Economy

What Will Happen When This City Gives Residents Income With No Strings Attached?

CREDIT: Christophe Ena, AP

Utrecht Mayor Aleid Wolfsen

The city of Utrecht in the Netherlands is about to embark on an experiment to see whether giving residents a universal, unconditional income can work.

At the end of the summer, the city will team up with University College Utrecht to put the roughly 300 people who will participate into one of three groups: one getting a monthly check ranging from €900 ($1,000) for an adult to €1,300 ($1,450) for a couple or family with no rules or restrictions, which they will continue to receive even if they find a new job or another source of income; another that will face a certain set of rules and restrictions; and a control group getting benefits based on current welfare laws. Currently, low-income residents lose their benefits if they can’t find a job.

The experiment, which will last for a year, aims to figure out whether giving people income without any requirements is harmful to them or the economy, or instead allows people more choice over when and how they work and gives them more time to spend on caring for family, say, or studying. “People say they are not going to try as hard to find a job,” Nienke Horst, a project manager for the Utrecht city government, told Quartz. The experiment will answer the question, but she thinks the results will be positive. “We think that more people will be a little bit happier and find a job anyway,” she said.

Other municipalities could also start their own experiments, and at least four are waiting to get permission from The Hague.

Utrecht is not the first place to try out unconditional benefits, often known as a universal basic income or UBI. The Ugandan government gave one group of people a year’s worth of income, or about $380, without restrictions and denied it to another group. Those who got the money invested most of it in skills and businesses and wound up 65 percent more likely to practice a skilled trade. They also worked an extra 17 hours, on average, compared to those who didn’t get the cash and saw a 41 percent increase in their earnings four years later, indicating that the impact lasted.

Another experiment in Kenya found that after poor families in rural areas were given an unconditional $513, their incomes were 33 percent higher than a control group a year later, their assets were 58 percent higher, their hunger was reduced, and their psychological wellbeing increased. Similar results have been found in Liberia, Mexico, and South Africa.

The idea has surfaced in developed countries before as well. In the 1970s, the Canadian city of Manitoba gave about 30 percent of its population a “mincome,” or a guaranteed level of income, although people who worked had the benefit reduced by 50 cents for every dollar their earned to encourage work. Poverty was completely eliminated during the period the program ran, public health improved, high school graduation rates went up, and while working hours dropped, it was mostly among young men who continued their education and mothers who spent time on caring for children.

The idea keeps cropping up. Cyprus’s legislature recently passed a guaranteed minimum income. The Swiss will get a chance to weigh in on creating a universal basic income. Greece’s finance minister has called for one.

And it’s also an idea that’s been floated here in the United States. In 1969, President Nixon proposed the Family Assistance Plan, which would have eliminated many federal anti-poverty programs and caseworkers in favor of a negative income tax that would guarantee a minimum income to all American families. But the idea failed to gain traction. A natural experiment happened here, however, when the Eastern Band of Cherokee Indians decided to distribute the profits of a new casino to its members in 1996, giving them each $6,000 a year. Poverty was cut in half, children’s behavioral problems declined, crime went down, and graduation rates went up.

The impact of universal basic incomes could be huge. In the U.S., giving people $3,000 a year could cut the poverty rate in half, while giving every child $400 a month would reduce child poverty from 22 percent to below 10 percent.