UBI: Is recession pushing the US towards permanent cash payments?

As Congress prepares to debate the next economic stimulus package, UBI pilot projects are underway.

Ramona Ferreyra
Ramona Ferreyra, one of 1,000 New Yorkers in the Bronx to receive a one-time cash grant of $1,000 as part of the SaverLife programme, said the cheque helped her bounce back from having just five dollars in her wallet and $90 in the bank [Courtesy: Ramona Ferreyra]

Forty-year-old Ramona Ferreyra lives in the south Bronx section of New York City, cohabitating with her grandmother in a public housing building for seniors.

A Harvard University graduate, she worked as a civilian employee for the Pentagon and paid off $200,000 in student loan debt before her career was derailed by a chronic auto-immune disorder.

Today, she makes a living selling baby clothes through her company, Ojala Threads, a social-good enterprise inspired by Hispanic heritage.

But it’s not enough to make ends meet. “I get public assistance of $198 a month, $89 in food stamps, and $215 for housing allowance,” Ferreyra told Al Jazeera.

Her financial situation tipped into crisis this March, when the coronavirus sent New York City into lockdown. Ferreyra found herself with only five dollars in her wallet and $90 in the bank. But a one-off cheque for $1,000 from a pilot experiment in direct-cash payments helped pull her back from the brink.

Ferreyra said the stipend “changed everything” and allowed her to invest in marketing for her baby apparel business.

She is one of 1,000 New Yorkers in her borough to receive a one-off cash grant of $1,000 as part of the Neighborhood Trust Financial Partners and SaverLife’s cash relief programme, an experimental approach to putting struggling Americans back on their feet.

The initiative was funded by former United States presidential candidate Andrew Yang’s Humanity Forward organisation, as a way to spotlight how universal basic income (UBI) could preserve livelihoods.

Decades of financial policies have excluded the most vulnerable from accumulating wealth.

by Stacia West, professor at the University of Tennessee

With a guaranteed income floor, UBI would consist of direct, unconditional, and monthly government cash payments available to everyone – irrespective of their wealth or how much money they make.

Several high-profile pilot projects around the country are testing the effect direct cash payments can have on livelihoods.  And with millions of Americans receiving temporary emergency federal government pandemic aid, interest in making UBI a permanent feature of the US’s social safety net has arguably never been greater.

US jobless
With the $600 federal top-up to weekly unemployment benefits expiring next week and more than 30 million Americans currently collecting jobless benefits, the inadequacies in the US social safety net have been laid bare [File: Nati Harnik/The Associated Press]


Plugging the holes in the social safety net

The US coronavirus response signed into law on March 27 by President Donald Trump included one-off stimulus cheques, a temporary federal top-up for unemployment insurance and business payroll protection.

UBI combines elements of these CARES Act components but would require massive new legislation to enact.

UBI is not being proposed for the new stimulus package Congress is set to debate when it returns from recess on Monday. But with the $600 federal top-up to weekly unemployment benefits expiring next week and more than 30 million Americans currently collecting jobless benefits, the inadequacies in the nation’s social safety net have been laid bare.

UBI aims to fill those gaps by doing what it says on the tin – provide a “basic income”.

Neighborhood Trust Financial Partners in New York City was chosen by Yang’s group to distribute the cash relief payments to low and middle-income participants.

“The money we disbursed definitely helped them get over the crisis for a couple weeks,” Justine Zinkin, CEO of Neighborhood Trust told Al Jazeera.

Zinkin sees the pilot project as an opportunity to make UBI “more accepted as a potential alternative” to the web of arcane government benefits programmes that often fall short of covering basic needs.

Critics of the current benefits system lambast that services are strewn across multiple agencies and disdain that cultural judgments are often baked into eligibility verification.

A key tenet of purist UBI is that there would be no means-testing to determine who could qualify for regular monthly payments.

David Simpson, another Bronx resident in the SaverLife project filed for bankruptcy after health problems and career obstacles left him vulnerable.

“In this particular instance, it’s a stop-gap and a reaction to millions of people falling behind so drastically,” Simpson, 41, said of the $1,000 cash payment he received in April that allowed him to focus on getting back to work and straighten out his finances.

Simpson, who lives with his father and step-mother, got sick with COVID-19, as did the rest of his household at the end of March.

He told Al Jazeera that a federally funded, consistent UBI could “alleviate a huge mental and psychological burden. I would have totally been able to develop [professionally].”

“Folks can take more risk, work on the thing that they value, and turn it into a product.”

‘Proof of concept’

UBI has won support on radically polar sides of the US’s famously fractured political spectrum.

Progressives embrace its ability to help redress staggering inequality and bolster the social safety net, while some libertarians like UBI’s potential to shrink government bureaucracy.

Veronique de Rugy, an economist with George Mason University’s libertarian Mercatus Center, told Al Jazeera she could support UBI if it led to the abolition of minimum wage and other labour rules that she believes “get in the way of low-income earners working or getting jobs”.

She does not, however, promote the idea of distributing a basic income universally. “With cash payments, it makes no sense to tax people just to give them back the money,” she said. “Giving to people at all income levels creates a weird baseline [and is] very counterproductive.”

No full-throttled fan of UBI, de Rugy believes it creates a disincentive to work. “The notion that suddenly people will be productive is not validated by the data,” she said. “UBI makes people happier, instead of chasing unemployment cheques.”

Researchers last year in Finland found that their UBI experiment indeed lifted people’s spirits but kept them jobless. But a 1970s pilot experiment in Manitoba, Canada helped improve the quality of life in the rural community of Dauphin across the board without discouraging residents from continuing to work.

The coronavirus crisis is lending fresh urgency to validate – or invalidate – previous UBI research.  

In California, the Stockton Economic Empowerment Demonstration (SEED) UBI pilot offers a guaranteed monthly income of $500 that is time-limited but unconditional. The test was extended from 18 months to two years because of the pandemic – with project administrators not willing to cut off funds when people are most in need.

Stacia West, a professor at the University of Tennessee, has been researching UBI for many years and serves on the board of SEED.

“Decades of financial policies have excluded the most vulnerable from accumulating wealth,” she said, adding that “re-knitting the social contract” could make the typical American family less economically “fragile”.

At only $500, the Stockton experiments payments are not enough to cover basic needs for a month – which underscores another aspect of the UBI debate: How many existing benefits, such as housing vouchers and food stamps, would be eliminated if cash-payments became permanent.

West told Al Jazeera that the SEED control trial is designed to test “the efficacy of UBI as a financial vaccine” alongside the existing safety net, arguing that cash payments should be used to smooth out income volatility.

Scott Santens is a UBI advocate and political adviser. He told Al Jazeera that during the course of Yang’s presidential campaign bid, national support for UBI grew by six percentage points.

UBI makes people happier, instead of chasing unemployment cheques.

by Veronique de Rugy, an economist at George Mason University

And according to research at Stanford University, between from 2017 through the end of April, support for UBI increased by 20 more points.

Santens believes the pilot in Stockton, and a similar one in Jackson, Mississippi, build upon evidence from previous basic income studies that showed how people spend money “on the same stuff that we all find most important in our own lives”.

Back in the Bronx, Ramona Ferreyra sees herself as proof of how transformative UBI can be.

“I’ve been blessed but very depressed, at times,” said Ferreyra. “Getting that money was permission to think,” she said. “That’s what UBI really represents for people like me below the poverty level.”

Source: Al Jazeera