Is Stockton’s Basic Income Scheme Actually Working?

Is Stockton’s Basic Income Scheme Actually Working?

Proponents of Stockton’s universal basic income (UBI) pilot project – known as the Stockton Economic Empowerment Demonstration, or SEED – released a report last week detailing its first year findings.

The report’s main claim is receiving UBI boosted full-time work.  In February 2019, 28 percent of recipients had full-time employment, compared to 40 percent one year later.

Former Mayor Michael Tubbs, who lost re-election in November to Republican Kevin Lincoln, returned to the national media spotlight to herald the news.

“Let’s scream that from the mountaintops,” Tubbs told MSNBC last week.  “The $500 allowed people to be entrepreneurial and bet on themselves.”

“I don’t want to have a single argument again about people not wanting to work (under UBI),” he declared.

If something sounds too good to be true, it probably is.

In talking with PRI’s Wayne Winegarden about the study, he flagged several flaws with the report that should be scrutinized.

He notes the assessment may accurately summarize what happened between Feb. 2019 and Feb. 2020, but it provides no information about the value of a universal basic income. There is no evidence that the population receiving the UBI and the control group are representative samples of a targeted population, nor does it control for the many other changes that may have happened.

The report may also underestimate changes in behavior in UBI recipients.  For example, does knowing that you are special and receiving a government check that your neighbor is ineligible to receive change behaviors for both the sample and control groups? The authors also fail to provide a feasible economic explanation for why the UBI will increase people’s success at finding a job.

The SEED report also details how participants spent program funds, noting that “less than 1 percent of tracked purchases were for tobacco and alcohol.”   However, this figure could be low as 40 percent of money on the prepaid debit cards were transferred to bank accounts or withdrawn as cash.

The report tracks spending of the $500 per month that were paid for using the debit card.  It doesn’t account for how the money affects total household spending.  You might spend your $500 UBI money buying food or paying some bills, but that may free up other money for tobacco, alcohol, or other purchases that you otherwise might not be able to afford.

Winegarden concludes that there are many other flaws to this report, making any conclusions about the efficacy (or inefficacy) of an UBI impossible to draw.

SEED proponents say their goal is to understand “how guaranteed income may promote individual freedom and agency.”

Yet, they also declare that “unconditional cash must supplement, rather than replace, the existing social safety net.”

Their agenda is basic income plus “additional policies to implement alongside a guaranteed income,” including predatory lending laws, addressing “exorbitant fines and fees” from the criminal justice system, paid family leave, universal childcare, rental assistance, and ensuring that “labor is fairly compensated through a higher minimum wage.”

Adopting this agenda – in addition to UBI – would have an incredibly negative impact on entrepreneurial investment and job opportunities in Stockton and other economically-disadvantaged cities.  Consider:

  • As Rowena Itchon recently wrote, President Biden’s $15 minimum wage proposal is estimated to eliminate 1.4 million jobs nationwide by 2025 if implemented.
  • One employment law specialist termed California’s new family leave law, which affects businesses as small as 5 employees, “another example of something that’s well-meaning but may be a significant impact on employers.”
  • A proposed state “Master Plan for Early Learning Care,” including free preschool, paid family leave, and expanded child care payments, would cost between $2 billion and $12 billion.

Don’t forget that the Stockton pilot program is funded privately.  Its expansion to citywide or statewide would be incredibly expensive.  An expanded program would surely be paid for by public funds, increasing pressure for new taxes, as no private entity could cover the costs for an entire city or state.

In his PRI book Punting Poverty, Damon Dunn writes that, “the path to freedom is not accepting the limits of government handouts. The path to freedom is developing marketable skills and seizing opportunities.  This is a formula that can be repeated by anyone and at any time if government focuses its efforts, not on handouts that make economic suffering tolerable, but truly equips people to thrive and prosper.”

The bottom line – regardless of what their so-called study proclaimed, the SEED program is the embodiment of what Dunn calls, “fool’s gold that does not even attempt to offer economic empowerment.”

But by implementing the type of negative income tax proposal that Milton Friedman discussed, or making payments to the poor whose incomes are below a certain threshold in lieu of traditional welfare programs, we could better help those living in economically-disadvantaged communities like Stockton.

They would be able to better provide for their and their family’s basic needs, while also empowering them economically by letting them afford a good college education or technical certification to get a well-paying job or start a business.

More on how such a program would work and more effectively lift people out of poverty in Stockton to come soon in a future Right by the Bay post.

Tim Anaya is the Pacific Research Institute’s senior director of communications and the Sacramento office.

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Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.