Big guaranteed income program hits this US city

New UBI experiment promises $$$ for many, but success isn't guaranteed

Nov 02, 2020 | Editorial | Budgeting | Government | Spending Habits
Article headline image

The pandemic hasn’t been kind to any city

But some have fared worse than others. Take Compton, California, where one in five residents lives in poverty and nearly 22% of its residents are unemployed since the Covid-19 crisis began. Fortunately, the Hub City’s thorny finances are getting a much-needed boost via the recently announced Compton Pledge — the largest guaranteed income program ever attempted in the US. This promise to financially support some of its low-income residents with a stable source of cash could have an impact far beyond Compton city limits. How the Pledge plays out could help determine the viability of Universal Basic Income (UBI) in a country that has traditionally opposed it.

Why try UBI?

Proponents of a government-guaranteed income for each citizen believe that covering the basic cost of living for all citizens can help reduce inequality, especially among marginalized communities. A guaranteed paycheck has the potential to not only provide access to essential goods and services: it can also relieve stress, increase happiness, and promote trust in social institutions. But implementing UBI also carries sky-high potential costs that may not lift everyone out of poverty. With the possible exception of Alaska’s annual distribution of oil revenues, UBI hasn’t been implemented in the US on a broad scale. And Americans haven’t exactly been clamoring for it. A recent Gallup survey reported that only 43% of Americans supported UBI, compared to 75% of Canadians.

What makes the Compton Pledge special?

The scale: 800 low-income residents in the pilot program will receive $300-600/month over a two-year period, making it both the largest and longest-term guaranteed income program a US city has implemented. But these participants won’t just get cash — they’ll also gain access to free banking services throughout the Pledge’s duration.

The support: The City of Compton, led by Mayor Aja Brown, has partnered with dozens of community organizations, institutes, and charities. A board of local leaders will also serve as advisors on how to best serve marginalized communities. And the Pledge has already secured roughly $2.5 million in private donations to help fund the program.

Who’s being helped: A wide range of residents who’ve had trouble accessing financial services could be eligible, including the irregularly or informally employed, the unbanked, immigrants of varied legal status, and the formerly incarcerated. The program’s participants will mirror the demographic makeup of Compton itself, which is 68% Latinx and 30% Black.

Is this the first step for UBI in the US?

Not quite, but it may be the most important yet. The city of Stockton, CA, launched the Stockton Economic Empowerment Demonstration (SEED) in 2018, which gave 125 residents $500/month for 18 months. The program’s early data suggested responsible spending on the essentials — participants put most of their money toward food, clothes, and utilities. The Compton Pledge would build on SEED’s success by not only serving more than six times as many residents but also reducing limitations on who qualifies for aid. The Pledge’s impact on the community will also be proportionally larger. As a city with a population less than a third the size of Stockton’s, the program’s 800 participants may feel more like 2,400.

How will we know if the Pledge is a success?

It’s not entirely clear, but spending data may not be as important as raising enough financial support to keep the program running. SEED garnered enough attention to earn a $3 million donation in July from Twitter founder Jack Dorsey — a sum that could fund the whole initiative a second time. The Pledge’s organizers hope to drum up $8.1 million from private sources as they put their program into action. Will they reach their goal? We’ll find out soon — the Pledge is slated to begin at the end of the year.