Politics & Government

California city is giving people $500 a month, no strings attached. Here’s how they’re spending it

New data released as part of Stockton’s closely watched universal basic income experiment offer a first glimpse into how an extra $500 a month affects the spending habits and quality of life for those receiving the no-strings-attached funds.

The 18-month study — the first of its kind led by a U.S. city — aims to see whether a guaranteed income can reduce stress and, in turn, unlock new opportunities for people struggling to make ends meet. Tracking and analyzing the spending habits of the 125 individuals currently receiving the stipends in the California city, the program will also provide greater insight into the viability of long-term basic income models more broadly in the United States.

In Stockton, a city once known as “America’s foreclosure capital” where one in four residents currently live below the poverty line, the Stockton Economic Empowerment Demonstration, or SEED, is a kind of safety net that can empower residents financially, said Mayor Michael Tubbs. For people scraping by to pay rent or put food on the table, “something as small as $500 has been enough to allow them to breathe,” he said.

“There’s an ethos of pulling yourself up by the bootstraps,” Tubbs said. “Well, we’re providing the floor to put their feet on to put the boots on, and the cash to buy the boots.”

Nearly half of the recipients reported they’re just managing to get by financially, and one in five said they are going into debt to take care of themselves and their family, according to the newly released SEED data.

The recipients — full-time workers, stay-at-home caretakers, disabled individuals, students — overwhelmingly use the money to feed, clothe and house themselves. The median monthly income among the participants is $1,800, compared to the median household monthly income in the city of about $3,500.

“We heard a lot about, ‘Can $500 even make a difference in California?’” said Stacia Martin-West, an assistant professor at the University of Tennessee who is one of the study’s lead researchers. “When we know the median household is making $1,800 a month, we can see there’s a 30 percent increase in income.”

Who’s getting money? What are they buying?

The data are averaged from monthly purchases between February, when the program began, through the end of July, said Amy Castro Baker, an assistant professor at the University of Pennsylvania who is also helping lead the study.

About 43 percent of participants are working full- or part-time, according to Baker. Additionally, 20 percent have a disability that interferes with their ability to work, 11 percent are looking for work, 11 percent work as caretakers for aging parents or young children, 8 percent have retired and 5 percent are students.

Only about 2 percent are not looking for work, busting the myth that anyone who receives free money will stop working or “aren’t deserving” of the funds, Tubbs said.

“The story line of giving people cash is ... are they going to be rational with that?” Baker added.

The answer, based on initial results, is yes, she said: For spending, about 38 percent of purchases each month go toward food, and 25 percent on sales and merchandise such as clothing, home goods and items from discount stores such as Walmart.

Gas, electric and telecommunication bill payments make up the third largest spending category, about 11 percent. Less than 1 percent of total money tracked has been spent at alcohol or tobacco retailers, according to SEED spokeswoman Amanda Blanton.

“These folks are just like you and me,” Tubbs said. “There’s nothing crazy about their choices.”

About 47 percent of recipients are white, 28 percent are African American, 13 percent are Asian and 12 percent identified as other. About 37 percent also identified as Hispanic.

SEED will continue to release data on how participants are spending their money on an online dashboard, which will go live Saturday at www.stocktondemonstration.org/dashboard.

Universal basic income programs nationwide

Guaranteed or universal basic income programs to address wealth inequality and complement existing safety net systems in the United States have become an increasingly popular policy idea.

California Sen. Kamala Harris and Michigan Congresswoman Rashida Tlaib have both recently proposed bills offering tax credits for working and middle class individuals and families that could be accessed as a monthly check.

Democratic presidential candidate Andrew Yang has focused his campaign on a universal basic income proposal he calls a “Freedom Dividend.” And cities such as Chicago and Newark, New Jersey, have begun exploring the possibility of starting similar pilot programs.

“We’re in a space where we’re just trying to figure out what is the most ethical, humane way that we can implement a new way of looking at the social contract and economic justice,” Martin-West said.

Who’s paying for this?

The Stockton program is partially paid for by a $1 million grant from the Economic Security Project, an organization that has raised millions to fund and explore universal basic income programs. Another $2 million comes from foundations and individual donors, according to ESP spokeswoman Saadia McConville. The city of Stockton is not financing the program, Tubbs said.

The program will run through July 2020.

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Alexandra Yoon-Hendricks covers Sacramento County and the cities and suburbs beyond the capital. She’s previously worked at The New York Times and NPR, and is a former Bee intern. She graduated from UC Berkeley, where she was the managing editor of The Daily Californian.
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Bryan Anderson is a political reporter for The Bee. He covers the California Legislature and reports on wildfires and transportation. He also hosts The Bee’s “California Nation” podcast.