The Minimum Basic Income Experiment

The Minimum Basic Income Experiment

By October 26, 2015 Blog No Comments

We are living in a world that is getting much tougher on most Americans. It’s increasingly difficult for unskilled workers to make a living wage, machines are on the verge of replacing a large part of the workforce and any new jobs that machines create will likely go to the highly educated and ambitious new generation being raised on technology. Many people believe Guaranteed Minimum Income is the answer. But will Guaranteed Minimum Income really be good for the United States?

Guaranteed Minimum Income (GMI), also known as Universal Basic Income or Basic Income, is the concept of giving citizens free money every month. It replaces all welfare systems and assumes that all adults are capable of responsibly caring for themselves if given the necessary funds. And in theory, GMI should eliminate poverty, as US Senator Paul Ryan sees it. That’s why the Netherlands, Switzerland, and many African countries are experimenting with it.

It’s possible GMI is the evolution of welfare programs. Or it could cause a slew of other problems in society. The only way to truly know if GMI is the answer to America’s growing inequality is to run a proper experiment as follows.

The Guaranteed Minimum Income Experiment

A good experiment should last at least 1 year, spread across different cities and include people from diverse socio-economic classes.

The only way to truly know if Guaranteed Minimum Income is the answer to America’s growing inequality is to run a proper experiment.

To start things off we’ll need a $5,000,000 investment. From there we can conduct an experiment on 200 people in 2 cities. That’s 100 people in each city. One city will be expensive (i.e. Los Angeles) and one city will be cheap (i.e. Detroit). And on doing so we can find insights in how different GMI models will work in different economies.

How much money should be given?

Let’s assume we want to have two test groups in each city. One will receive a small GMI and one a larger GMI. This will help us understand how GMI is used and how much should effectively be given out in the future.

Group 1: Will get $5,000/year to spend however they want

Group 2: Will get $15,000/year with the caveat that a portion of this money must go towards signing a 1 year lease during this time period. This might sound like a strange requirement, but it’s important to remember that a guaranteed minimum income replaces all welfare services. This money needs to ensure that no one receiving it is homeless, destitute, or living a life which burdens social systems. So to start our experiment we have:

  • Detroit (50 people x $5,000) + (50 people x $15,000*) = $2 million
  • Los Angeles (50 people x $5,000) + (50 people x $15,000*) = $2 million
  • * Must sign 1 year lease to receive funds

What restrictions should be placed on the money?

This is one of the most important parts of the experiment. Restrictions must be placed in order to ensure no one is abusing this system. GMI completely replaces all welfare and safety net systems in the country, meaning if you mess around with the money given to you then there is no safety net left to help you. If someone has issues with addiction, gambling, mental illness, or making irresponsible decisions in any way then things can really get bad. To try to limit the risk of people using GMI irresponsibly, we will have the following restrictions:

1) Money should be distributed on a monthly basis

2) Money should be given in the form of a debit card

3) Only 25% of funds can be taken out monthly as CASH

4) Only 50% of GMI money can be used to pay off previous debt

5) No one in the experiment can take out additional loans or cash advances while involved in the study

6) No one in the study can currently be on welfare, as this will violate their benefits. Luckily, America currently fails to help a large impoverished population making no income, so there are still a lot of people we can help with this experiment.

7) Everyone must take a mandatory 1 day Financial Literacy and Savings course.

How much oversight should there be?

It’s important to get as much information as possible from participants if we are to effectively measure the impact of GMI on Americans. If people choose to buy alcohol with their money that’s okay, not preferred, but ok. What’s important is that participants are fully transparent so that we can best understand the results.

1) Whenever possible, participants should use their debit card

2) All cash transactions should be logged in a book

3) Participants should keep a weekly log to describe how they used the money every week and describe what they bought on the receipts

4) Participants should speak to someone from the GMI TEAM every 2 weeks to go over their logs and keep us informed of their experience.

In total, we’re probably requiring an average of 2 hours of work a week from participants of the experiment.

This money needs to ensure that no one receiving it is homeless, destitute, or living a life which burdens social systems.

Who should be in the experiment?

We need various different income levels, age groups, and various social classes in order to create a good experiment. Ideally, this can show us how different people improve their lives with a GMI.

1) All recipients must be Americans over the age of 18

2) No one who supports children in this first experiment

3) Living situation: 50% should be currently homeless or living in a place not considered a home

4) 25% should be unemployed without any earnings. Another 25% should earn between $5,000-$15,000, 25% should earn between $15,000-$25,000, and the last 25% should earn between $25,000-$50,000

5) The demographic should be someone split between 18–25 year olds, 25–35 yr olds, 35–55 yr olds, and 55–65 yr olds

6) 25% should suffer from addiction (drugs, gambling, alcohol). 25% should suffer from severe mental illness.

I know dividing things up like this seems like a lot of work, but it’s actually quite simple. And it’s critical to know how different groups will use GMI. It’s very possible GMI is beneficial for some groups and not for some others. Having worked in depth with the homeless and mentally ill in the past year I can tell you that some will benefit greatly from GMI and others will misuse the system. But even this is an assumption.

This is a massive project with massive implications

Understanding the data behind all different groups will help separate assumption from reality and provide the data researchers need to make educated GMI decisions for years to come. Our final experiment looks like this:

  • Detroit (50 people x $5,000) + (50 people x $15,000*) = $2 million
  • Los Angeles (50 people x $5,000) + (50people x $15,000*) = $2 million
  • Money distributed monthly on GMI debit card
  • Testers not allowed other loans or cash advances
  • Cannot currently be on welfare
  • Only 50% of funds can be used to pay off previous debt
  • Testers must keep a weekly log of spending and speak to HQ once a month
  • Applicants must earn less than $50,000/yr and will be chosen from a mix of ages, housing needs and mental issues.
  • * Must sign 1 year lease to receive funds

Conducting the study

You may recall I originally said this experiment would require $5 million dollars. The extra $1 million is for hiring an all-star team who can dedicate themselves to this project for 2 years. Almost as important as the actual results is having people who can gather and analyze those results. Staying in contact with 200 participants, organizing the data and presenting insights for it is no easy task. And as Mattermark’s Danielle Morrill once said to me, “good people get paid.”

This is a massive project with massive implications. If you’d like to support the Guaranteed Minimum Income experiment then you can do any of the following:

  1. Share this post
  2. Comment below with any other factors you think the GMI experiment should consider
  3. To get more involved (invest, join the team, media inquiries) emailggopman@gmail.com or tweet to @StartupGreg

About Gregory Gopman

Greg Gopman is a tech entrepreneur and social activist in San Francisco who has been published for his work on Solving Homelessness and Community Vocational Schools aka Transition Centers. He spends his days convincing governments to adopt more progressive solutions and stop wasting time and money on failing programs.