Guaranteed Income Programs: An Old Idea that Gives New Hope
Universal Income programs became popular during Andrew Yang’s presidential campaign, who promised to give each American adult a “freedom dividend” of $1,000 a month. While interest in Yang’s presidential campaign ended early, the interest on guaranteed income program only grew, both, locally and nationally. These conversations promoting Guaranteed Income have been informed by the so-called robot apocalypse, which prophesizes that workers will be displaced into a Malthusian cycle of poverty. Others, in a similar vein, have argued for guaranteed income programs as a way to slow-down raising income inequality and enhanced poverty.
Guaranteed Basic Income is not a new idea: as early as in the XVIII Century an unconditional basic income program was established in the village of Speenhamland, England that gave every family a large enough transfer to subsist regardless of whether they worked or not. Since then, both politicians and economists on the left and on the right have argued for different experiments that promote a basic income transfer among the most vulnerable. In fact, even Richard Nixon in 1973 proposed the “Family Assistance Plan”, that offered the poorest households in America a cash transfer of $1,600 annually plus food stamps.
It is worth defining what a Guaranteed Income (GI) program is, and how is this different to Universal Guaranteed Basic Income. “Universal” refers to transfers that do not focus on one group, but rather are paid to the whole population. “Guaranteed” meaqns that they are unconditional, with no-strings attached. “Basic” refers that the income is large enough to satisfy basic needs. Thus, as Hilary Hoynes and Jesse Rothstein argue, a national Universal Guaranteed Basic Income is expensive, and would be even more expensive than our current safety net system including expenses in health and social security. From a policy perspective it makes more sense to talk about Guaranteed Income: No strings, unconditional transfers that are directed to vulnerable populations.
Perhaps the most high-profile GI program in the United States so far is Stockton’s Economic Empowerment Demonstration pilot. This program gave $500 a month to 250 households for two years. The evaluation of this program suggests that programs targeted at vulnerable households are an effective means to reduce poverty. The SEED program resulted in lower month-to-month income volatility, a higher opportunity of finding full-time employment, and better health and emotional outcomes for those who received the guaranteed income.
In fact, the group Mayors for a Guaranteed Income point out that there are currently at least nine different Guaranteed Income programs in California, and there is great interest in developing many more. These programs are different in their scope, their size, and their population of interest. For example, the city of West Hollywood has developed a proposal to give 25 LGBTQIA youth a no-strings payment of $1,000 dollars a month for 18 months. The city of Alameda and Community Works have received seed funding to pay $500 dollars a month for 12 months, to individuals reentering the community post-incarceration. Another program, and the largest in the US until now, is Los Angeles’ BIG:LEAP that will pay 2,947 single parent households in Los Angeles $1,000 dollars a month for one year. Yet, until now these programs have been geographically concentrated in their scope and restricted in their population of interest.
Thankfully, a more important and ambitious program is in the horizon. The state legislature recently approved the “California Guaranteed Income Pilot Program.” This program allocates $35 million to counties and cities who pilot guaranteed income programs for the most vulnerable Californians. This pilots will prioritize youth who are aging out of the foster care system and pregnant women. I cannot underemphasize this: this is very encouraging news. Guaranteed Income (GI) programs have shown to alleviate poverty, to improve labor market outcomes, and to improve mental and physical welfare both in the United States and abroad.
Perhaps the most visible GI abroad was piloted in Finland, where two-thousand unemployed individuals received a monthly guaranteed income of €560. Some people have called the program a flop, mostly because comparing the probability of employment by the individuals in the program with a statistically equivalent control group of those not in the program yields small differences. Yet, what the program was successful at was decreasing levels of stress and anxiety among participants.
A different program was administered by the Canadian province of Ontario. This program, instead of supporting people who were unemployed, focused on giving 4,000 individuals a no-strings attached payment of roughly C$17,000 for individuals or C$24,000 for couples over three years. Regardless of employment status. Participants in this program reported higher levels of self-confidence and lower stress. Unfortunately, the program was ended early as it was deemed by the government as insufficient to end poverty.
But can we predict what a large-scale GI program look like? The most encouraging indirect evidence from unconditional GI transfers comes from the stimulus payments during the pandemic. In late December, 2020, during the height of the pandemic, one in eight American households reported to the Household Pulse Survey that they had experience some kind of food insufficiency, defined as not having enough food to eat during the last seven days. The introduction of the second stimulus payment reduced the proportion of food insecurity by more than fifty percent.
The Speenhamland experiment died after public figures such as David Ricardo and Thomas Malthus spoke against it. Nixon’s Family Assistance Plan died in congress among opposition of both Republicans and Democrats. Even the Stockton, the Finland, and the Ontario experiments ended early or were discontinued. Yet, good ideas are resilient and hard to forget. The recent interest on targeted Guaranteed Income programs rise hope that these ideas will finally get a fair chance and alleviate the vulnerabilities of those most in economic need.