Universal Basic Income Pilot In Chicago Takes Cues From California
A Chicago task force dedicated to studying economic inequality released on Thursday its recommendation to explore a guaranteed income pilot and expand the Earned Income Tax Credit.
The recommendations were included in a 50-page report filled with data about stagnant wages and growing income inequality and highlighting personal stories of Chicagoans struggling to make ends meet despite working multiple jobs and sticking to strict budgets. According to the task force, these proposals would put additional money in the pockets of low- and middle-income families to keep them above water financially.
Guaranteed income, often called universal basic income, is the concept of giving residents a no-strings-attached payment. In Chicago, the recently formed Chicago Resilient Families Task Force is recommending a trial to give 1,000 selected participants a $1,000 payment every month for a year and a half. In all, the pilot would cost $1 million a month or $18 million, in all.
The aim of the trial, to be paid for with philanthropic dollars, is to see if receiving a guaranteed amount every month would help struggling residents through “improved school attendance, an increase in savings, and improvements to health and well-being.”
The task force’s recommendations to change the Earned Income Tax Credit, or EITC, includes broadening eligibility for the credit, increasing the minimum credit, spreading out the payments over the year, and creating an automatic filing option. The EITC is a tax credit for low- and moderate-income workers.
47th Ward Ald. Ameya Pawar, who’s currently running for city treasurer, first called for the creation of the task force in a City Council meeting last July. Pawar said Chicago’s exploration of new economic opportunity programs is not idealistic, but necessary in a changing economic climate.
“It is time for cities like Chicago to lead a national dialogue on income inequality, and in part of that, recognize that there is a coming storm,” Pawar said. “This sort of confluence of student loans, a lack of affordable housing, and the cost of child care is ... impacting people from the upper middle class all the way down to the working poor. And that is something we're not talking about.”
Nationwide, other cities have been experimenting with the idea of guaranteed or universal basic income for its residents, and Chicago’s task force looked to leadership in places like Ontario, Canada; Jackson, Mississippi; and Stockton, California to form its own pilot.
The Stockton pilot may be of keen interest since it’s set to kick off this month. Starting Feb. 15, 100 Stockton residents will receive $500 payments every month for 18 months.
The leader championing that effort, Stockton Mayor Michael Tubbs, said that as the son of a single mother, he knows the struggles of low-income families all too well.
“My mom … worked incredibly hard,” Tubbs said. “No matter how hard she worked, it was still hard at the end of the month to pay bills. So I would watch her [go to] the check cashing places, or watch her lose sleep, or watch her borrow from Peter to pay Paul all the time.”
Funding for Stockton’s pilot program and Chicago’s Resilient Families Task Force comes from the Economic Security Project. Chris Hughes, one of the organization’s co-chairs and a co-founder of Facebook, said the cities have two things in common: They have problems that reflect greater issues happening nationwide and they have leaders seeking innovative ways to solve them.
“Any time a leader comes forward and says, ‘Hey, I believe that we need to have a broader cultural and political conversation about economic opportunity, economic justice, and the role that cash can play in delivering on the American Dream,’ we say absolutely,” Hughes said. “It's our role to empower those leaders to make that case.”
If Chicago launches its own guaranteed income pilot program, the Economic Security Project has pledged to help provide financial support, Hughes said.
From MLK to Nixon
The idea of guaranteed or universal basic income is not a novel one for the U.S. In Martin Luther King, Jr.’s 1967 book, Where Do We Go From Here: Chaos or Community?, he outlined his vision for using what he called a direct approach to solving poverty by giving Americans the income they need to pay for what they needed. A universal basic income was also a part of former President Richard Nixon’s Family Assistance Plan.
And in at least one U.S. state, the idea has taken root. In Alaska, allresidents, including children, receive an annual dividend from a state-owned fund and has since 1982. The money in the Alaska Permanent Fund comes from oil revenues, and payment amounts have varied from about $800 to $2,000 throughout the years.
Advocates, like the Economic Security Project, argue that similar programs are needed as the country’s job landscape changes. They’d also like these efforts to become part of a greater conversation about how social services are structured. Modernizing EITC, for example, would be a stepping stone in improving other policies, according to the Economic Security Project.
“We can make it bigger, we can make it monthly,” Hughes said. “We can expand the definition of work to include child care, and elder care, and other things. And we end up with an income floor for working people that is strong and secure and the kind of foundation that we can build from and think about other economic policies … on top of it.”
Others, like Deanna Grant, argue that there should be more to giving residents money — like requirements on how it’s spent or mandated education. Grant, who has specialized in tax accounting for 20 years, said reimagining EITC or giving other kinds of monthly disbursements are in vain without proper financial education on how to be a good steward of money.
“Whether you give it to (people) annually or monthly, it won’t matter,” Grant said.
Currently, neither the Stockton pilot nor the recommendation for a Chicago pilot include any requirements or additional services to those included in the study.
“Use of the funds would be unconditional. Recipients can decide how the income can best meet their unique needs and goals,” the Chicago task force’s report says.
Stockton’s economic narrative
For Stockton’s pilot, dubbed the Stockton Economic Empowerment Demonstration or SEED, there is no limit on individual household income but participants are chosen from neighborhoods where the median household income is at or below the city’s 2016 median of $46,033 — the most recent census estimate when the program was announced in 2017.
SEED mailed approximately 1,000 applications to residents in the eligible neighborhoods and then randomly selected 100 participants from the responses. The program hopes to evaluate if having an extra $500 per month can impact financial insecurity and if it can encourage recipients to take “agency over one’s future” by making changes such as going back to college or trying other career training programs.
Tubbs said the system of choosing residents by neighborhood income “still provides a little bit of wiggle room” to include more residents of different income levels.
“You could be more than the median and still qualify as long as the rest of your census tract in your neighborhood is at the [median] or below,” Tubbs said. “But ideally, we'll get to a point — whether it's at the state level, etc. — where there's a permanent dividend given to everyone no matter where you live or how much you make.”
The Chicago task force wants to choose participants in a similar way. The group’s recommendation calls for all 1,000 participants to live in neighborhoods below the area’s family median income: $59,300 for an individual, $67,700 for a family of two, $76,200 for a family of three, and $84,600 for a family of four, according to the task force report. Targeting those most in need can help determine if the payments are helping to alleviate poverty and inequity, the report says.
Challenging narratives about the poor
Some critics argue that giving cash, without any rules on how it’s spent, would deter people from wanting to work. But other examples show the opposite: cash payments in Alaska didn’t change the number of people with full-time employment, but part-time work increased by 17 percent, a study from the National Bureau of Economic Research shows.
Pawar believes that line of thinking says more about how we treat low-income people than it does about their actual decision-making.
“I just don't understand why economic development means giving rich companies money, but giving poor people money means you're wasting money,” said Pawar, who was against the tax incentive-filled attempts by Chicago — and Illinois — to lure Amazon to the city. “So I want to challenge the narrative that we have and say: Why can't we just achieve the greater good by actually helping people make ends meet? Instead of this really horrible American ethos where we believe that poor people make bad decisions, and therefore, we shouldn't help them.”
‘The upper-middle class all the way down to the working poor’
And in Chicago, Pawar sees guaranteed income as an economic policy that would also benefit residents in his upper-middle class ward. Financial problems such as mounting student loan debt, a lack of affordable housing, and the rising cost of child care are issues causing Chicago residents across income levels to struggle, he says.
“If people in my ward are saying, ‘I can barely hang on,’ I need to convince them to see why a single-parent household or why someone making $12 or $13 an hour is not just trying to hang on. They're fighting for their life,” Pawar said. “And there is a coalition to build the earned income inequality. And cities have an opportunity to lead it.”
Arionne Nettles is a digital producer on WBEZ's news team. Follow her on Twitter at @arionnenettles.