Under the experiment, which was funded by OpenAI founder Sam Altman, 1,000 participants in Texas and Illinois received $1,000 per month for three years starting in 2020, with a control group of 2,000 additional participants who received $50 per month. The recipients earned an average income of less than $29,000 and earned within 300 percent of the federal poverty level.
A group of academics from the University of Toronto, University of Illinois at Urbana-Champaign, University of Michigan, and University of California, Berkeley just released their review of the effectiveness of the experiment for the National Bureau of Economic Research.
Among their key findings:
- Individual income among the recipients fell by about $1,500 per year relative to the control group, excluding the income transfers.
- For every one dollar received, the study notes, total household income excluding the income transfers fell by 21 cents.
- During the experiment, the average unemployment duration increased by 1.1 months compared to those in the control group.
- There was a 2 percent reduction among the basic income recipients of those who were actively working in the labor market.
- Participants saw a 1.3 to 1.4 hour per work reduction in hours worked.
The results are not surprising. Wherever these experiments have been tried around the world, from Canada to Europe, basic income programs have either been abandoned or haven’t been proven to work.
Tubbs, Altman and others promoting these basic income experiments like to tout their status as being “data driven.” However, the proponents typically don’t account for the flaws in the research, such was the case with the report reviewing the findings of the Stockton basic income experiment in which we identified numerous flaws in the study that make any conclusions about the program’s success irrelevant.
In this case, the proponents are really trying to spin the flaws with basic income the researchers identified in the paper. A CBS News story covering the report’s findings spins that “giving low-income people guaranteed paydays with no strings attached can lead to their working slightly less, affording them more leisure time.” The slickly designed project website overwhelms the readers with quotes about a participant being able to afford braces or another participant who paid their car bill and rent with the money, with users having to scroll far down the page to find the negative aspects of the experiment identified above.
Tubbs and supporters of basic income will argue that the call for basic income is testament to the fact that government isn’t spending enough on social services. Not true. The federal government spends more than $1 trillion annually on programs ranging from Medicaid to food stamps in addition to the billions more California spends on CalWORKs, homeless programs and more.
For his part, Altman argues that, “as technology continues to eliminate traditional jobs and massive new wealth gets created, we’re going to see some version of this at a national scale.” However, the history of the U.S. economy is always evolving and innovative. Past tech disruption has not involved giving people financial incentives to remain stuck in poverty.
Rather than giving away other people’s money out of guilt for the great success of one’s company or industry, it would be encouraging to see tech execs like Altman argue with the same zeal for school choice and removing AB 5’s restrictions on entrepreneurship – real steps that have been proven to move people up the economic ladder and prepare them to succeed in a changing economy.
Dr. Wayne Winegarden is a senior fellow in business and economics at the Pacific Research Institute. Tim Anaya is PRI’s vice president of marketing and communications and the co-author of the forthcoming PRI book, The California Left Coast Survivor’s Guide.
