Beginning in November, a new UBI pilot with 2,000 low-income families in Massachusetts will be given $200 to $400 a month that can be used for anything from food to paying bills.
By: Shirley Leung.
Chelsea, one of the poorest cities in the state, is about to host a bold experiment in reimagining capitalism, one that may answer an age-old question: Can giving away money with no strings attached help people out of poverty?
Beginning in November, about 2,000 low-income families will be given $200 to $400 a month, money that can be used for anything from food to paying bills.
The trial, with $3 million in seed money and set to run for four months at first, is a version of the universal basic income concept that has long been debated, tested in small measures, but not implemented by any country. Tech entrepreneur Andrew Yang made it a plank of his brief presidential campaign.
The Chelsea pilot may seem like a simple way to support families living on the brink during the pandemic, but the social experiment could have broader implications — perhaps shedding light on the argument over whether giving money away without conditions encourages poor people to quit their jobs or spend it unwisely, or empowers them to make decisions to break the cycle of poverty.
“What we would love to demonstrate in this program is if you can rely on it for a certain period of time, it could lift your head above water and help you with a plan to move forward,” said Jill Shah, president of the Shah Family Foundation, which has worked on food insecurity and has donated $1 million to the Chelsea pilot.
The city of Chelsea is providing $1.5 million, much of it from COVID-19 federal relief funding. Two other institutions, the United Way of Massachusetts Bay and Merrimack Valley and Massachusetts General Hospital have contributed $250,000 and $200,000 respectively. Shah and other backers are raising additional funds to extend the pilot to six months, if not longer.
Chelsea in many ways is the city in the US to test such a controversial concept. A majority Latino city with about 40,000 residents packed in dense neighborhoods, it was hit early and hit hard by the novel coronavirus, and continues to suffer higher numbers of infections, deaths, and job losses.
A survey of the Chelsea families enrolled in the program found a staggering 82 percent have endured a financial hardship over the past year, such as the loss of a job, drop in income, or health emergency. About 38 percent reported they sometimes did not have enough to eat — compared to around 8 percent nationally.
Even before COVID-19 wrecked the economy, too many Americans had been living on the financial edge: More than a third are unable to cover an unexpected $400 expense, according to an oft-cited Federal Reserve study. The pandemic has put millions more, largely those in low-wage jobs, out of work, and their debts are mounting. Several senators — including Democrats Ed Markey and Kamala Harris, and Independent Bernie Sanders — introduced bills after COVID-19 hit that would temporarily send monthly checks of $1,000 to $2,000 to many Americans to help make ends meet.
“This pandemic makes the case for a guaranteed income,” said Maria Belen Power, associate executive director of GreenRoots, a Chelsea environmental justice group that has been working on public health and food insecurity issues.
Currently, the biggest, most high-profile guaranteed income initiative is taking place in Stockton, Calif. Launched by Mayor Michael Tubbs in February 2019, the program is giving 125 families $500 a month through January.
In Chelsea, City Manager Tom Ambrosino said the idea was born of necessity: The city has been running a food pantry during the pandemic, but with winter coming, officials didn’t want so many people standing in line, hours on end in the middle of an outbreak of a contagious disease to collect boxes of free food. So the city will close its food pantry at the end of October and issue a Visa debit card called “Chelsea Eats” to low-income families that can be used at supermarkets and any merchant that accepts the card. (Other food pantries run by nonprofits in Chelsea will remain open.)
About 3,600 households applied for the monthly payments of $200 to $400 each, depending on family size — far more than available slots in the program. So in September, Chelsea held a lottery to select 2,074 families.
Ambrosino doesn’t like to trumpet the “Chelsea Eats” program as a basic income initiative because of the divisive politics surrounding such a policy. “I wanted to avoid a philosophical debate,” he said. “We needed to solve a problem. Here’s a way to solve it.”
As the wealth gap widens in America, some point the finger at capitalism, a system that is tilted toward the wealthy, who through tax cuts and other favorable government policies, are getting richer, while the poor are being left behind.
Universal basic income is an attempt to reduce inequality, bolster safety programs, and remove the stigma of welfare.Finland conducted what is considered the biggest basic income experiment from 2017 to 2018, giving monthly stipends of 560 euros (about $630) to about 2,000 unemployed residents. The government found recipients were happier and healthier, but that the aid had little impact on employment compared to a control group that did not receive the money.
So far the Stockton, Calif., pilot of 125 low-income families has shown 40 percent of expenditures have gone toward food, 25 percent to merchandise, and 11 percent for utilities. Less than 2 percent was spent on tobacco and alcohol, and fewer than 2 percent of enrollees are unemployed.
In my interviews with Chelsea residents enrolled in the debit card program, they had no plans to quit their jobs. In fact, they said they are grateful to be working again after the pandemic shut down parts of the economy.
Michelle Guardado, 32, said she owes $3,000 in back rent and the monthly stipend can help her pay it off. Speaking through a Spanish interpreter, Guardado told me she was out of work for four months and didn’t qualify for unemployment benefits. She lives with her 12-year-old daughter and a 34-year-old cousin who is disabled.
Guardado said she was only recently able to return to her full-time schedule at a seafood factory in Gloucester. She earns a little less than $400 a week, and she is expected to receive about $300 a month from the debit card program.
“It’s a huge help for me,” said Guardado. “A lot of people have lost their jobs. Even people who are still able to work, they aren’t able to work their full hours like before.”
Chelsea resident Yenis Zelaya, 39, lost her job at a laundromat and was out of work for five months. She couldn’t collect unemployment benefits and fell behind on rent and other bills, including about $1,000 to Eversource. In August, she landed a job as a teacher’s aide in a day care facility and expects to receive $400 a month through the Chelsea pilot.
“I didn’t have money for five months. Now I need to pay everything,” said Zelaya, who has three teenage children. “This money will help me a lot.”
Researchers from Harvard Kennedy School, working with the Shah foundation, will study the effects of the Chelsea initiative on residents enrolled in the program against those who did not receive payments. Jeffrey Liebman, professor of public policy at the Kennedy School who is leading the study, hopes the pilot will shed light on how policymakers can best help the neediest populations.
“With all of the current attention on inequality, I hope there is still enough energy to also focus on reducing poverty,” said Liebman who is also director of the Rappaport Institute for Greater Boston.
To United Way chief executive Bob Giannino, the real value of the Chelsea pilot is removing the indignities of receiving public assistance — whether it’s standing in line for food or battling a bureaucracy for benefits. Giannino knows the feeling too well, having grown up in a family that relied on government handouts.
“The tactic is putting money on a card so people can buy their own food,” Giannino said of the Chelsea program. “The strategy is independence. The strategy is dignity.”
