These pilot projects could help restructure our state economy into one that prioritizes shared prosperity over the hoarding of individual wealth. But to create meaningful change at the macro level, the baton must be passed to our federal leaders.
Lorrine Paradela is a single mom raising two kids on a tight budget who knows what it’s like to stay up at night worrying about how to pay the bills. She is not alone, particularly since the pandemic, which has put an even heavier economic burden on women of color.
What sets her apart is that she had an economic lifeline during the height of the pandemic — an extra $500 a month on top of the income from her job.
As a participant in Stockton’s guaranteed income pilot project, Paradela received the monthly cash for two years, using it as she saw fit for her family. That meant being able to replace her car when it was totaled in an accident without having to miss work for lack of transportation. It meant being able to thank her teenage son for watching his little sister by depositing $20 in his account to put toward a new video game. It meant sleeping through the night without stressing about how to cover the month’s bills for the first time in years.
Paradela’s story and 124 like it were made possible by the Stockton Economic Empowerment Demonstration, the inspiration for several pilot projects now providing similar benefits to thousands of people in the Golden State. Oakland Resilient Families, for example, just began making payments to 300 families in East Oakland, and will soon expand to 600 families citywide.
The Stockton project helped fuel systemic change at the state and federal levels. It was instrumental in persuading Gov. Gavin Newsom to announce $35 million in guaranteed income pilot funding, the first time a state has ever financially supported the concept. California’s investment is a major leap in the movement to provide an income floor to all who need it: it recognizes that cash is a powerful tool in the goal to end poverty, spur pandemic recovery and build economic stability.
California’s experiments also helped fuel a national debate over cash-based pandemic aid after a study of the Stockton project revealed that recipients found full-time employment at more than twice the rate of nonrecipients. These findings countered decades of false narratives that unconditional cash enables laziness and prolongs unemployment. This finding helped create the political will to pass several rounds of stimulus checks, as well as the expanded federal child tax credit — essentially a guaranteed income that nearly every parent in America began receiving in July.
We both have experience with testing programs that provide a benefit that outweighs cost. We saw that the results of unrestricted cash are clear. Despite the economic devastation of the pandemic, we’ve seen a record drop in poverty due to historic government investment in our greatest national resource: our people.
Because these programs generally are tied to income, they provide an outsized positive benefit to women and people of color, who are more likely to have low incomes due to sexism and racism embedded in our economy and policies.
While the state investment in guaranteed income is an important step and sets an example for other states to follow, providing support to all who need it in California and beyond ultimately requires a federal guaranteed income program. In the richest country in the world, we can certainly require the wealthy to pay their fair share in taxes so that prosperity is shared instead of hoarded. In the 1950s and 1960s, when America saw the biggest expansion of the middle class, the wealthiest Americans paid a top income tax rate of 91%. Today, the top rate is 43.4%.
Once we’re able to enact a federal guaranteed income, the impact on California cannot be overstated. New research from the Insight Center’s Cost of Being Californian report shows that California is pricing out the nonaffluent. The hourly wage needed for a single parent with two kids to meet basic household expenses ranges from $26.32 an hour in Modoc County and $27.53 an hour in Plumas County, to an astonishing $74.60 and $73.28 an hour in the Bay Area counties of San Mateo and Marin. That’s equivalent to an annual salary of $155,000 in San Mateo just to make ends meet.
California is on the right track to fundamentally restructure our state economy into one that prioritizes shared prosperity over the hoarding of individual wealth. But to create meaningful change at the macro level, the baton must be passed to our federal leaders.
Stockton and Oakland’s philanthropically funded pilots were the important first leg of this relay race. One of the biggest shifts over the past year is the understanding that philanthropy cannot sustain widespread state or national guaranteed income programs — that’s the job of government.
The federal child tax credit expansion and its unrestricted payments are an excellent start, estimated to cut child poverty by nearly half during the one year it is funded. But what about the other half? And what about the next year?
It is time for the United States to continue its long history of taking what’s proven possible at a small scale and ramping up those benefits to all who need them.
Other states should follow California’s lead and recognize the power of guaranteed income to create a future in which everyone has the opportunity to not just survive, but thrive.
The authors wrote this for CalMatters, a public interest journalism venture committed to explaining how California’s Capitol works and why it matters.