Free-money experiment in California pays off

The former mayor of Stockton, California, said people thought it "was a joke": Give 125 randomly selected residents $500 a month for two years with no strings attached and no work requirements.

Now, one year later, researchers say the "joke" is working. The guaranteed income program allowed families to gain financial stability and additional flexibility to cover emergency expenses, according to a report released Wednesday by researchers. The yearlong study of the Stockton Economic Empowerment Demonstration program was presented during a digital news conference.

Those who received the money were twice as likely to gain full-time jobs than others, pay off debt, and report lower rates of anxiety and depression, according to data analysis by independent researchers Stacia West of the University of Tennessee and Amy Castro Baker of the University of Pennsylvania.

They reviewed data from the first year of the project, which didn't overlap with the pandemic. A second study looking at year two is scheduled to be released next year.

Launched in February 2019, the 125 people were at or below the city's median household income of $46,033. The program was financed by private donations, including from Facebook co-founder Chris Hughes.

The $500 stipends were disbursed via prepaid debit cards so researchers could track merchant category codes and register in what type of stores or products participants were spending their money.

From the participating group, people spent the money on basic needs — 37 percent on food, 22 percent on home goods and merchandise, 11 percent on utilities, 10 percent on auto costs and less than 1 percent on alcohol and/or tobacco.

The project announced by Mayor Michael Tubbs in 2017, the first black mayor of the Northern California city of about 290,000 people, was at the time the highest-profile experiment in the US of a universal basic income, where everyone gets a guaranteed amount per month for free.

The idea became a major part of Andrew Yang's 2020 campaign for president. He proposed what he called the "Freedom Dividend": $1,000 a month for every single American adult. In January, Yang announced he is running for mayor of New York City and said if he wins, he will give $2,000 a year to half a million New Yorkers in extreme poverty. Participants would receive the cash through monthly transfers to a bank account opened in their name at a newly created "People's Bank".

When Tubbs announced the project, critics argued free money would eliminate the incentive to work, creating people dependent on the state.

When the program started in February 2019, 28 percent of the people slated to get the free money had full-time jobs. One year later, 40 percent of those people had full-time jobs. A control group of people who didn't get the money saw a 5 percentage-point increase in full-time employment over that same time period.

Researchers found the people who got the money reported lower incidences of anxiety and depressive symptoms when compared to those who didn't get the money.

Tubbs, who lost his reelection bid as Stockton's mayor in November, said his goal is to convince state and federal lawmakers to implement guaranteed income programs on a larger scale.

Last year, Tubbs founded and launched an initiative called Mayors for a Guaranteed Income, an effort to send monthly assistance checks to some residents of cities to see if concepts such as universal basic income can help them weather the current economic downturn. The program received a $15 million donation in December from Twitter CEO Jack Dorsey.

Twenty-six cities' mayors have signed onto the campaign. Pilot programs are already operational in Compton, California, which is funding 800 residents at varying amounts for the next two years, and St. Paul, Minnesota, which is providing $500 each month to 150 low-income families for up to 18 months.

Agencies contributed to this story.