Chicago just approved one of the US’s largest basic-income pilots: $500 monthly payments for 5,000 people

Chicago worker
Marquisha Byrd makes face shields for frontline responders at Dimo’s Pizza in Chicago, April 16, 2020. Kamil Krzaczynski/AFP/Getty Images

Chicago just became the latest city to offer residents monthly cash payments, no strings attached.

The city council voted Wednesday to approve one of the largest basic-income programs in US history – a pilot that will give 5,000 low-income households $US500 ($AU664) per month for one year. Participants will be chosen at random, but individuals must earn less than $US35,000 ($AU46,501) per year to qualify.

The council authorized nearly $US32 ($AU43) million for the pilot as part of the city’s 2022 budget. The program’s funding comes from $US2 ($AU3) billion in COVID-19 relief dollars allocated to Chicago through the Biden administration’s American Rescue Plan.

The pilot specifically aims to relieve financial burdens on families hard-hit by COVID-19. Hundreds of thousands of Chicago residents lost their jobs during the first six months of the pandemic, and around 18% of Chicago residents live below the federal poverty line.

“Growing up, I knew what it felt like to live check to check,” Chicago Mayor Lori Lightfoot wrote earlier this month on Twitter. “When you’re in need, every bit of income helps.”

Several other Democratic mayors similarly see cash stipends as a promising way to address poverty in their cities. More than 50 have joined the coalition Mayors for a Guaranteed Income, the members of which all pledge to start basic-income pilots in their cities. The founder of that coalition is the former mayor Stockton, California, Michael Tubbs. He launched one of the US’s first guaranteed-income pilots in 2019, a program that gave 125 residents $US500 ($AU664) per month for two years.

Other cities have followed his lead. Saint Paul, Minnesota, approved a basic-income pilot last year, in which 150 low-income families get $US500 ($AU664) a month for up to 18 months. Oakland, California, is now accepting applications for its basic-income pilot, which gives $US500 ($AU664) monthly payments to 600 low-income families for 18 months. In Compton, California, 800 residents are already receiving a guaranteed income of $US300 ($AU399) to $US600 ($AU797) a month for two years. And Richmond, Virginia, is distributing $US500 ($AU664) per month to 18 working families.

Critics worry that basic income can’t address large-scale poverty

Chicago thanksgiving
People wait in line to receive a free turkey ahead of Thanksgiving in Chicago, November 23, 2020. Kamil Krzaczynski/AFP/Getty Images

Critics of basic income argue that free stipends would reduce the incentive for people to find jobs or encourage them to make frivolous purchases. Several studies, however, have suggested that cash benefits don’t keep people from entering the workforce.

After Stockton’s program ended in January, researchers found that it reduced unemployment and increased full-time employment among participants. Stipend recipients also reported improvements in their emotional wellbeing and decreases in anxiety or depression. Most of them spent their money on basic necessities like food and merchandise, including trips to Walmart or dollar stores.

Chicago Alderman Gilbert Villegas told The Washington Post that his city’s pilot will monitor how participants spend their stipends for the first six months. Depending on the results, the city may direct the stipends toward specific uses, such as covering heating bills or food.

Still, some members of the Chicago City Council were hesitant to back the program. Members of the Chicago Aldermanic Black Caucus argued that the money could be better spent on violence prevention or a reparations program. Alderman Nick Sposato, meanwhile, told Politico earlier this month that basic income is “a socialist idea that doesn’t consider the mainstream.”

Critics of basic income also sometimes point to the mixed results seen in larger-scale attempts at cash-transfer programs. A 2018 report found that the Alaska Permanent Fund, which has been distributing cash to state residents since 1982, increased part-time work by 17%. But the cash transfers had no effect on overall employment numbers (the share of people who had jobs).

Finland’s basic-income trial, meanwhile, also found that employment rates between stipend recipients and those in the control group were about even. But the results of that program, conducted from January 2017 to December 2018, were complicated by the fact that participants had to give up part of their standard conditional benefits – things like housing allowances and illness compensation – to receive the monthly stipends.

Proponents of basic income still think it has the potential to reduce poverty on a national level.

“I am so proud of all the pilots, but I’m ready for policy,” Michael Tubbs told Insider in March. “I’ve got all the evidence I need.”