969 and Richard Nixon’s plan to give $1600 a year plus food stamps to families of four with no income. The Congress was not interested. More recently, we can go to Switzerland where, in 2016, voters rejected a similar idea while Finland and Canada have temporarily implemented it. But not the United States.
Stockton’s Universal Basic Income (UBI)
A nonprofit organization selected Stockton, California for its UBI experiment because almost one quarter of the city’s 315,000 residents live in poverty. From a neighborhood with a median income below $46,000, they selected 125 people and a control group of 200. The basic idea was to give each person a monthly debit card deposit of $500.
The $3 million project was funded by $1 million from one nonprofit and $2 million that other donors and organizations provided. Then, because of the pandemic, extra funding has extended the end date from this summer to the beginning of 2021. The start date was approximately 18 months ago.
Looking at the results, researchers have cited a practical and intangible impact. Food topped the list for spending and then items from stores selling clothing and home goods. After that, recipients paid for utilities, cars, doctors, and recreation. One girl got a prom dress. A woman who had a $1250 monthly rent bill and earned $2400 a month from two jobs said the guaranteed cash gave her peace of mind. People enjoyed more time with their children and better sleep.
Our Bottom Line: Redistribution
As economists, we can say that the universal basic income is redistribution. Whether it comes from a nonprofit private organization or from government, a guaranteed basic income transfers what one group has earned to others.
Though not a universal basic income, we have redistribution now through social spending programs that range from Social Security to food stamps. Below, the OECD (Organization for Economic Cooperation and Development) shows the percent of GDP that social spending represents in member countries. I’ve pointed the arrow at the U.S.:
Perhaps a UBI could replace all social spending?
My sources and more: For an update on the Stockton experiment, this CityLab article is a good place to start. From there, an NPR interview with Stockton’s mayor had more of the story as did the SF Chronicle. Then, for an overview of social spending, I suggest the OECD, However, if you want just one good read, do look at The New Yorker and then econtalk for an excellent podcast.