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An economic experiment in California will give citizens free money, but big questions remain

Skepticism is warranted.


Selena Larson


Posted on Jun 10, 2016   Updated on May 26, 2021, 3:28 pm CDT

Silicon Valley’s most well-known startup incubator will soon be experimenting with a centuries-old economic idea in an effort to study how assured monthly income could modify tech’s economic impact in a future where technology takes our jobs.

Y Combinator (YC) is launching a very small basic income pilot program later this summer in Oakland, California. The organization is planning on giving 100 residents in the city a guaranteed monthly income of between $1,800 to $2,000, possibly more, for six to 12 months. It will be funded by YC’s nonprofit arm YC Research and led by research director Elizabeth Rhodes, Ph.D graduate from the University of Michigan. 

Basic income is an idea that’s floated around since the 16th century; philosopher Thomas More touches on a similar idea in his book Utopia. Since then, philosophers, founding fathers, economists, and civic leaders around the world have debated the idea of a secure income for every citizen, whether they are employed or not. 

In theory, it’s supplemental to any other income individuals receive; ideas about how much, from whom, and for how long vary depending on the country or economic system, but essentially, monthly financial support provided by the government or other public institution is meant to improve quality of life as well as give citizens some spending power. This month, Switzerland became the first country to vote on universal basic income. The country rejected it

YC’s interest in this stems from its own involvement in creating products that are changing human behavior and the needs we have in the workforce. Tech companies, like those YC funds, are creating new ways of disrupting the workforce, from self-driving cars that will put taxi drivers out of work to artificial intelligence and robots that can replace people in industries like accounting, manufacturing, and education.

“It really could be the case in coming years we’re going to see an erosion on quality of jobs both in terms wages and job security,” Matt Krisiloff, who is working on the basic income project at YC, said in an interview with the Daily Dot. “As that’s happening, it’s important to figure out how can we make sure people caught in that kind of transference from a world where labor is needed for everything to a world where we might not need as many people for certain tasks. How can we make sure those people still have an opportunity to find new skills or find new things they’re interested in and make sure they’re not stuck below poverty.”

There are still a number of questions yet to be answered regarding the pilot program, including the exact amount of income, and how individuals will be chosen for the project. Additionally, the organization is working on solidifying partnerships from academic and civic institutions to help with the research, though Krisiloff declined to describe what those relationships might look like.

In a blog post, YC said the organization had connected with Oakland city officials; a representative for the city did not specify who those people might be after repeated attempts for clarification.

“The City of Oakland is currently helping to facilitate introductions with various community based organizations, elected officials, and government agencies that will be helpful in data collection and other facets of the pilot study’s design phase,” Michael Hunt, special assistant at the Office of Mayor Libby Schaaf, said in an email.

In the heart of Silicon Valley, where there is an abundance of both resources and wealth, there are enormous economic and social disparities, much of which is blamed on tech industry workers who can pay exorbitant prices to live there, pushing out people who can’t afford rising costs, or forcing them to pick up contract work created by those startups (like driving for Uber or delivering for Instacart) to help generate a livable income. YC chose Oakland because of its socio-economic diversity, as well as the proximity to YC and the startups and people it’s funded, Krisiloff said. 

As we begin to feel the effects of the increasingly connected workforce, technologists are starting to question the roles they play in people’s lives beyond how many app downloads or software installations they generate. As Natalie Foster, a fellow at the Institute for the Future, said, there are two main components of tech’s desire to investigate social ideas like basic income.

“Silicon Valley’s interest in this topic is one part guilt and one part optimism,” Foster said in an interview. “People spend day in and day out thinking about the impact automation and technology will have on society, and the labor force. And at the same time, this is a group of people who like big moonshot ideas and tackling big problems.”

YC carries a certain cachet in the tech world. Alumni of the incubator include Airbnb, Dropbox, and Zenefits. It’s also affiliated with some of the most polarizing mouthpieces in the industry: cofounder Paul Graham and current president Sam Altman. When the organization throws its weight behind an idea—like Open AI, the YC Research-funded effort to research beneficial artificial intelligence—the industry pays close attention.

To that end, the firm’s nascent efforts to start some research into a 500-year-old idea that may grow into a full-fledged study could generate more thoughtful consideration of technology’s impact on human lives in early stages of technological development. Hours after the company posted the basic income project update to its own news forum, the comment section was over 1,000 responses deep. 

It’s not necessarily the tech industry’s job to manage or create social policies, but experimenting with citizen’s income certainly does further conversation. 

“People in the tech community tune into the Y Combinator brand. YC tackling an idea that is trying to eliminate poverty and lessen inequality could have a ripple effect across tech,” Foster said. “It’d be great if it became cool to pay attention and work on social issues. More of the tech community could start paying attention to social issues, and to see that work as part of our responsibility as citizens.”

There is a dearth of research on basic income in high-income countries, in part because it’s so expensive. And longterm studies that require government support can be derailed because of changing political interests.

Finland is piloting a basic income program with 10,000 families in the country; Ontario, Canada is considering a community-level basic income trial; and in the Netherlands, Utrecht is running a very small experiment, too. A Bay Area-based organization, My Basic Income, advocates for and experiments with a basic income, and recently gave one sweepstakes winner $15,000 for the year. 

In the 1970s, one seemingly promising minimum income experiment in Canada fizzled out after five years, when the government pulled the plug on the project before data could be analyzed and determine whether the project benefited citizens. Thirty percent of citizens in Dauphin, Manitoba, a town of about 10,000 people, received what would now be equivalent to $15,000 per year. As Dr. Evelyn Forget explained, the program was an effort to figure out how the government paying people would impact the workforce; if free money would make people not work.

Forget is an economist, professor at the University of Manitoba, and the academic director of the Manitoba Research Data Centre. She’s working on digitizing some of the relevant data found in the 1,800 boxes of research from the Dauphin study, picking up where researchers left off decades ago.

“We’re thinking we’re still going to get a bit more out of that data, I guess the question is to what extent you can apply results from the mid-1970s to the world today,” Forget said in an interview. 

According to Forget, there were two groups that did, in fact, work less upon receiving basic income: New mothers and teen boys. Moms essentially extended their maternity leaves, staying out of the workforce longer before returning, while high school completion rates increased for boys, and they entered the workforce later. She also found a correlation between the number of hospitalizations during the time people received basic income: A  significant reduction in hospital visits, especially among visits designated mental health. 

Forget said the YC study is interesting because the privately-funded organization doesn’t have to wait for government approval or financing to undertake a pilot and start giving away money. But she is concerned that the small sample size and short timeline could provide inaccurate or unhelpful data about the real impact of a longer term minimum income. 

“I think that there’s at least a possibility that they’re going to find out that people seem to be spending their money on frivolous things, and there’s at least a possibility that there might be a bit of political backlash against the kind of findings that will come out of such a short term and such a small scale experiment,” she said.

On the other hand, she said, she does understand the thinking going into the experiment—a small pilot study could spur further research and more investment for a longer term project. 

There is no official launch date for the YC program; no participants officially exist yet, and the partnerships with the city and other organizations are not announced. For now, the basic income project seems to be operating a bit like a stereotypical startup: A small team approaching an unknown with piles of cash, a big goal, and no solidified plans on how to achieve it. 

Krisiloff said YC is entering this experiment with “no ideological bends,” one way or another, and said the main study, which they plan to start after the pilot with additional funding from as-yet-unknown partners or donors, will run about five years. 

“In a society with so much wealth, there are all these people who can’t have a base level that’s reasonable right now,” Krisiloff said. “As we’re moving toward a future where fundamentally we’re creating more abundance and wealth in the world, we should figure out ways to make sure we don’t have people living below poverty.”

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*First Published: Jun 10, 2016, 9:53 am CDT