A city in the San Francisco Bay Area is giving some families $500 per month for 18 months - no strings attached

• In Oakland, California, 600 low-income families will get $500 monthly payments for 18 months.
• The stipends are part of a basic-income pilot designed to lift families of color out of poverty.
• The program organizers hope to make a case for a federal basic-income policy.

Oakland, California, is about to become the latest city to distribute free money to its residents.

Mayor Libby Schaaf announced Tuesday that the San Francisco Bay Area city has officially launched a basic-income pilot that will give $500 monthly payments to 600 low-income families for 18 months. Recipients can spend the stipends however they like.

The families will be selected randomly, but they will all be Black, indigenous, or people of color, and must earn 50% of the city's median income or less: about $59,000 per year for a family of three. At least 300 spots are reserved for families whose earnings are below 138% of the federal poverty level: about $30,000 annually for a family of three.

Basic-income pilots have gained popularity in the US since 2019, when Stockton, California, launched a trailblazing experiment to give 125 residents $500 per month. Since then, several mayors have initiated similar trials. Saint Paul, Minnesota, started a basic-income pilot in the fall, in which 150 low-income families get $500 a month for up to 18 months. In Compton, California, 800 residents are receiving a guaranteed income of $300 to $600 a month for two years. And Richmond, Virginia, is distributing $500 per month to 18 working families.

Oakland's program hopes to deliver the first stipends to its initial 300 families this spring.

'Poverty is not personal failure'

Michael Tubbs, the former mayor of Stockton, California - who launched its basic-income program - formed a group called Mayors for a Guaranteed Income in June. The members are all mayors interested in starting basic-income pilots across the US. Schaaf was among the first 10 to join the coalition.

Each city involved in the group is promised up to $500,000 dollars in funding for their program, thanks in large part to a $18 million donation from Twitter CEO Jack Dorsey. But Oakland has raised much more than that - $6.75 million so far - through philanthropic donations.

At least 80% of that funding will be distributed directly to families over the course of 18 months. The program's first enrolled families will all live in East Oakland, then families in other neighborhoods will follow. Almost half of East Oakland residents live in poverty, compared to 17% of residents across the entire city.

Schaaf said Oakland's experiment would ideally generate more evidence to support a federal basic-income policy.

"We believe that poverty is not personal failure - it is policy failure," she said in a video announcing the pilot.

Repeating Stockton's success

Critics of basic income argue that free stipends reduce the incentive for people to find jobs or encourage them to make frivolous purchases. Several studies, however, have suggested that cash benefits don't keep people from entering the workforce.

Researchers found that Stockton's two-year program, which ended in January reduced unemployment and increased full-time employment among participants during its first year. Participants also reported improvements in their emotional well-being and decreases in anxiety or depression.

"Boosted by Stockton's results, our goal is to add to the body of evidence that unrestricted cash to our lowest-income residents - and particularly those who've suffered from historical racial inequity - can improve outcomes and change systems," Schaaf wrote Tuesday on Twitter.

For the most part, Stockton's basic-income recipients spent their stipends on everyday necessities like food, clothing, utilities, and auto costs.

"Contrary to public opinion that the rich budget best, they actually don't," Amy Castro Baker, an assistant professor at the University of Pennsylvania's School of Social Policy and Practice, told Insider. "We know from a body of data that the poor budget best because they have to survive."