125 People Were Given $500 Per Month In Free Money For Two Years – Here’s What Happened

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What would you do if someone said they would give you $500 per month in free money for two years? Please don’t say you would lease a car!

While $500 per month certainly isn’t enough money to retire, an extra $6,000 per year in after-tax income is life-changing for a lot of people. And if you already had enough money, that excess cash could go right into creating new passive income streams.

For two years, 125 people in Stockton, California were forced to answer that question when they were given $500 per month. This experiment was created to learn more about the effects of universal basic income. There were no restrictions on what the participants could do with the income. And the results were kind of surprising.

The study, which was conducted by the Stockton Economic Empowerment Demonstration (SEED), began in February 2019. The 125 participants were chosen because they lived in census tracts at or below the city’s median household income of $46,033.

The obvious concern around universal basic income is that if you give people free money every, single month, they will have less incentive to seek out employment. The results actually proved otherwise. Sort of. But more on that later.

Per WFAA News

When the program started in February 2019, 28% of the people slated to get the free money had full-time jobs. One year later, 40% of those people had full-time jobs. A control group of people who did not get the money saw a 5 percentage point increase in full-time employment over that same time period.

“These numbers were incredible. I hardly believed them myself,” said Stacia West, an assistant professor at the University of Tennessee who analyzed the data along with Amy Castro Baker, an assistant professor at the University of Pennsylvania.

Tomas Vargas said the extra $500 a month was enough for him to take time off from his part-time job and find full-time work that paid better. He said he was depressed at the start of 2019, but now says he is happier and healthier.

“Every day I get to wake up and enjoy my kids,” he said. “My wife, we enjoy time together. We didn’t have that before.”

So why did employment go up? According to Matt Zwolinski, director of the Center for Ethics, Economics and Public Policy at the University of San Diego, the results might be skewed to look more positive because the participants knew it would only last for two years which made participants less likely to drop out of the workforce.

One interesting finding is that even though the participants knew the free money would eventually stop, they did report lower levels of anxiety and depression when compared to the group of people who didn’t receive any money.

 

Author
C. James

C. James is the managing editor at Wealth Gang. He has a degree in finance and a passion for creating passive income streams and wealth management.