Monday 8 March 2021
COVID has accelerated a number of changes in our society – the rise of online retail, working remotely, adoption of cloud computing. One other change it may have accelerated is universal basic income. Government’s around the world have shielded people from economic shutdowns with direct cash transfers (think Job Keeper and Job Seeker in Australia). For advocates of universal basic income, this gives them a powerful data set to study as they advocate for the benefits of direct cash transfers beyond COVID.
At the same time, a number of cities and states around the world are running universal basic income experiments. One such study, in the city of Stockton in California, has yielded some interesting results.
The design of the study was to send $500 a month to 125 randomly selected individuals living in neighbourhoods with average incomes lower than $46,000 per year. This was a true ‘no strings attached’ UBI trial – the participants were able to send the money however they saw fit, with no drug tests, interviews, means or asset tests, or work requirements.
The conclusions of the study are telling. The families receiving the money tended to spend the money on essentials (less than 1% of the money went to cigarettes and alcohol), the money doubled the household’s capacity to pay unexpected bills, allowed recipients to pay down debt and to support friends and family, improving financial stability in the broader community.
Most importantly, this guaranteed income did not dissuade participants from working. In this study, the share of participants with a full time job rose 12 percentage points, compared to 5 percentage points in the control group. The study’s authors suggest that this money created capacity for goal setting, risk taking and personal investment. (It also just makes logical sense – if you’re working two jobs to stay above the poverty line you don’t have a lot of time to search for better opportunities, let alone take an afternoon off every time you get a job interview).
This finding can be added to the large (and growing) body of evidence that show direct cash benefits do not dramatically shrink the labour force and in some cases help people find work by giving them the stability they need to find and take a new job.
Recipients mental health improved, and were happier, healthier and less anxious than their counterparts in the control group. Michael Tubbs, a former mayor of Stockton, summed it up as, “cash is a better way to cure some forms of depression and anxiety than Prozac”.
Such a big change is still a long way off from being rolled out in any country nationally. Yet, as more and more of these studies are added to the growing body of evidence about the net-benefit of UBI, these debates will be front and centre in the coming years.