As new tech threatens jobs, Silicon Valley promotes no-strings cash aid

AP

The rise of artificial intelligence has stoked fears that such technological advances will wipe out millions of jobs. Silicon Valley entrepreneurs have thought about that too, and they've long pushed an idea to soften the blow: cash aid from the government, no strings attached.

Now, the first results are out from the latest and largest study on the impacts of free money — research spearheaded by the man behind ChatGPT.

Sam Altman, CEO of OpenAI, offered to fund an experiment on what's termed basic income back in 2016. In a blog post that year, he said some kind of national payments would likely be needed as technology killed more jobs even as it generated massive wealth for others. So, he said, it would be good to study what might happen if people got regular paychecks from the government.

"Do people sit around and play video games, or do they create new things?" Altman wrote. "Do people, without the fear of not being able to eat, accomplish far more and benefit society far more?"

Tech-driven job losses weren't his only motivation. Altman mentioned progress toward eliminating poverty, writing, "I also think that it's impossible to truly have equality of opportunity without some version of guaranteed income."

There were a thousand different needs

It took a while for his experiment on free money to happen, and in the meantime, dozens of other experiments were carried out. The idea also got a boost from the success of federal relief checks and other aid during the COVID-19 pandemic. But Altman's study is far longer than most and involves a more nationally representative group across rural, urban and suburban areas.

For three years, 1,000 lower-income people selected in Illinois and Texas received $1,000 a month. (A control group of 2,000 others received $50 a month.) Elizabeth Rhodes, the research director with Altman's nonprofit, OpenResearch, started tracking their financial situations as she signed them up.

"One person's just finished beauty school, but she couldn't afford the cosmetology license," she says. "One person's phone had just been turned off. Another person had just been in a car accident and then totaled the car, and they couldn't afford another one."

There were a thousand different needs, she says, and only cash could meet them all. Rhodes says this study, like the many others, finds people mostly spent the extra money on basics: food, transportation, rent.

"We see an increase in people actually paying for housing," she says. "So a lot of people were actually doubling up with other people, and they were able to move out on their own."

Many also put money in the bank. The largest increase in spending was actually on helping family and friends.

One unexpected challenge during the experiment: The COVID-19 pandemic hit early on. This complicated the research but also meant it played out during a sudden spike in unemployment. "The cash gave more people agency in their employment decisions during the most turbulent time in modern history," says Karina Dotson, the research and insights manager with OpenResearch.

For example, the study found that the extra cash allowed one woman to take a pay cut for a job with room to advance, and she now makes close to six figures. But that jump in job quality was rare.

Overall, people who got the cash payments worked a bit less — 1.3 hours less a week on average — and their partners did the same. This includes some who'd been logging 50 or 60 hours a week at more than one job.
Participants also reported more leisure time.

Dotson recalls one single dad employed at a restaurant. "And when he learned about the cash transfers, he told us that he immediately went to his boss and said that he wanted to reduce his hours so that he could spend as much time as possible with his 4-year-old son," she says.

As for Altman's question about whether people would create new things, the study did find more interest in entrepreneurship. But it wasn't until the third year of payments that some, mostly Black participants, took steps to actually start a business.

Meanwhile, many people reported major declines in stress and food insecurity early on, but that faded after the first year. Researchers aren't sure why. Rhodes also notes that in certain cases, the extra cash actually led to more unexpected expenses. For example, some recipients were able to buy vehicles, which then broke down and needed repairs.

The OpenResearch team plans more analysis on where people moved during the study — the most common reason participants gave for moving was to be in a better school district — and the impact that the cash had on children's educational outcomes.

Altman declined an interview request to discuss the findings so far. But the bottom line is that in the debate over whether basic income helps people's long-term prospects, the report says, "Our results provide support for both sides."

Supporters say basic income alone is not a magic solution

Guaranteed income is an old idea with a surprisingly diverse fan base, from libertarian economist Milton Friedman and President Richard Nixon to the Rev. Martin Luther King Jr. and the Black Panthers. Other Silicon Valley billionaires who've endorsed it include Elon Musk and Jack Dorsey.

The most expansive vision has been a universal basic income, as when 2020 presidential candidate Andrew Yang called for giving every U.S. adult $1,000 a month (plus cost-of-living increases) regardless of income. In Altman's 2016 blog post, he called for giving people "enough money to live on."

But the thinking around basic income has shifted sharply. The raft of recent experiments and the proposals for some kind of national policy are far more limited and targeted toward lower-income households.

"I hope that people are taking away from this study and other studies that a guaranteed income will not work alone," says Facebook co-founder Chris Hughes.

He also co-founded the Economic Security Project, which advocates for basic income. But Hughes says it's not a magical solution — $500 or $1,000 a month is not nearly enough to overcome the ballooning costs of housing, health care, education and child care. Still, he says, the growing body of research, as well as the pandemic payments, prove that a little extra can keep families steady.

"I think a great place to start would be to have a guaranteed income when the going gets rough," he says. To that end, Hughes suggests that automatic payments could kick in when an uptick in unemployment signals a recession.

But turning no-strings cash into national policy would face strong opposition. Some states have even banned it.

"Making contributions to society through the labor market … is a more promising system than one where poor people just get a check from the government," says economist Michael Strain of the American Enterprise Institute.

Even though research so far shows limited impact on work, Strain worries that a permanent basic income program would exacerbate a long-term decline in employment rates for some groups.

A better idea, he says, would be to significantly boost tax credits for lower-income workers. For example, say someone lost a $40,000-a-year job to automation, and the only other job the person could find paid $25,000. "What if we lived in a world where the government gave you the 15 grand?" Strain says. "You only get it if you take the job. But the government will try to, you know, kick in enough to make it worth your while."

For the record, neither Strain nor Hughes worries much about massive job losses from technologies like AI. They say history shows that over time, new technology creates new kinds of jobs. But they agree that as work becomes increasingly precarious, struggling American families need more help, one way or another.