- In Stockton, California, 125 residents got $500 per month, no strings attached, for two years.
- After a year, the trial results showed that most of the money went toward food and merchandise.
- Less than 1% was spent on alcohol or tobacco.
- Visit the Business section of Insider for more stories.
For two years, 125 residents of Stockton, California, collected $500 from the city on a prepaid debit card every month. They could spend it however they wanted.
To qualify for the program, known as the Stockton Economic Empowerment Demonstration (SEED), residents simply had to live in a neighborhood where the median household income was the same as or lower than the city’s overall, about $46,000.
A new report by a team of independent researchers reveals how the participants spent their money during the program’s first year. Nearly 37% of the SEED stipends went to food, while 22% went toward sales and merchandise, such as trips to Walmart or dollar stores. Another 11% of the stipends was spent on utilities, and 10% on auto costs.
The findings undermine a common criticism of basic-income programs: that unconditional cash encourages people to make frivolous purchases, or perhaps buy unhealthy items like drugs and alcohol.
Less than 1% of the SEED stipends went toward alcohol or tobacco.
Mekie, a mother of six, was one of the basic-income recipients in Stockton. (The program doesn’t reveal participants’ last names for privacy reasons.) She used the money on rent, car payments, and her children, she said.
“My son wanted to go to a football camp — I was able to pay for that,” Mekie said in the report. “I was able to buy him some new shoes. I was able to give him money so he wouldn’t be hungry when he was at his track meet when he would go out of town.”
Participants borrowed less from friends and family
Before the basic-income program, some SEED recipients said they couldn’t afford enough food for their households each month. Some capped out on their monthly limit for food stamps, while others couldn’t pick up enough hours at work to cover their monthly food budgets. So participants often borrowed food from family and friends, the report found.
But with an extra $500 each month, participants regularly reported that they could afford to feed their households on their own.
Some were also able to financially assist family members outside their home. One participant, Sarah, said she used her stipends to help her daughter-in-law pay for car-insurance and to assist her siblings in purchasing school clothes for their children.
The researchers concluded that “stabilizing food security in just one house with the $500 generated echoes of food security for those they ordinarily borrowed from.”
Stockton’s full basic-income experiment ran from February 2019 to January 2021, but the new report only analyzed the participants’ first year of spending. Michael Tubbs, the former mayor of Stockton who spearheaded the program, said he thinks the cash payments also helped residents afford food and utilities during the pandemic.
“I’m excited for that research,” he told Insider. “I’m still heartbroken, however, for the 300,000 folks in my community who weren’t given the basic income, who also had to deal with COVID-19 and entered it in a less prepared position.”
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