Give away money? No strings attached? That sounds crazy; so crazy, just the idea conjures immediate and unfounded objections. In truth, UBI has been demonstrated to achieve impressive outcomes while rebutting fears that if you give people money they will cease seeking work and live off the public trough. Retake is launching a fact-finding journey to explore how UBI could create individual, family, and community resilience in NM. Why? Because it works and NM has over 400,000 people living in poverty.
Instead of traditional welfare programs with their patriarchal approach of dictating how, where, and on what terms individuals can build their lives, UBI offers the dignity and self-determination that recognizes a one-size-fits-all approach is antiquated and rooted in distrust. Years of research show that when given unrestricted payments, recipients are able to pull themselves out of poverty and create economic stability for themselves and their families.
One of the most important reasons for implementing or at least studying a Universal Basic income in NM is that we have a very high proportion of residents living in poverty. According to WelfareInfo.org, the poverty rate in New Mexico is 20.6%, second highest in the nation. One out of every 4.9 residents of New Mexico lives in poverty, meaning that 420,293 of 2,043,896 residents reported income levels below the poverty line in the last year.(poverty rankings by state).The poverty rate of New Mexico is dramatically higher than the national average of 14.6%. What’s more, employment is often not a vehicle for escaping poverty — 29.9% of jobs in New Mexico are considered low-wage jobs because they have a median annual pay below one hundred percent of the poverty level for a family of four.
But while so many New Mexicans are poor, the state itself is far from poor, with $2.57 billion in reserve funds after the close of the 2022 legislative session, leading Representative Mo Maestas to comment, “This budget has the highest reserves we’ve ever seen.” With a robust surplus only to grow larger in 2023 due to wild increases in G&O revenue, it is time for NM to consider investing its wealth in its poorest residents.
While revenues from gas and oil continue to increase, it is clear that a transition of our economy and our workforce is inevitable and with it will come financial uncertainty for those whose jobs disappear in that transition.
One of the most frequently cited reasons for introducing a UBI is to help support workers losing employment due to automation and other shifts in our national and state economies. From the Berkeley Economic Review, “experts predict that, within the next 12 years, one out of four Americans will lose their job to technology.” In NM, those job losses will be compounded by our transition from a fossil fuel-based economy to a more sustainable, renewable energy-based economy. So it would seem that a program that is effective in supporting low-income, displaced workers is something NM should at least study, if not implement.
To thoroughly understand the effects of UBI as public policy, it is crucial to look at arguments on each side of the discussion and analyze their applicability in the context of past economic experiments. Fortunately, the Berkeley Economic Review‘s “Unboxing Universal Basic Income” has assembled a research-based review of UBI that outlines both the arguments in favor of UBI and concerns about the policy. While we will focus on this review in this post, we will also devote time to two pilot projects, one in Stockton, California and the other in New Mexico. Our goal is to engage, educate, and excite our readers first, and then key legislators about the reasons why UBI makes sense as national and state policy.
Whatever the source of employment sector disruption, UBI is seen as a valuable tool for easing that transition for displaced workers. From the Berkeley Economic Review:
Emerging evidence suggests that a UBI program would have positive effects on the workforce and help soften the adverse effects of automation. There are multiple interesting shifts in human capital that may follow a basic income being implemented in the US. First, research shows that financial insurance tends to have a significant impact on the decision-making of individuals. UBI would ensure that taking a financial risk, such as attending night classes or buying a more expensive computer, will not lead to immediate poverty. This “income floor,” funded by the government, can lead to more people taking these developmental, calculated risks. Through this method, former members of the now automated labor force may be able to pivot from their past careers into more advanced technological fields, and grow in interdisciplinary ways that will ensure high employability. Essentially, the financial security provided by an UBI would enable and motivate members of the workforce to retrain and join emerging labor markets. Furthermore, under UBI framework, individuals may be incentivized to find jobs they actually find interesting– a rare scenario within work requirement-based welfare programs. Rather than finding a job just for the sake of receiving welfare benefits, citizens have the financial backing to explore more rewarding careers. This may lead to higher employee happiness and, consequently, an increase in overall company productivity.”Berkeley Economic Review: “Unboxing Universal Basic Income“
A variety of studies have shown that UBI not only offers profound benefit to recipients, but also boosts the economy. From Berkeley Economic Review:
A 2017 report by the Roosevelt Foundation used the Levy Institute macroeconometric model to demonstrate that an unconditional cash assistance program of $1,000 [per month] for all adults annually would expand the economy by 12.56 percent over the baseline after eight years. The study shows that, in addition to a rise in aggregate demand, a $1,000 UBI would likely cause an increase in output, employment, labor force participation, prices, and wages.
Various studies of cash transfer programs in other countries demonstrate that economic growth ultimately also trickles up to other aspects of welfare programs. The “Mincome” Experiment in Manitoba, Canada, where an experimental basic income project was tested almost 40 years ago, showed that the population receiving a basic income had an 8.5 percent reduction in hospital visits, with fewer incidents of work-related injuries, and fewer emergency room visits from accidents and injuries. Additionally, the population experienced lower psychiatric hospitalization, which is an indicator of higher overall mental health. Another example, the GiveDirectly™ program, created cash transfer methods for poor households in Kenya, and showed positive effects in nutrition-based spending and overall assets for these households.”Berkeley Economic Review: “Unboxing Universal Basic Income“
Berkeley Economic Review concludes by noting that while results have been promising, there is a critical need for further study of UBI if it is to serve as an important policy tool for making the transition to a sustainable national economy.
Here’s the bottom line: evidence indicates that UBI will foster job creation and economic development. But a program of this scale has never been implemented before, and especially in a country as economically developed in the US. There is still not enough research to conclusively understand whether the idea would be beneficial for the country, but the potential does seem promising. If it works as intended, UBI would lift dozens of millions of individuals out of poverty, and simultaneously foster economic growth for the United States. A post-automation society will likely require a drastic transformation of the US economy. Bringing universal basic income into the discourse of mainstream politics will be valuable for years to come.”Berkeley Economic Review: “Unboxing Universal Basic Income“
Given the above, we are encouraged to know that a UBI pilot project has been launched here in NM and that last year a memorial was introduced to study UBI. HM 22, introduced by Rep. Patricia Roybal Caballero, passed the House Health & Human Services Committee but was never heard on the House Floor. (Read our summary of HM 22 at this link, to learn more about why UBI would be good for our state.) Retake will be working during the Interim Hearings, which run from May to November, to try to foster broad support for the bill and will monitor how the pilot project evolves.
Through the pilot, undocumented or mixed-status immigrant families who are often excluded from traditional benefits and relief programs are now eligible to participate in a guaranteed basic income pilot program in which they will receive $500 a month for 12 months, starting this month. The program is being sponsored by the New Mexico Economic Relief Working Group, a coalition of community-based organizations, and funded by philanthropic groups and donors.
The working group is selecting 330 families from 13 counties, and at the end of the 12-month period will evaluate how the unrestricted payments altered family finances, mental health, education and employment decisions, and other factors. Even preliminary results from the pilot are likely a year away, so while awaiting those results we will forge on, examining other pilots and research.
In a post-Session meeting with Speaker Egolf earlier this month, I was told that even just a study of UBI would be a heavy lift, as the business community generally and the chambers of commerce specifically would strongly oppose anything that strengthens low-income workers’ lives. The argument is that business is having a hard-enough time securing employees without their having UBI to make them more economically resilient. While our research won’t likely cause chambers of commerce to shift their position, it can build understanding and support among legislators.
The Stockton Economic Empowerment Demonstration (SEED)
SEED was born out of the simple belief that the best investments we can make are in our people. In February 2019, 125 residents who lived in census tracts at or below the city’s median household income began receiving a guaranteed income of $500 a month for 24 months. A hand-up, rather than a hand-out, SEED sought to empower its recipients financially and prove to supporters and skeptics alike that poverty results from a lack of cash, not a lack of character.
A high-profile universal basic income experiment in Stockton, Calif., which gave randomly selected residents $500 per month for two years with no strings attached, measurably improved participants’ job prospects, financial stability and overall well-being, according to a newly released study of the program’s first year.
The Stockton Economic Empowerment Demonstration, or SEED, was founded in February 2019 by then-Mayor Michael Tubbs and funded by donors.NPR: California program giving $500 no strings stipend pays off, study finds.
The pilot is being evaluated to assess the impact of an unconditional $500 a month on financial security, health, mental health, and employability. A study published after the first year of the pilot demonstrated important impacts. From Preliminary Analysis: SEED’s First Year:
The first year findings of SEED are promising, showing a causal connection between guaranteed income and financial stability, and mental and physical health improvement. The mixed methods RCT approach not only allowed SEED to detect these quantitative effects, but to understand how guaranteed income operates alongside the existing social safety net, how recipients maximized the $500 under extreme resource constraints, and how guaranteed income may promote individual freedom and agency.
We found that the $500 made making rent payments, covering childcare, and taking care of medical needs more bearable for recipients, but it was not nearly enough to cover the exorbitant costs of these necessities.
This means that guaranteed income should not be considered as a singular approach for household stability, but rather as one policy option to be implemented alongside others to shore up market failures. Additional policies to implement alongside a guaranteed income include: protection against predatory financial actors and instruments like caps on adjustable interest, second-chance banking, third-party targeting of financially vulnerable populations, and exorbitant fines and fees from the criminal justice system; address the unique barriers that women face in the market through paid family leave and universal child care; mitigating the cost of housing through rental assistance, tenant protections, and increased supply of housing; and ensure that labor is fairly compensated through a higher minimum wage. All polices should help build an economy that works for everyone and is rooted in equity
for traditionally marginalized populations.
I highly recommend a review of the full report, as it provides details about how the program was launched and how it operates, and it is full of interviews with participants, which puts a human face of struggling with systemic poverty.
Certainly, the findings from the Stockton demonstration are promising enough to warrant a deeper dive into other UBI programs and their evaluation findings. And as the graphic above makes clear, there are an abundance of initiatives to research. Retake is committed to continuing to dig into that research and share it with you, with legislators, and with allies in preparation for the 2023 legislative session. If you would like to help with this research, please write to us at firstname.lastname@example.org.
In solidarity and hope,
Paul & Roxanne