- The city of Stockton, California, is giving 125 residents monthly payments of $US500, no strings attached.
- The payments are part of a basic-income trial led by the city’s 29-year-old mayor, Michael Tubbs.
- One participant told Business Insider that the stipend helped pay for her medical expenses. She’s also saving up to visit her sister, who is ill.
- Visit Business Insider’s homepage for more stories.
Virginia has always been diligent about sorting her mail.
The 61-year-old resident of Stockton, California, who asked that her last name be kept private, told her husband not to throw any letters away while she was visiting her sister in Oregon last year. In the pile waiting when she returned, Virginia found a notice from the city inviting 125 residents to participate in a trial of basic income. The city was offering a monthly stipend of $US500 for 18 months.
“My husband said, ‘That sounds like something that’s too good to be true,'” Virginia told Business Insider. She called the city to set up a meeting.
“It was exciting and nerve-wracking,” she said. “I thought, geez, there’s no way I’ll get that $US500.”
Virginia has been participating in the program, officially known as the Stockton Economic Empowerment Demonstration, since February. It aims to test whether giving people an unconditional stipend – essentially paying them simply for being alive – could reduce the city’s poverty and inequality. Virginia will get $US500 a month through July.
She said the payments were easing her stress about buying everyday necessities.
“I’m not saying, ‘Oh, it’s just free money – I’m just going to go blow it,'” she said. “I’ve helped pay off a debt, a small one. This has helped me be able to buy food and medicine that I know I would have to use my regular income for.”
Virginia’s experience aligns with the initial results of the trial, which showed that, on average, participants had so far spent about 40% of their stipends on food and another 24% on sales and merchandise – like trips to Walmart or dollar stores. Another 11% went to paying for their utilities, and about 9% went to buying gas and repairing their cars.
“It’s a landmark study in the history of basic income,” Michael Stynes, the CEO of the nonprofit Jain Family Institute, told Business Insider.
Virginia spends most of her basic income on food and medicine
On the 15th of every month, the debit card Virginia got from the city is loaded with $US500. Before the stipend started arriving, she said, she wasn’t saving any money and owed several debts, each less than $US5,000.
“I’ve been trained to pay my bills – start with the small ones, then work up to the bigger ones,” Virginia said.
She and her husband, Albert, have been married for 23 years and are retired. Albert receives Social Security checks, she said, but doesn’t have any retirement savings. Virginia sells Avon cosmetics to earn about $US300 a month, though she expects to make more this month after selling the company’s gift items at holiday boutiques.
Their total household income before the monthly stipends was about $US42,000 – $US3,500 a month before taxes.
“Sometimes it’s very stressful trying to make ends meet, but we manage to get by every month,” she said.
Virginia said she spent most of the $US500 on food and medicine. She has diabetes, high blood pressure, and high cholesterol. She and Albert each have about six monthly prescriptions, she said. The average copay for one medication is $US15 for a three-month supply, which amounts to $US60 a month for the household. But that doesn’t include Virginia’s insulin, which she said was the most expensive.
The $US500 covers these medications and allows Virginia to put $US50 a month toward paying off her debts. She said the stipend had also enabled her to put away another $US50 in savings each month. She plans to use that money to visit her sister, who is almost 20 years older and in poor health, in May.
“I’m going to see a loved one who I don’t know how much longer I’m going to have,” she said. “It was hard for me to do that before this money came.”
Early results from Stockton’s basic-income trial
In 2012, Stockton became the largest city in the US at the time to file for bankruptcy. It’s no longer bankrupt, but about a quarter of its population lives below the federal poverty line.
When Michael Tubbs was elected mayor of the city in 2017 (he was just 26 years old at the time), he began searching for a way to lift more residents out of poverty.
“I came into doing the pilot without a fully formed perspective – or as fully formed as it is now – but really more out of curiosity,” he told Business Insider in April. “If this was a solution that could work, I wanted to test it out.”
To qualify for the program, residents had to be at least 18 and live in Stockton. They also needed to reside in a neighbourhood where the median household income was the same as or lower than the city’s overall: $US46,033. From there, 125 residents were selected at random to participate.
Critics of basic income argue that cash stipends reduce the incentive for people to find jobs and encourage recipients to make more frivolous purchases. But Tubbs said he didn’t give much thought to whether the trial would be controversial.
“My team was more nervous than I was,” he said. “I honestly will tell you this: I didn’t really see much risk.”
In October, the researchers behind the program – a group from the University of Tennessee at Knoxville, the University of Pennsylvania, and the Jain Family Institute– released the first set of data showing that participants were spending most of their money on food.
Stynes said that dispelled the “welfare queen” notion that people used government stipends to play video games, drink beer, or do drugs.
But he added that Stockton’s program was relatively small compared with other basic-income trials and that there wasn’t a lot of time left, so it could be difficult to make strong claims about how effective it might be as a permanent policy.
Virginia splurged on meat for Christmas dinner
Before retiring, Virginia worked for the State of California for more than two decades in various roles, including as a secretary at the California Health Care Facility, which houses inmates with long-term medical needs. Albert, a former truck driver, stopped working after he was injured on the job more than 22 years ago.
Virginia’s son, Mark, now lives with them. She said he owed her “quite a bit” of money but gave her about $US100 a month. Mark recently got a part-time job working at a warehouse.
Virginia recently refinanced her home to lower her interest rate, which she said helped her save about $US200 a month. She has also figured out how to cut costs while running errands, what she calls “making her rounds.” First, she combs through mail ads from grocery stores to compare prices. Then she makes a list of the items she needs and maps out her route.
“I start where I live and I go in a circle, get what I need, then end up back at home so I can save gas,” she said.
She often gets groceries at the WinCo supermarket. “They have really good prices and then you can buy in bulk,” she added.
Before the basic-income program, Virginia said, she used to do a big grocery run at the beginning of the month and spend up to $US100, planning for the coming weeks. That accounted for most of her monthly grocery costs. Now she can buy food and supplies more incrementally.
“Nowadays I don’t even do monthly shopping anymore because I just keep it stocked a little at a time,” she said. “I’m very frugal with my money, whether it’s my personal money or the money that Stockton has been giving me. Once in a while I’ll buy a steak, but it still has to be on sale.”
Virginia said she recently spent $US60 – $US1.79 a pound – on meat to make pozole, a Mexican stew made with ancho chilli broth, for Christmas dinner. It was the most she’d ever spent on meat at one time. Albert picked up the chillis at a flea market.
Virginia was nervous about the price but said her son offered to split the cost. For Christmas, they’re hosting 20 family members for a Mexican-themed meal of pozole, enchiladas, rice, and beans. Tamales, she said, were too expensive. She’s anticipating a few extra guests.
“Our church has a Bible college and some kids just can’t afford to go home,” she said. “I’m not going to have them sitting at the dorm. They can come over and eat with us.”
This year, Virginia added, she’s less stressed about whether she’d make enough money selling Avon cosmetics to afford gifts.
“I was pushing it really, really hard before the stipends because I needed extra money,” she said of the part-time job. “When [the stipend] goes away, I’ll push it extra hard again.”
Tubbs said a basic income was ‘allowing people to breathe again’
So far, the basic-income experiment seems to be working as Tubbs expected.
“I predicted they would spend money much like we spend money, on necessities first,” he said.
One man used his stipend to buy dentures. Another resident used the money to go visit family, as Virginia plans to.
The money is “allowing people to breathe again,” Tubbs said.
Nearly 70% of the participants in Stockton’s trial are women. The researchers think this is because women are more likely to open a household’s mail than men, so they were the first to receive the city’s notice. The team behind the trial also determined that women in Stockton were more likely to manage their household’s daily tasks, which include paying bills. That’s true in Virginia’s family.
“I pay all the bills,” she said. “I plan ahead.”
Tubbs said the fact that most of the payments were being managed and spent by women made him even more confident that the experiment would improve residents’ financial health. He pointed to research from the World Bank indicating that investing in girls’ education led to increases in national income and gross domestic product.
The stipends are expected to run out soon
Virginia said many Stockton residents still weren’t aware that the basic-income trial existed. Her family, friends, and fellow churchgoers who do know can’t believe she was chosen, she said.
“Some people say: ‘Well, how in the world? That’s not fair that you got picked – you make good money,'” Virginia said. “But everybody needs help once in a while. You never know anybody’s situation.”
With eight months left in the trial, the city hasn’t determined whether it will extend or expand the program. For now, Virginia said she treated each payment as if it were her last.
“I don’t want to depend on it forever because it’s not going to last forever,” she said. She also understands there is no guarantee that any future phase of the trial would include her family.
“They might pick other people. If they do, I understand – it’s only fair,” Virginia said. “But it would be nice if it would continue.”
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