In one California city, offering free cash helped fight poverty and COVID

When Stockton, California, resident Gregory Gauthier had to take time off from his job at auto dismantler Pick-n-Pull to recover from hernia surgery, he was grateful to have a financial cushion courtesy of the city: a guaranteed paycheck.

The $500 no-strings-attached monthly stipend also proved vital for a 48-year-old woman who came down with COVID-19 early in the pandemic, before vaccines and treatments were widely available. The money allowed her to stay home from work and isolate while she was sick without having to worry how she would make ends meet. 

The stipend also helped Stockton residents buy or repair cars so they could get to their jobs, pay to dry-clean their work uniforms, and seek out better-paying job opportunities. More generally, recipients said the extra cash led to improved physical and mental health, findings from the Stockton Economic Empowerment Demonstration (SEED) show. 

Misconceptions "rooted in racism"

Advocates for the program — perhaps the nation's most closely watched experiment in guaranteed income — say the results amount to a proof of concept with important implications for public policy. The biggest takeaway: Offering low-income people a regular cash stipend is a powerful tool for mitigating income volatility and maximizing people's well-being. The findings also dispel the misconception that free cash disincentivizes people from working and breeds laziness, they said.

"It really proved so much of our thinking around economic security isn't rooted in data, it is rooted in racism," said former Stockton Mayor Michael Tubbs, who launched the SEED initiative in 2019, when he was in office. "Because the data shows the literal opposite of all the negative things people surmised would happen if you gave people a small cushion with which to survive and live with dignity."

Tubbs told CBS MoneyWatch that critics of the program predicted it would discourage people receiving the stipend from working and that they would likely spend it on drugs and alcohol.

"We were told that it was somehow going to reward sloth or laziness, but what we saw was it was actually spent on necessities and allowed people to spend more time with their families," he said.

Stockton, roughly 80 miles east of San Francisco and with a racially diverse population of just over 322,000 residents, made sense as a testing ground for basic income given many of its residents' precarious financial state. 

The city's median household income of $46,033 falls well below the state's, while Stockton ranks 18th in the nation for child poverty. Nearly a quarter of its residents live below the federal poverty line. 

How economic security fights viruses

Although unplanned, the eruption of COVID-19 in 2020 proved an ideal test of the concept given that one aim of providing low-income people with an income floor is to help them weather unexpected hardships. 

"It's an important part of contingency planning, disaster response and pandemic preparedness. Economic security is tantamount for those things," Tubbs said. "For some folks SEED was a blessing because it allowed people not to spread even further a virus that was wreaking havoc."

Researchers Amy Beth Castro and Stacia West concluded in a report that the $500 stipend "permitted judiciousness about COVID and what conditions workers would tolerate for poorly compensated work."

"Workers avoided COVID exposure by expecting more from their employers when they had an income floor," the report states.

The full data will be published Monday at 3 p.m. Eastern time in the Journal of Urban Health.

During the initial and most lethal phase of the pandemic, millions of essential workers held jobs that couldn't be performed from home, while many didn't receive paid sick days. That left two unpalatable alternatives: skip work and go unpaid, or risk exposing themselves and family members to a deadly disease.

"The guaranteed income acted as anchor or bridge during a very troubling time, especially for people who didn't have any paid time off," Tubbs said. 

Boosting public health by relieving stress

Castro, an associate professor at the University of Pennsylvania in the school of social policy and practice, and West, assistant professor at the University of Tennessee College of Social Work, said the demonstration highlights the direct connection between cash and improved psychological and health outcomes. 

"There are incredible public health implications because we know that financial stress gets into the body and can contribute to anxiety and depression. But more importantly, depression can impact one's ability to show up for family and in the workforce," West told CBS MoneyWatch. "We found that you can interrupt that if you choose a different path policy-wise that can have a tremendous impact on public health."

Tubbs, researchers and participants themselves also reiterated how important it was to be able to spend the cash however they wanted.

"Finances are so volatile month to month. One month it could be one issue and the next month it could be something else, so cash being flexible is powerful," Tubbs said.

For his part, Gauthier initially spent his stipend to buy a car, and later used the cash largely to purchase food and clothing for his four children as well as to pay bills.

"It was good that it didn't have a lot of restrictions on it," he said. 

There are now dozens of similar guaranteed income programs underway in the U.S. Tubbs expresses hope that more cities and counties will embrace the concept as the U.S. continues to emerge from the pandemic and Americans face the scourge of inflation.

"I'm more optimistic than ever because I believe the crisis we're in makes it that guaranteed income will be policy by the end of this decade," he said.