When Stockton gave people cash, they got jobs | Hacker News Reader

When Stockton gave people cash, they got jobs

reasonstobecheerful.world

58 pointstoomuchtodo80 comments

I'm a great believer in the power of cash to solve problems. Rutger Bregman's Utopia For Realists opened my eyes on this matter. The minority of "rotten apples" only spoil the concept if we let them - we can view their potential misuse as part of the operating cost of helping a large majority of people into happier and more productive states of life.

I worry that some employers fear that UBI and similar will decrease workers dependency on their employment, and thus become more demanding and more expensive. My own intuition is that keeping a strong imbalance in power between employer and worker is at best a local maxima for the employer, and much greater profits can be achieved with a more balanced relationship with the workforce.

Yes, zombie companies which are just profitable enough to stay in business can be a real long term drag on the economy. Increasing costs can counter intuitively promote economic growth by removing them.

Zombie companies, but also zombie jobs (or the much-quoted "bullshit jobs") where I have the impression they only stick around because people say "eh, it's not the most cost-efficient measure, but since we're paying people so little and they can easily be laid off why take the risk of automating it?"

As a European I often feel that way when looking at jobs in the US that in Europe would be too costly to staff: Three people at constructions signs holding signs with "Stop" and "Go" instead of a mobile traffic light. Senior citizens at the cash register which help you bag your groceries. I wouldn't mind if these kind of jobs would be made obsolete if workers had the option to not take them.

Here in the Caribbean it's even worse. Our gas stations employ people to fill up your car. I remember when I first traveled to the U.S. as a child and was surprised to see people filling in their own tanks of gas. With my innocent mind, I immediately thought that their quality of living was worse because they had to get out their car and do the labor of filling up their tank. Now I realize that the Caribbean has many of these jobs by force because are employment rates are so low. It's a sad realization.

There are two states in the USA that require gas to be filled by an employee, no self-serve allowed. New Jersey and Oregon. This was put in place as a measure to protect jobs - for better or worse.

The observation is correct. In Europe you have social programs, in America you have gig jobs and Walmart. Walmart even tells its employees how to sign up for all sorts of programs, like food stamps and housing aid, and that's how the taxpayer subsidizes them.

> My own intuition is that keeping a strong imbalance in power between employer and worker is at best a local maxima for the employer, and much greater profits can be achieved with a more balanced relationship with the workforce.

Cue Henry Ford on wanting his employees to be able to afford his products.

Moreover, it works even better when it's universal. If only your company or your industry had to pay higher wages, that's probably not great for you. Most of your customers aren't your own employees, so most of the benefits go to others while you pay a disproportionate cost.

But doing it for everyone helps everyone. People can afford more of everything, so they buy more of everything, so companies produce more of everything and make more money. Enough at scale to offset the higher wages -- by definition, provided the level of savings is unaffected. And if savings increase then that's good too because "savings" are invested which makes it easier for companies to raise capital.

The irony of a lot of this is that capitalism depends on the circulation of money. The poorer the person the less likely they are to put that money into some investment fund or the bank (which I wouldn't call trapping the money but it does make it less liquid). A UBI just seems like a great way to ensure that cash actually flows.

I think you’re forgetting about globalism. The global middle class is much larger than ever before. Free Trade agreements and outsourced labor make relying on a local middle class a relic of the past.

I think that depends on what perspective you're looking at. There is still a fractal nature to this. I think there's still an advantage if you're coming from the perspective of empowering your country. If you're a rich elite and trying to profit maximize I think your perspective matters more. But the goal makes a difference.

Trade is a small percentage of US GDP. In 2019 it was only 2.5T in exports out of a 21.4T GDP.

That’s no where near enough to keep the economy moving.

What about products being made in foreign countries and sold in different foreign countries that are owned by an American company? That’s sort of what I was getting at.

US companies is really misleading here. Google is a very American company but it isn’t 100% owned by Americans. That’s why economists break things down by imports and exports.

I think that as long as it is raw cash it can help. I have however noticed that it seems like the 3 most expensive things in the US right now are Medical, College, and Housing. I've also noticed that the government subsidizes or dumps cash into each of these in one way or another. In college it is through pell grants and/or student loans. In medical it is through Medicaid/Medicare and also the tax subsidies around health care, and same thing with housing and the different type of loan options they have like FHA, VA, Rural Development, etc as well as the tax deductions they bring.

If we just hand people cash I think this would limit the distortion but if you subsidize people in just one area it seems that produces a disproportionate rise in price in that one area.

I wonder if a UBI, done well, couldn’t help compete with foreign companies who enjoy much cheaper labor. The UBI could move people from thinking of an employer as a total source of income and livelihood to a marginal source of income. They’d be much more flexible to employer demands, once employers start to think of labor as a marginal cost than something to average out across multiple units of output. Ie employees become more like the contractors that Uber/Lyft say they’re hiring across the economy.

To me a big problem with UBI is who is eligible. Yes, I know it is called 'universal' but this doesnt mean everybody. Like should a person living in Europe be able to claim UBI from the US? Well, this example is silly, but just to show that 'universal' wont mean 'everybody'. I believe for UBI the devil is really in the detail.

The devil is always in the details, but there are vastly more details to manage with our current amalgamation of overlapping safety net systems spread across the local, state and national level. One of a UBI's strongest selling points is that it's comparatively very simple.

if it is the US govt giving UBI to its citizens, then they should give it to all their citizens, no matter where they are?

The US govt, for reference, taxes the income of US citizens wherever they are in the world..

Just citizen, or also green card holder? What about illegal immigrants? (And in the original provocative statement I meant EU citizens living in EU, should they get UBI from US? (just to debunk the often heard 'its for everyone'))

Well I don't know about green card holders or illegal immigrants. perhaps there would be a qualifying period for new members of the club in any case? If it is a US benefit then why would they give it to somebody elses citizens?

If you want to talk about promoting a world government then yeah lets do it and forget about borders?

while i agree that there are very, very few bad apples, and our intuitions incorrectly overweigh them to our detriment, the power imbalance in labor won't be solved by ubi. it can never be big enough to make that kind of difference (see: cost of stimulus checks relative to the economy), and that's why it's a frustrating distraction wasting cycles when we could be talking about ways to level the playing field, like removing the advantages to capital, providing real-time information symmetry to workers, dampening corporate protection, enforcing anti-trust, and dozens of other more effective policies.

ubi is like candy when what we need are balanced meals.

Being able to be an active member of a society has costs associated and without the ability to at least cover for them you will be stuck as a social outcast, because you will already be considered a lesser of a candidate while job seeking. Proper dressing, hygene, transportation, meals, able to crash under a roof with basic access (electricity, modern communication tools)...

Insensitive people seem to give all these costs for granted. If you don't have these stuff you are literally stuck, with a retroactive and compounding effect.

Previous threads:

$500 a month, no strings attached, to fight poverty worked - https://news.ycombinator.com/item?id=26345394 - March 2021 (38 comments)

Stockton’s Basic-Income Experiment Pays Off - https://news.ycombinator.com/item?id=26333206 - March 2021 (1 comment)

The promising results of Stockton’s basic income experiment - https://news.ycombinator.com/item?id=23855967 - July 2020 (83 comments)

Stockton extends its monthly $500 UBI payment experiment - https://news.ycombinator.com/item?id=23393496 - June 2020 (169 comments)

Stockton, CA Tested Universal Basic Income. Here’s How Recipients Spent It - https://news.ycombinator.com/item?id=21153341 - Oct 2019 (17 comments)

Stockton residents got $500/month basic income, spent on food, clothing, bills - https://news.ycombinator.com/item?id=21153063 - Oct 2019 (97 comments)

Stockton, California to give $500 a month in basic income to some residents - https://news.ycombinator.com/item?id=17649021 - July 2018 (25 comments)

Free Cash to Fight Income Inequality? Stockton, CA Is First in US to Try - https://news.ycombinator.com/item?id=17189733 - May 2018 (67 comments)

Stockton, CA to provide a universal basic income for its poorest residents - https://news.ycombinator.com/item?id=16220816 - Jan 2018 (3 comments)

3yrs ago, Stockton was bankrupt. Now it's trying out a basic income - https://news.ycombinator.com/item?id=15803729 - Nov 2017 (2 comments)

The latest experiment in basic income will be coming to Stockton, California - https://news.ycombinator.com/item?id=15509335 - Oct 2017 (118 comments)

How do we square this with recent nation wide experience that increased unemployment benefits are causing people to sit out the labor market?

eg.: https://news.ycombinator.com/item?id=27086861

There was also a pandemic, hard to compare

IMO if this just becomes a round-about way to raise the minimum wage, I'm all for it.

I hear a lot of talking heads explaining that there's more jobs posted now than ever but people just don't want to do them. Therefore, we should cut unemployment benefits. My take on it is... how about instead, they raise wages?

It's really strange to hear the exact same talking heads decry that wages have remained stagnant for decades. It's not like the stick is the only mechanism we have to incentivize behavior.

[edit] Labor market prices are a function of supply and demand; a good way to raise wages is to constrain supply. This is a nice way to do that, IMO.

They can raise wages, and some companies already have (Chipotle). But they will pass that cost on to the consumer and now your worker's raise is negated as inflation eats it up.

The assumes the price of goods outpaces wages raised. NYC minimum wage buys you more McDonalds in NYC compared to Alabama. So the cost of goods in NYC has not risen past the gains in wages.

Inflation is actively managed by the Fed, they can simply constrain supply of money. There's almost no world in which this doesn't happen anyways, given the macroeconomic climate.

A key difference is that the cash payments in this study were unconditional, which is pivotal to the hypothesis being tested.

Unemployment stops if you take a new job. This increases the uncertainty and risk - why take a new job that might not work out and potentially pays less money than what unemployment pays? The risk is not worth the reward in this situation.

Now if instead someone tells you that you are getting cash for 24 months regardless of whether you find a job or not, you are incentivized to find work as fast as possible because you get to keep the cash either way. If you find a job, great now you have extra money for savings, and are reducing risk and uncertainty, rather than increasing it.

This is more of an assumption about why people aren't returning tot work. Reality is a lot more complicated: kids can't go to school; low paying jobs are even more shitty now than before; people are still refusing to wear masks and some get violent if you ask them to; employers are doing the minimum necessary to meet code; etc. So this isn't exactly an ideal test environment.

Since some states are cutting back benefits, we get to see a live experiment. If employment numbers go up in these states, then that might be a correct assumption. But there's a real chance that employment remains low.

Labor shortages were an issue before the pandemic. Society just cheered because we called it "low unemployment."

I posted this below but the facts available actually discredit this narrative that enhanced benefits are causing people to sit out labor market participation. https://www.cnbc.com/2020/06/25/people-receiving-unemploymen...

I have personally spoken with 3 business owners who have work, would like to hire back their old workers, but those workers won’t come back because they would lose money by working.

Regarding the study you quoted, the authors note: “ One should be cautious with a causal interpretation, however, because we also find evidence that those collecting UI benefits may differ from those who do not collect benefits along unobservable dimensions. Specifically, those who receive UI benefits tend to have had higher-paying jobs than those who never apply for benefits, suggesting that they may be higher-skilled workers, on average.”

[Edit - my concern with UBI is that if a majority can continually vote for a rise in the UBI, by increasingly taxing a rich minority, eventually those tax levels will get to the point where less is produced. Even if people choose not to work if it pays more than working (my belief based on limited local experience - I certainly wouldn’t go to work if it paid less than staying at home!), it’s not relevant to UBI which is unchanged whether you work or not]

That sounds to me like the business owners are failing to pay competitively. If the unemployment benefits are higher than their wages, it's the wages that are the problem. Also, have you spoken to the ex-employees directly? How do you know they haven't moved on to better paying jobs and that's why they're not returning?

I've personally spoken to a regional manager for a chain that owns a number of small restaurants, and they recently faced a similar issue when the brass decided they would move all the drivers to wait-staff pay. They lost EVERY driver on staff when they saw their first check. They could make more money moving to Uber or competitors.

Pay competitively, or the market solves the problem for you. Yeah, there's gonna be the bad apple in the mix that would subsist on Unemployment benefits or UBI, but that minority isn't an argument why UBI is bad.

I don't believe in the argument around the concern that UBI can be raised so high by taxing the rich that it tips the scale. When 1% of the population controls such a high majority of the economy, at what point do you say that they're the problem, not the people on UBI?

thanks for your anecdotes

> But new research from the Chicago Federal Reserve throws cold water on that argument.

https://www.chicagofed.org/publications/chicago-fed-letter/2...

> June 2020 > using data from 2013 through 2019

"new research" ok.

> facts

NPR had an expert on unemployment and unemployed people on this morning who pointed out that this narrative is not supported by facts. Instead, the people who received these enhanced benefits have searched for jobs at a higher rate than those without.

https://www.marketwatch.com/story/people-search-less-for-job...

That's just cheating. They're comparing people who have been unemployed long enough to lose the benefits to the recently unemployed. Obviously the former group will have underrepresented the people most independently inclined to look for a job, because more of those people will have found one before becoming members of that group.

You have to qualify for the expanded unemployment benefits but I suppose that's a detail to be overlooked if it's inconvenient.

"You have to qualify for the expanded unemployment benefits" is exactly the point. The criteria for qualification causes a disparity between the experimental group and the control group, which invalidates the experiment.

> How do we square this [...] increased unemployment benefits are causing people to sit out

To start with, while it's a current talking point, it's not at all clear that this is actually what's happening.

Giving people cash unconditionally would be much better than requiring them to not have any job . The former encourages recipients to retain their jobs or even look for higher paying jobs, and handles corner cases better(single mom working two jobs ineligible for unemployment on losing one).

There is an even better thing.

If I give everyone $1k/m for free, I know a good percentage is going towards housing, food, and transportation.

Why not just control those items more? Why give out cash when we know all the landlords will just up the rent accordingly?

Better to have good housing construction policies, good food distribution policies, and transportation as well.

Then we can give out credits to everyone.

> Better to have good housing construction policies, good food distribution policies, and transportation as well.

City governments are ripe for corruption. They make bad choices.

By considering employers spend billions of dollars a year lobbying to keep the power imbalances.

Think about the efforts Amazon and Walmart go to keep their employees from unionizing.

Consider how Uber misclassified workers as contractors to avoid providing legal benefits.

Or how every year before the pandemic there was push back on not just raising minimum wage laws but efforts to completely repeal them.

This goes back in history to unsafe working environments, overtime, health insurance, workers comp, etc…

Stock markets are at record highs, companies have record profits, economic inequality is at all time highs…yet businesses continue to push the narrative they pay to much to workers and the would rather strip all Americans of benefits, who really need them, just so they can fill a handful of jobs at below market rates and below living wages.

Probably because it's one town.

Imagine if an entire country did this, or the entire world. The base currency would quickly become worthless because everyone would have it.

This is kind of like saying "can't we all just get along?" because a kindergarten class somewhere in Minnesota has kids who don't fight.

That was mostly in food service and hospitality, wasn't it? Pay is traditionally lousy, working conditions are bad, and there's a pandemic doing on. Can't fault anyone for not going back to that!

I think it's quite hard to separate the exogenous shock of the pandemic from how people are looking at the nature of their job.

There's entire industries that got upended or closed overnight. If it was as 'simple' as just a recession or layoffs, I think that would be more of a controlled test.

But just off the top of my head, restaurants, grocery stores, retail, child care. Assuming people would just come back sort of implies that everything is the same, but it is most certainly not. Anecdotally, I've heard from friends who are nurses that feel severely burnt out from this. The pandemic sort of flipped proverbial monopoly board, and I don't think you can restore the game to the exact state it was in.

Quite honestly, is that even a bad thing? People who are sitting out of the job market probably were not good at their job, or hated it anyways. If they're happier (and not "taking" the jobs of others) then that seems fine. Especially considering that the other 99% who do go back to work also benefit.

Millionaires say, "Give your children enough money to do something, but not enough money to do nothing."

It applies across the board. Studies of poverty traps provide evidence of learned helplessness. If you're rich, most things that go wrong can be solved with money. If you're poor, money isn't a solution to any problem.

Even $500 a month solves a lot of problems that will enable the individual to get out of a hole they'd otherwise die in.

There are producers and there are consumers. For millennia, the benefit of the work done by productive people has flowed, disproportionately to unproductive people.

Society is revolting at the unfairness. Rich folks get more than $500/mo on their mortgage interest deduction. Poor people have nothing. Get nothing. Work hard barely to survive.

The lack of equity is destroying society. Our human contract with each other is being honored by one set of people and not by another. Selective application of rules is resentful.

There are producers and there are consumers. The producers aren't going to stop producing because the government gives them food, water, and shelter. These are basic human needs. Basic needs for any living organism. We treat other humans worse than animals, yet they are.

We have to change our collective consciousness and be honest with ourselves or we won't progress civilly.

I posted this link because it demonstrates that policies locally (in this case, a city) can make a meaningful difference, while efforts are underway (but take longer) to enable robust social safety nets at scale using public policy. It’s also a valuable datapoint from a behavioral economics perspective. For many, if help is provided, they can succeed.

$500 tax free is quite a lot of money to a low income person. That's nearly two weeks of work at minimum wage; probably a bit more than that after factoring in taxes.

It's not a lot of money. It's $1.8 Trillion a year if we gave it to every American. The GDP of the USA is $21 Trillion, so we are talking about 10% of our GDP going to eliminate poverty.

Remember, in 2008, we gave about $17 Trillion to the banks.

It's a lot of money to a poor person.

The fact that it's also not a lot of money to the economy in general just amplifies how little is needed to make a big difference to a lot of people.

I agree. I think the $500 tax savings home owners get makes not a lot of difference in their lives and simultaneously, they'll believe they earned it, while scoffing at the idea of giving free money to someone who has none.

We're not very ... self-aware as a society.

This is inspiring. It's great to see that the money is used as capital to improve themselves and increase their chances of long-term prosperity. This makes me even more excited to see what further research illustrates with implementing similar programs.

How about give everyone a state id first.

It'd solve a lot of problems and we're (in the US) already living with most of the down-sides of one but without any of the benefits; however, it's a somewhat unpopular idea among Democrats and a very unpopular idea among Republicans. Without a major shift, it's not gonna happen.

Can you cite a source about republicans not wanting state IDs? The data would seem to contradict you.

I feel like Republicans push back against the idea of one being compulsory. Its a strange state of affairs for sure.

Republicans want voter ID, but they don't want to mandate IDs that must be carried. Democrats seem to stand for the inverse.

We already have state IDs. Talk about making them mandatory and provided, automatically, for free and useful for the things a national ID is useful for (replacing our widespread and awful use of Social Security numbers as a de facto personal ID for interactions with business and government, for example) and you start to run into resistance in a hurry.

They do tend to favor adding ID requirements to voting, though, yes.

What's that have to do with UBI? I'm confused.

OP probably asserts that government that struggles to issue trivial piece of plastic to all of its citizens has absolutely no capability whatsoever of executing something as grandiose as UBI.

Not really related, but related enough to be interesting: https://ubic.app/ This is a proof-of-passport cryptomoney: You receive money on a regular basis simply with your passport, making it a de-facto UBI

Tangent of a tangent: Wiki says "in 2006, only 20% of Americans had passports. As of 2011, approximately 37% of Americans have passports or passport cards."[1]

Did the 2008 financial crisis somehow double the number of Americans with passports?

[1]: https://en.wikipedia.org/wiki/Identity_documents_in_the_Unit...

Getting people on the ropes into 'safe situation', especially residence, is no doubt key to getting them to stand on their own two feet, but this is a separate discussion from UBI.

the best argument I've heard for UBI is that it reduces the overhead of administering the allocation of benefits that we are going to provide anyway. Right now, much administration is dedicated to validating that an entitlement exists and can be proven. under a UBI regime, less of the money would be spent on administration because entitlement is seen as a given. In a way, advocating for UBI is advocating for smaller government. Allocating UBI to everyone and taxing earnings to a greater extent seems to possibly result in less overhead for the same outcome.

Good luck getting rid of the current admin staff. They won't leave without a fight.

Considering they'd be getting UBI, maybe just make it high enough they'd leave willingly.

It's not clear that the staff would have to be fired. Their work can just be directed to more directly helpful things, such as helping people find jobs, training, child care, etc. rather than operating some arcane qualifying system of dozens of poorly integrated gatekeepers.

The real question is how we pay for UBI. UBI, being universal, means everyone gets money. Where does that money come from, including over time and into the future?

How much do we spend on the benefits that are currently validated including the admin overhead? How much would be spent on UBI? I'm guessing that we don't spend as much on that admin overhead as we would under a UBI plan that includes everyone.

> Where does that money come from?

The simple answer is taxes. Companies don't get UBI since they're inhuman. And rich people will almost certainly pay more in taxes more than they receive in UBI.

> I'm guessing that we don't spend as much on that admin overhead as we would under a UBI plan that includes everyone.

My intuition says the opposite. Speaking in startup terms, it's significantly easier to roll out a new feature to all users, or offer a discount to all customers, or enact a policy for all employees than it is to create two or more groups to determine who gets what.

Though our guesses disagree, I'd hope we could agree to experimentally test the hypothesis, and to enact policy based on what the data show.

I want to help the less fortunate. I don't think our Reaganomics style tax structure where the rich pay less taxes is going to support UBI.

If we just throw out our existing tax policy and replace it with something less complicated and fair then we don't need UBI.

Here's a quick blog post with a link to more depth, on how UBI can be good for the economy. https://www.scottsantens.com/the-cost-of-universal-basic-inc...

In computing terms, I like to think that monetary flows are how the market shares information. So having more people "in the game" will increase the fidelity of the information, opening new markets. For example, discount retail might be able to serve more specialty niches.

In the uk we spent £2.6bn on staffing the department for work and pensions in 2017 and for that 2.6bn cost they dispensed £1.9bn to “job seekers allowance” claimants (unemployment benefit).

The 2.6bn is staffing costs only, it ignores e.g. fines and legal costs for when the dwp gets things wrong. The dwp was wrong almost 400 times per day, every day of the year if you count the tribunal rulings against them in 2017.

UBI seems cheap.

If we take the 2.6b + 1.9b that is 4.5b spent today. Equally divided among the UK population of 68.1m, we can give about 66 pounds a year to each person for the same cost. Is 66 pounds a year solving anyone's problems?

> The real question is how we pay for UBI. UBI, being universal, means everyone gets money. Where does that money come from, including over time and into the future?

Under the existing system there are benefits and they phase out aggressively. Some lower income people experience the equivalent of marginal tax rates in excess of 100%. It's a poverty trap -- you can't make a little more money because if you do, the government takes all of it. (And it's little better when they take 80% or 90% of it.) It's very bad.

Under a UBI the formal tax rate would be "higher" -- someone making low wages might be paying 30% compared to what is on paper 0% now, but it would really be 30% instead of 80+% after benefits phase outs that wouldn't exist. It effectively allows you to use a flat tax and end up with a system more progressive than the status quo. (Or you can make it more or less progressive as you please by changing the amount of the UBI.)

The largest beneficiaries of this are the working poor; the lower middle class. Right now they make "too much money" and have lost all the benefits. Under a UBI they would still receive some, e.g. at a 30% tax rate and a $12,000 UBI, someone making $30,000/year would net $3000.

The effect on people right in the middle would zero out. They'd nominally pay more in taxes and then get it all back.

But that $3000 has to come from somewhere, so the upper middle class might pay slightly more than they do now.

Maybe this means software developers would be paying slightly higher taxes. Or maybe not -- eliminating poverty traps is likely to produce economic benefits. First, people with less money have more, and are likely to spend it, which helps the economy. Second, it would likely produce an increase in wages, because people would be less desperate for jobs and employers would have to pay workers more. Both increase the tax base which allows the same level of benefits at a lower tax rate. Also, corporations would pay some of the taxes but only individuals would receive the UBI.

Realistically most benefits would not be replaced with UBI. People are not going to accept letting people who blow their UBI payments starve in the streets or go without medical treatment. The majority of benefits, including the most expensive (Medicare and Medicaid), would remain.

Agree, but also the issue with discussing UBI is a lack of data that is objectively applicable. Any study that tests UBI on a small scale is flawed from the get go, you can't have a placebo group, everyone knows they're in a study, and participation is voluntary.

So then the debate becomes impossible, because the pro UBI side can only talk in theory and hypotheticals, which is never going to swing anyone even slightly inclined to conservatism.

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