Partnering with a private charity, the City of Stockton, California will test whether a government-administered universal basic income (UBI) program can lift people out of poverty.
The Economic Security Project, a charitable organization co-chaired by Facebook cofounder Chris Hughes, is donating $1 million to the city to fund an eighteen-month study of a UBI program.
Starting in 2019, 100 Stockton families will receive a monthly payment of $500 per household from the city government for the duration of the social experiment, with no conditions or work requirements.
Pros and Cons
Bryan Caplan, a professor of economics at George Mason University and a policy advisor with The Heartland Institute, which publishes Budget & Tax News, says economists are of two minds about whether to replace the nation’s entitlement system with a UBI.
“The main ‘pro’ that economists talk about is that it doesn’t mess up your incentives, because you get the money regardless of what you’re doing,” Caplan said.
“In terms of the cons, the enormous expense is a big thing,” Caplan said. “Just to give money to everyone is a lot more expensive than giving it [only] to people in need. If you’re giving money to everyone, it’s really expensive.”
Robert Whaples, a professor of economics at Wake Forest University and a research fellow with the Independent Institute, says a UBI would create more problems than it would solve.
“You always have to look at an income effect versus a substitution effect,” Whaples said. “The basic income guarantee gets rid of the substitution effect you see in most welfare programs—discouraging people from working—and gives them a check, which makes them richer and also discourages them from working.”
Suggests Pro-Growth Policies
Whaples says creating private-sector prosperity for everyone works far better than just giving people money.
“The best alternative is to have a prosperous economy where there are job openings all over the place and we train people [for them],” Whaples said. “In some sense we’re getting there. We don’t have many illiterate people in this country. People go to high school, we train people, and then the unemployment rate is incredibly low.
“That prosperity of the economy is probably what people want the most,” Whaples said.
