A Policy Review of the SEED (Stockton Economic Empowerment Demonstration) Project: Is the Devil in the Details?

This review examines the Stockton Economic Empowerment Demonstration (SEED) project, a guaranteed income (GI) project that was undertaken in Stockton, California from 2019- 2021. SEED is a collaborative initiative by the Mayor's Office of Stockton, the Reinvent Stockton Foundation (RSF), and the Economic Security Project (ESF). The purpose of the SEED project was to ascertain the effects of guaranteed income on the well-being of the project recipients, with a focus on the effects of a UBI on participants' financial and psychological health. This review will study the potential benefits and challenges involved in implementing such a project, from political, social and economic perspectives. The review will also examine a UBI project's long- and short-term viability, and its impact on a city, and the project's beneficiaries. The review will aim to provide a balanced understanding of guaranteed income projects, and the means by which they affect recipients as well as other stakeholders, and the possibilities of implementing guaranteed income on a larger scale.

Introduction

This paper provides a policy review for the Stockton Economic Empowerment Demonstration) (SEED) project. SEED is an acronym for Stockton Economic Empowerment Demonstration, a guaranteed income project initiative that is a collaboration between the city of Stockton and two nonprofit organizations (Rector & Teixeira, 2018). According to the SEED website, the aim of the project is to assess a guaranteed income project in its ability to alleviate poverty, social inequality and to measure the effects on the financial and psychological wellbeing of its recipients. Since February 2019, the program has been disbursing $500 a month to a small sample of eligible residents of the city of Stockton.

A policy review about a guaranteed income (GI), or universal basic income (UBI) project is more than examining its impact on the project’s beneficiaries and the positive political goodwill attributed to the program’s leadership and the supporters. As Widerquist (2018) points out, it is the examination of the larger issues embedded in this policy experiment that are also of interest to policy stakeholders. Questions such as examining long term effectiveness, or whether the policy be can replicated on a more substantive level, and the issue of how will such a scheme be financed tend to be prominent issues. In other words, can the economic, social, cultural effects be observed in a small-scale study such that the study provides generalizability enough to demonstrate large-scale effects? Is the policy permanently sustainable and fiscally responsible? And finally, will it provide lasting community well-being? It is the examination of theses issue that allows for a more substantive and well-rounded examination of the issues surrounding UBI/GI.

Inherent in a policy review regarding UBI and GI, we are also examining policy as a measure of community well-being. The Organization for Economic Co-operation and Development (OECD) (2011) “argues that most experts and ordinary people around the world would agree that it requires meeting various human needs, some of which are essential (e.g., being in good health), and includes the ability to pursue one’s goals, to thrive and feel satisfied with their life” (OECD, 2013). Moreover, as a measure of community well-being, the OECD frames community well-being as a measure of economic well-being, overall quality of life and sustainability for programming as covered in this review.

This policy review will try and examine the issues mentioned. Firstly, it will examine the past and current scholarly literature on the issue of GI and UBI. Secondly, it will provide a critical review of the SEED project and analyze its aim to improve the economic well-being and quality of life of certain residents. The review examines why the city of Stockton may have been chosen and provides a discussion on the sustainability of future economic and community well-being projects. Finally, this review will provide a conclusions and suggestion for future research on GI projects.

The Arguments for a Guaranteed Income (GI) or Universal Basic Income (UBI)

Widerquist (2018) defines universal basic income (UBI) and its variant guaranteed income (GI) as a “periodic, cash income paid individually to all members of a political community without means test or work requirements” (2018, p.15). The UBI or GI is a regular cash payment provided to members of a community, without the stringent eligibility requirements of a “means” test. A means test refers to a prerequisite that is usually applied in most government assistance programs that ensure that the recipient is awarded the benefit based on a qualifier. For example, Social Security benefits are provided to recipients that qualify based on age, or disability or other means that establish qualification on certain, pre-determined criteria. A UBI, or GI however, tends to have minimal means test requirements. The appeal of a Universal Basic income is intuitive to its proponents as a poverty alleviating mechanism, and the idea has been supported for politicians, economists and philosophers for centuries (Collier, 2020). Recently, the idea has once again gained prominence because of its support amongst the prominent Silicon Valley executives such as Facebook co-founder Chris Hughes, and presidential candidate Andrew Yang. The primary motives for a guaranteed income benefit are to alleviate unintended and unanticipated negative consequences of poverty that current benefit systems may not be able to fulfill, and that allow recipients top by-pass onerous eligibility requirements, especially as some requirements can be seen as specifically designed to discourage utilization. Additionally, in many instances low-income residents may have needs that a traditional government assistance program is unable to fulfill. As the SEED project itself points out:

Sometimes people require more than food, housing, and medical insurance. They need a new car battery to get to work the next day, or they need cash to pay an unanticipated bill that might otherwise trigger a downward spiral. In these ways, unconditional cash mitigates the capriciousness of life and provides certainty in the midst of chaos. (SEED, 2019)

While UBI and GI programs have been in proposed policy conversations for poverty alleviation for a while, there have been some recent developments regarding reasons why proponents have renewed arguments for their implementation. One dominant narrative is that the increased automation that is becoming the norm in industries may lead to increased unemployment; and another is that most low-income groups do not possess adequate funding or training to deal with such an unexpected financial burden. Collier (2020) cites number of studies that have demonstrated that current technological advances may be responsible for increased unemployment, now and in the future. Three of the studies in particular posit that almost half of current jobs could be automated in the future, and as a result, nearly as many jobs would be lost to automation (Collier, 2020). Proponents of guaranteed income plans argue that the UBI’s and GI’s may help offset some of the income losses experienced.

This past year’s ongoing recession and resultant unemployment due to the COVID-19 pandemic is another reason to consider a guaranteed income benefit. Past research has shown the inability of a large percentage of U.S. workers to have a financial cushion to deal with unexpected financial burdens. A survey by the Federal Reserve in 2019 demonstrated that over a third of participants would have a difficulty covering an unexpected expense of US $400, i.e., 37% of the participants stated that they would be unable to pay an unexpected expense of $400 using cash, savings, or a credit card paid off at the next statement (Bhutta et al., 2016). Twelve percent of the survey participants stated that they would be unable to pay the expense at all (Bhutta et al., 2016). The state of affairs becomes more dire when the study explored the issue of “rainy day” funds. Current measures recommend that the average household have savings of at least 3 months of expenses to cover any larger unexpected contingencies that may arise. The survey found that three out of 10 adults stated that they would be unable to cover 3 months of expenses by any means.

This state of affairs has probably been exacerbated by the current recessionary climate, and the economic hardship caused by the COVID-19 pandemic. Ståhl and MacEachen (2020) point out how the financial hardship caused by the pandemic has laid bare issues of financial inequity and economic fragility, especially as it pertains to individuals employed in industries that have been the most hard-hit, such as the food and beverage industry, travel and tourism, and the self-employed “gig” economy. Such industries are not equipped to deal with what Ståhl and MacEachen (2020) refer to as “extreme external shocks”. While a flexible labor market (a market that has the ability to increase and decrease labor based on demand) is advantageous to employers who can ramp hiring up or down, in a recession where at-risk individuals are unable to remain employed the fragility of their economic situation becomes evident (Collier, 2020; Ståhl & MacEachen, 2020; Widerquist, 2018). The current COVID-19 pandemic “… provokes the question of whether current social security systems are sufficient for security in a flexible economy” (Ståhl & MacEachen, 2020). Proponents of UBI/GU schemes argue that a guaranteed basic income could help alleviate such issues for at-risk citizens. Yang (2018) posits that a guaranteed income would also alleviate the “bureaucratic burden”, that is administrative burden of paperwork, and the added work is lessened both on the government employee, as well as the at-risk citizen who has to ‘prove’ eligibility on a constant basis for traditional social welfare programs. Yang (2018) and other proponents also predict a trickle up, economic boom; whereby individuals with more disposable income may be able to contribute to economic sectors they have traditionally not had the ability to be a part of. Examples of these could be a treat (a night at the movies), dining out and other recreational pursuits. As a result, proponents argue that a greater amount of economic freedom and more disposable income would lead to the prosperity to other sections of the economy, a “trickle-up” economic boom (Yang, 2018).

In terms of social and mental wellbeing being, proponents have posited that GI benefits also includes a greater amount of freed time (since the person isn’t doing multiple jobs or juggling many commitments to make ends meet), allowing for the recipient’s ability to engage in creative pursuits, care for children or aging family members, and so a GI collectively enhances community wellbeing. The stressors associated with poverty and monetary need are well documented, and while GI schemes may not wholly eliminate poverty, they may go some distance towards alleviating it, reducing some of the stressors associated with the constant need for more funding to help with basic needs. Glazer (2017) also points out that providing a GI check would give recipients creative and entrepreneurial freedom, and so benefit the community, which they participate. Murray (2016a, b) argues against welfare programs, and argues for the use of a GI, stating that a welfare programs are contrary to themes of work, thrift and neighborliness. According to Murray (2016a) “The welfare state is pernicious ultimately because it drains too much of the life from life” (Murray 2016a, p.3). In other words, living on welfare can be a demeaning state of affairs that robs the individual from a sense of self-worth, and makes one’s life and life’s pursuits dependent on the welfare cycle. Providing UBI/GI options to qualified residents alleviate the negative self-conceptualization of being less than the “normal” citizen and gives recipients a greater sense of being part of a community that they can participate in, engage with, and thrive in.

The SEED Project

Distinguishing itself as the first “mayor-led” guaranteed income project, SEED (Stockton Economic Empowerment Demonstration) is a GI (guaranteed income) project that started in February 2019. One hundred and twenty -five city residents were selected to receive a GI amount of $500 per month for 18 months. The time line has since changed to 24 months to support recipients during the Covid pandemic. The funds have been disbursed without stringent “means” tests, i.e., potential participants of the study were targeted solely based on past measures of self-reported income. The project researchers are Drs. Stacia Martin-West and Amy Castro Baker, who will examine the impact of the funding on the recipients’ wellbeing and their psychological distress as well as their physical functioning (SEED, 2019). The project is funded through private donations, and the aim of the project “seeks to confront, address and humanize some of the most pressing problems our country faces: inequality, income volatility, and poverty” (SEED, 2019, p.1). The vision of the project seems to be to show how SEED “Provides an opportunity to imagine a fair and inclusive social contract that provides dignity for all”.

According to the SEED website, Stockton, California was chosen as the most suitable city in which to have the experiment (SEED, 2019). While the city is currently financially solvent and has an economy that is recovering, the city of Stockton filed for bankruptcy in 2012, making it the largest city in the US to have ever done so. As of 2017, the median household income fell below the state’s median, and there is a sizable population of the city living in poverty. According to the website, Welfare INFO the poverty rate in Stockton in 2017 was 22.4% (i.e., one out of every 4.5 residents in Stockton lives in poverty), whereas the 2017 poverty rate in California was at 15.1% (WelfareINFO, 2021). With the current recession as a result of the pandemic, it can be assumed that the rate for Stockton may be higher in 2021, and may continue to rise until the pandemic is under control. Stockton is also a highly diverse city with significant populations of citizens that identify as Black, Latino and Asian. Stockton also ranks 18th in the nation in child poverty, and has a high unemployment rate (7.5% in 2019), and only 35% of the city’s students are college ready by high school graduation. These statistics showcase a situation in which guaranteed income experiment would be welcomed, and be beneficial to recipients. The experiment also addresses the barriers of income and development that are associated with embedded structural racism and the resultant systemic poverty, when people of color are denied opportunities for development and self-enhancement. As Michael Tubbs, then Mayor of Stockton (whose office led the program) pointed out:

We need a social safety net that goes beyond conditional benefits tied to employment, works for everyone and begins to address the call for racial and economic justice through a guaranteed income. (Holder, 2021)

Baker et al. (2020) describe the SEED experiment as a means to assess how a GI project could co-exist and work alongside existing welfare systems. The actual SEED program disbursement began in February 2019. The SEED websites are currently sharing data from February 2019 till June 2020 (SEED, 2019). Some of the data shared in the website is quite revealing especially in terms of its impact on recipients.

Based on the information from the website (SEED, 2019), to test this basic income experiment, the researchers drew a sample from Stockton’s residents that had reported an annual median income at or below $46,033. A sample of 4200 households was selected, and a mailer sent explaining qualifications for the SEED project. 475 respondents to the mailer that met the criteria were then randomly assigned into 3 groups. One group would receive the funds and was considered the treatment group (n= 125). Another comparison group would not receive the funds but would participate in the data collection activities. This group was deemed an “active” control group and used to assess economic, and psycho-social well-being (n= 200). Finally, a third “passive” control group was identified, and participants in this group do not participate in the data collection but consented to the use of administrative data. The intention behind the passive control and the active control group is to assess the progression of economic psychological well-being of residents who did not receive the funds, to ensure that any changes in the resident’s states of wellbeing are due to the GI funding. The funds were distributed through a debit card provided to recipients, and each month $500 dollars would be uploaded to the card. The expectation of the researchers was that the recipients would use the debit card to make purchases, that researchers would be then be able to track (SEED, 2019).

Discussion of Data

Demographically, approximately 70% of the recipients identify as female, with the rest identifying as male, and the comparison groups exhibits a similar gender makeup. Forty-three percent of the recipients worked either full time or part time. Unemployed recipients, i.e., those actively looking, or no longer looking for employment, accounted for 12% of the recipients (less than 2% of the recipients are unemployed and not looking for work). A fifth of the recipients (20%) were disabled, and around 10% were recipients who were stay at home parents, or caregivers.

The data on the current financial situation of the recipients (presumably obtained by June 2020), shows that in spite of the monthly GI infusion of $500, 48 % of the recipients are still “just managing” and 22% are “going into debt”. Only 3% state that they have enough funds left to be able to save some of their money. Implications of this data suggest that a sizable proportion of low-income Stockton residents may be employed but still do not have sufficient means to make ends meet. Clearly welfare and assistance programs may not be sufficient for low-income residents to significantly lift themselves out of their current economic state.

The data also shows that the largest percentage of the purchases from the debit card have been for food (approximately 37%), and the second largest on merchandise (approximately 22% on items which include electronics, office supplies, books, newspapers, home improvement, shoes, clothes), the third largest on utilities (approx. 10.8% including water, gas and electricity bills, phone bills). Some of the smallest have been on self-care/recreation and education: 2.19% and 0.81% respectively (SEED, 2019).

The above numbers and their analysis suggest that the GI amount provided may have been enough to address the most immediate and pressing needs of the recipients, but not enough to allow for the additional benefits of well-being that have been discussed earlier in this paper, i.e., mental self-care, educational development, possible recreational activities, and creating a financial reserve to protect against future hardships. The SEED preliminary analysis report did demonstrate that there was a small, but significant difference in emotional health. Using the Kessler 10, an instrument that measures psychological distress run terms of anxiety and depression, the report concluded a small but statistically significant improvement in the mental health of the SEED recipients.

Semi structured interviews with the participants allowed for a greater amount of data and understanding, especially wit with to self-care and mental health. The authors of the report conducted qualitative interviews and these found that there were shifts in mental stress and an increase in self prioritization. Participants reported that the extra cash allowed then to focus non self and family, for instance writing poetry and buying ice-cream for their families, being able to buy birthday cakes (SEED, 2019). The analysis also found some “pooling behaviors”, which may have led to reduced anxiety, and greater self-care before the GI cash infusion. Participants reported difficulties in having enough cash for food and other necessities such as child care. They also reported not having enough to help out other family members (for example in case of an illness in the family) or any other needs that extended fancily may have. (West et al., 2021). With the GI cash they were able to engage in what the analysis report terms “pooling behaviors”, where participants reach out to help members of an extended network. As the analysis notes:

The $500 into their extended networks in aerial and immaterial ways that alleviated financial strain across fragile networks and generated more time for relationships … The 500 also assisted recipients with stretching resources across their networks to cover the needs of ill and aging family members, material needs such as school, or sports equipment, and transportation to and from doctor’s appointments they would otherwise skip. (West et al., 2021)

The SEED website does mention a caveat to this data collection (SEED, 2019). The recipients transferred forty percent of the disbursed funds off the debit card, and as a result, the researchers were unable to track the spending data of those funds. The researchers explain these funds using data gathered from follow up interviews of the recipients. They determined four trends: that the recipients may not have believed in the project and so removed the money off the debit card as soon as they received it; that the lack of faith in past government trials may have caused recipients to not trust that the money would remain; that managing multiple cards may have been cumbersome and so the debit card funds were cashed; and those low-income neighborhoods have a mostly cash based culture. However, that such a sizable amount of disbursed funds cannot be tracked is a cause for concern, and future GI experiments may want to take note of such a state of affairs (Holder, 2021; SEED, 2019).

Policy and Political Implications of GI Experiments

One of the underlying expectations for GI experiments currently conducted across cities is to continue to bolster a narrative that a larger, more substantive guaranteed income project (maybe at the county or state level) would be an additional tool in the arsenal to end systemic and cyclical poverty. UBI’s potentially serve as a mechanism that alleviate persistent economic and social disadvantage in communities where such factors make it difficult for individuals that face economic hardship to climb out of poverty.

Past studies have demonstrated the efficacy of such an approach. Bermans’ (2018) study on the Alaska Permanent fund dividend demonstrated positive effects of poverty alleviation in low-income recipients (particularly seniors and children). Poverty rates decreased and Bermans’ (2018) study also found that the commonly regarded adverse effects of UBI, such as recipients being less motivated to work (reduction in potential labor force), buying temptation goods (alcohol, drugs and other items that would lead to family dissolution) or the cost of financing the UBI project. Other scholars have found similar trends in other UBI experiments, and also negative past arguments that providing a UBI does not adversely affect the labor supply market (Skoufias & Di Maro, 2008; Widerquist, 2005). Berman (2018) also references studies in developing nations, namely India, South Africa and Malawi where UBI for lower income populations have allowed for greater school attendance amongst youth, since youth are no depended upon for supplementing the household’s income (Case et al., 2003; Miller et al., 2006; Standing, 2013).

SEED’s preliminary analysis report released in March also pointed towards positive employment statistics: a 12% increase in employment of the SEED recipients in the first year, while the control group only had a 5% increase in employment. Such results are even more impressive considering the negative effect the pandemic had on employment in 2020. The results may indicate that participants were able to leverage the $500 monthly payments to improve employment prospects (West et al., 2021). The 7% comparative gain in employment from the participant base is noteworthy when n comparing the SEED recipient group results to the control group results. This increase has certain implications, especially for opponents of UBI schemes especially regarding the prohibitive “costs” of the UBI/GI to the taxpayer and the community at large. Opponents argue that a GI/UBI scheme would cost the taxpayer and the community more but the 7% increase in employment is a favorable statistic since it implies when recipients are assisted with a UBI/GI, they are in a better position to prospect for and gain employment. The extra cash infusion may allow for a freeing up of time, or reduced stressors associated with cost-of-living expenses so as to allow the recipient to have the ability to seek and maintain employment. Increased long term employment in the community implies a potential increase in taxable income, and more dollars infused into the community that can be spent towards goods and services, thereby making the recipient a more contributing member of society and not as much of a “burden” to the tax payer.

The issues that arise are project costs, and the temporary nature of the program. SEED was paid though by private donors (West et al., 2021). Now that the project has demonstrated benefits does that soften the soil for a city, county, or state to fund towards those programs? Past results on the cost efficiency of such programs are mixed, though the competing narratives seem to be colored by the political stances of those writing the narrative (Collier, 2020; Rector & Teixiera, 2018; Widerquist, 2018). Local government legislatures, especially those cities or counties in which such a program may be most needed may be ill-prepared to bear the cost ion such a program. This implies that in most cases. The most likely candidate would be state or federal tax increases, but the data on that seems mixed at best. Past proponents of a UBI/GI scheme have proposed eliminating all other means tested welfare programs, and to use this “cash out” to fund UBI (Murray, 2016a, b). The issue with such a proposal is that some means tested programs such as Social Security and Medicare are incredibly popular in the US and just abandoning them in such a fashion would not be a policy narrative that could be easily supported. Other proponents have proposed additional taxation; Murray (2016a, b) proposes a carbon tax, or just boosting taxes on higher income Americans. Again, while it is easier to propose taxation to solve such an issue, getting a tax averse culture to accept greater taxation has always been an issue in American politics. Glazer (2017) points out another, more troublesome matter, that UBI schemes may make matters worse for the poorest Americans. According to Glazer (2017) “The Center on Budget and Policy Priorities estimated that more than 42% of Americans are lifted out of poverty by food stamps, TANF, the earned income tax credit and Social Security. Replacing all or most of those safety net programs would plunge the poor deeper into poverty…” (Glazer, 2017, p.61).

Opponents of the UBI scheme paint the issue as even more dire. They point to considerable tax increases, for example Glazer (2017) provides the example of Canada which has a child allowance UBI, and points out that the average Canadian Family now spends 42.5% of its income on federal, state (province), and local taxes, an increase of over 2000% since the 1960s. So, while support for such schemes remains high as long as someone else foots the bill, trying to fathom how government can sustain such UBI still remains an issue.

Conclusion and Implications for Social and Community Well Being

This policy review examined a guaranteed income (GI) scheme named the Stockton Economic Empowerment Demonstration SEED project. It discussed the benefits of the project and critically analyzed the results. It also provided a discourse on the benefits of a universal basic income (UBI) scheme as well as the challenges of universal implementation. While the review discerns the positive policy narratives that such projects create around the discussion of a UBI, it also provides an understanding of the inherent issues with taking the idea of a UBI further, i.e. transforming a UBI project from a limited endeavor in time and scope, to one that is sustainable, possibly at the local, or state level.

From a community and social wellbeing perspective, it can be assumed that the results are promising. They allude to a variety of mental, social, and community benefits recipients can avail if they are enrolled in such schemes. The Organization for Economic Cooperation and Development, OECD (2011) identify eleven dimensions that allow an individual to contribute to community well-being. Of the eleven the four dimensions that would most probably be affected positively by a guaranteed income would be income and wealth, access to housing, physical and mental health, and education and skills. Since income and wealth measure the economic resources available to an individual to satisfy needs and wants and to guard against future vulnerability, the data analysis of the SEED project demonstrated that this was accomplished. Participants were able to spend on essentials as well as some were able to save for a rainy day, and others even able to help vulnerable community members through pooling behaviors. The data also showed that the third largest percentage of monies allocated were towards costs such as utility bills, essentially demonstrating that the GI allowed for housing security thereby allowing recipients to have to worry less about their living conditions. Additionally, both quantitative and qualitative data analysis established an improvement in mental health. This paper has pointed out that there was a statistically significant improvement in the emotional health of the SEED participants. Qualitative interviews of the participants also indicated that the participants were able to spend time in recreation activities (for example writing poetry) or even sharing cherished moments with family (such as buying a birthday cake for a celebration). Consequently, it can be assumed that mental health did improve as a result of participation in the SEED program. Also, a small amount of the SEED funding was used towards self-recreation, and education and self-care (SEED, 2019).

The above implies that a UBI does have a positive impact on social and community well-being, i.e., that the recipients of seed experienced positive outcomes that resulted in a greater sense of well-being for them. The implications for community well-being are evident. A GI project that targets low-income groups by providing a small but significant cash infusion, without the requirement of a stringent means test would allow community members to benefit by having greater access to a guaranteed income source, more stable housing and living arrangements and a greater amount of self-care and better emotional health.