Ann Arbor recently joined the growing list of cities across the nation exploring what happens when lower income families receive a steady stream of cash in their pockets each month — no strings attached.
Last month, Ann Arbor City Council approved a guaranteed basic income program — funded by $1.6 million in American Rescue Plan Act dollars — that would provide 100 income-eligible entrepreneurs with $525 a month for 24 months. The University of Michigan’s Poverty Solutions initiative is helping run the pilot.
Ann Arbor joins Louisville, Kentucky; Madison, Wisconsin and dozens of other cities across the U.S. testing the idea that recurring cash sets families up for financial success. Earlier this year, a national nonprofit pitched a plan to bring a guaranteed income program to Detroit.
The gist of guaranteed income is this: consistent cash payments to people with no restrictions or work requirements to help them meet their basic and most pressing needs, the way they see fit. Proponents of guaranteed income programs say it provides a cushion for strapped families.
“A guaranteed income is meant to equalize opportunity through economic security,” said Saadia Van Winkle, a communications strategist at Mayors for a Guaranteed Income, a network of city leaders advocating for guaranteed income, in an email. “It’s an effective way to combat several factors that are stifling economic mobility — the coronavirus pandemic and its near and long-term economic fallout, our country’s history of entrenched poverty that hasn’t ebbed in decades and the growing concentration of wealth at the very top.”
Ann Arbor’s model: $525, 24 months, 100 entrepreneurs
Ann Arbor’s program would randomly select 100 individuals and provide $525 a month for two years. It’s meant to help entrepreneurs with low and moderate incomes, at 300% of the federal poverty level. In other words: a single person earning $43,740 or a three-person household making no more than $74,580.
“It could be someone who actually has established a small business that’s actively operating to someone who occasionally does yard work and mows lawns for neighbors for pay, or someone who does babysitting on the side. So, we’re really casting a broad net when we talk about … entrepreneurial activity,” said Kristin Seefeldt, an associate professor at the University of Michigan, who is overseeing Ann Arbor’s pilot program.
Ann Arbor residents who receive public assistance and those who demonstrate economic hardship will be prioritized. Individuals who previously had an incorporated business can also participate, but they must meet income requirements and show need.
Administrators of the program are aiming to launch it in September, with payments going out in December or early next year. To receive updates, go to bit.ly/AnnArborBasicIncomeProgram.
“Basic income is really embracing this idea that people need cash and they need that cash to be flexibly used. And, moreover, we also know that our welfare system really has a lot of stigma attached to it and there’s a lot of hassles and bureaucracy associated with accessing programs. One of the tenets of guaranteed income is that it’s providing assistance with dignity. Here’s cash, you figure out how you want to use it, you know best,” Seefeldt said.
Researchers will be studying the program.
Seefeldt said that includes changes in participants’ well being, from their mental health to economic conditions. On the entrepreneurial side, researchers will be tracking if people are able to put more time and resources into their business or if they pull back from the gig work they do to make ends meet and pursue other opportunities.
What other cities are doing
There are at least 40 guaranteed income programs in the U.S., according to Mayors for a Guaranteed Income, and they grew after the pandemic hit.
YALift! is one of those programs out of Louisville, Kentucky. It received 1,100 applications when applications opened up, said Colleen Reilly, project manager of economic mobility at Metro United Way, serving parts of Kentucky and Indiana.
Organizers randomly selected 151 participants to receive $500 a month. It was geared toward young adults between 18 and 24 years old in three under-resourced and disinvested neighborhoods, Reilly said. The payments went out from April 2022 to March 2023.
Evaluations are still ongoing, but Reilly expects outcomes to be positive.
“We assume that we will see things like reduced income volatility — those month-to-month fluctuations that households face,” she said. “And we expect that our recipients will also be more likely to find full time employment. Other cities are finding that it’s actually increasing participation in the workforce.”
One participant, for instance, is a full time college student working multiple jobs, she said. The extra cash alleviated stress by helping pay for rent. Making guaranteed income programs sustainable means investing public dollars and not only relying on philanthropic funds, Reilly said.
Over in Wisconsin, the Madison Forward Fund — which launched last September and runs through August — provides 155 families $500 a month for a year.
“The program is a small demonstration pilot motivated by a need to better understand how unconditional cash transfers impact overall family well-being,” said Blake Roberts Crall, Madison Forward Fund program manager, in an email. “The research team is collecting data to assess numerous outcomes, including financial stability, employment, housing, child well being, and physical and mental health.”
There’s evidence, advocates say, that such a program works because of how the expanded child tax credit throughout the COVID-19 pandemic reduced poverty. The payments in 2021 cut child poverty nearly in half.
Michigan families used the payments on the basics — food, rent, child care, utility bills and clothing.
“Guaranteed income programs are flourishing across our country, and they are proving to be an impactful tool to combat generational poverty,” said Ann Arbor Mayor Christopher Taylor in a news release.