Detroit may implement a guaranteed basic income program, which could help to lift many Detroiters out of poverty.
Councilmember Coleman Young Jr. has submitted documents to the City Council and the City’s Legislative Policy Division to better understand how other cities have approached guaranteed basic income programs. Young has proposed 125 people enrolled in a pilot program to receive $500 per month for 18 months. If approved by the City Council, more money could soon be flowing into Detroiters’ pockets.
Under the current proposal, Detroit would use American Rescue Plan Act (ARPA) dollars to fund the income program. The city received $826 million in federal stimulus dollars in response to the coronavirus pandemic. Other cities included in the councilman’s paperwork used small amounts of ARPA funding to support short-term guaranteed income pilot programs. Ann Arbor’s City Council is expected to vote on a similar guaranteed basic income program March 1. Under Ann Arbor’s guidelines, $2.3 million in ARPA funds would be used to supplement a select group of families who would receive $500 per month over three years.
Patrick Cooney, assistant director of economic mobility at Poverty Solutions at the University of Michigan, said universal cash programs typically support the healthy development of children, reduce household stress and increase household stability. He said these programs have a “huge, positive impact on the well-being of low- to middle-income households.”
According to researchers, universal and guaranteed programs reduce stigmas around government subsidies in part because large groups qualify across income brackets – like the universal Child Tax Credit (CTC). Recipients will still qualify, even with modest pay raises and assets, so recipients don’t have to fear having to choose between progressing their career or purchasing groceries. In fact, reports on guaranteed basic income programs have shown that recipients tend to purchase basic necessities with the money and are more likely to find and maintain steady employment.
Cooney said sometimes cities that offer these programs are likely to find more part-time work, and that there are fewer, yet longer, periods of time when a person is unemployed because they have extra funds to be more specific about their job search.
“It would allow those households to gain some measure of stability, which actually could boost employment rates by allowing them to put gas in the car and buy clothes for an interview,” Cooney said. “These types of things that people often will prop up as barriers to employment for lower-income individuals, this will help, potentially, to alleviate some of those things.”
Most Detroit households would probably benefit from a universal cash program because high-income households don’t qualify for stipends.
Almost 70 percent of Detroit households fell under the Asset Limited Income Constrained Employed (ALICE) threshold in 2019. The United Way releases the ALICE report every few years to understand the economic impact of an area. A single adult in Michigan needed to earn at least $23,400 annually to cover basic necessities just before the pandemic began. Child care, food insecurity, lack of reliable transportation and health disparities were some of the more costly burdens for Detroiters. Since the report was released, the cost of living in Michigan has significantly increased due to inflation.
Another way to alleviate the increased cost of living is to increase income.
Recently, Mayor Mike Duggan announced the City of Detroit intends to increase 270 city employees’ wages to at least $15 an hour, pending City Council approval. Employees whose salary matches the state minimum wage requirement will see a 52 percent increase in hourly income.
“I appreciate you sticking with us, and we’re finally going to raise your pay to recognize that we don’t want you to work any place else,” Duggan said during a press conference in early February.
Councilwoman Latisha Johnson of District 4 proposed the salary increase to the City Council. The new councilwoman said that the pay increase would be a “significant change” for Detroiters. Council President Mary Sheffield expressed the same sentiment at the City’s press announcement, and said that City employees would be fairly compensated for their work with respect to the current cost of living.
Even though the increase to $15 an hour may be a 52 percent increase for some City employees, some say it’s still not enough due to high costs of living.
Cooney said, however, one question Detroiters should ask of their elected officials is whether using one-time ARPA dollars to fund the universal program is the best use of dollars, or if City Council can allocate funds from elsewhere.
“Because of (ARPA) limitations you could focus on one-time investments that have long-term impact, like home-repair funding for older homes, lead remediation efforts to reduce health impacts on children, or employment programs to help more people get into the labor force,” Cooney said. “What is the role of the (universal) pilot compared to other ways that the money can be spent? It’s unclear what the right way is, because there’s pros and cons to all of this.”