As new technology threatens jobs, Silicon Valley promotes no-strings-attached financial aid

The rise of artificial intelligence has fueled fears that such technological advances will wipe out millions of jobs. Silicon Valley entrepreneurs have been thinking about that too, and have long pushed an idea to soften the blow: government financial aid, with no strings attached.

Now the first results are known from the latest and largest study into the impact of free money, a study led by the man behind ChatGPT.

OpenAI CEO Sam Altman offered to fund an experiment with something called basic income in 2016. In a blog post that year, he said that some kind of national payments would likely be needed, as technology would destroy more jobs while creating vast wealth for others. So, he said, it would be good to explore what would happen if people were paid a fixed salary by the government.

“Were people sitting around playing video games, or creating new things?” Altman wrote. “Are people, without the fear of not being able to eat, accomplishing much more and contributing much more to society?”

Technology-driven job losses weren’t his only motivation. Altman cited progress in eliminating poverty, writing, “I also think it’s impossible to have true equality of opportunity without some form of guaranteed income.”

There were a thousand different needs

His free money experiment took a while to get off the ground, and dozens of other experiments have been conducted in the meantime. 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 much longer than most, and includes a more nationally representative sample of rural, urban and suburban areas.

For three years, 1,000 low-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 of Altman’s nonprofit OpenResearch, began tracking their financial situations when she signed them up.

“One person just graduated from cosmetology school and 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 totaled the car, and they couldn’t afford a second one.”

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

“We’re seeing an increase in people actually paying for housing,” she says. “So a lot of people are moving in with other people, and they’re able to move out on their own.”

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

One unexpected challenge during the experiment: The COVID-19 pandemic hit early. This complicated the study, but also meant it was set during a sudden spike in unemployment. “The money gave more people a say in their work decisions during the most turbulent period in modern history,” says Karina Dotson, the research and insights manager at OpenResearch.

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

Overall, people who received the cash payments worked slightly less — an average of 1.3 hours less per week — and their partners did the same. This includes people who worked 50 or 60 hours per week at more than one job.

Participants also reported having more free time.

Dotson recalls a single father who worked in a restaurant. “And when he heard about the money transfers, he told us he went straight to his boss and said he wanted to reduce his hours so he could spend as much time as possible with his 4-year-old son,” she says.

As for Altman’s question of whether people would create new things, the study found more interest in entrepreneurship. But it wasn’t until the third year of payments that some, mostly black participants, took steps to actually start businesses.

Meanwhile, many people reported large reductions in stress and food insecurity early on, but those disappeared after the first year. Researchers aren’t sure why. Rhodes also notes that in some cases, the extra money actually led to more unexpected expenses. For example, some recipients were able to buy vehicles that then broke down and needed repairs.

The OpenResearch team plans to do 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. They also plan to analyze the impact of the money on children’s educational performance.

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.”

Proponents say basic income by itself is not a panacea

Guaranteed income is an old idea with a surprisingly diverse fan base, from libertarian economist Milton Friedman and President Richard Nixon to the Reverend Martin Luther King Jr. and the Black Panthers. Other Silicon Valley billionaires who have 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 American adult $1,000 a month (plus living expenses), regardless of income. In Altman’s 2016 blog post, he called for giving people “enough money to live on.”

But thinking about basic income has changed dramatically. The range of recent experiments and proposals for some kind of national policy are much narrower and focused on lower-income households.

“I hope people learn from this research and other research that guaranteed income by itself doesn’t work,” said Facebook co-founder Chris Hughes.

He also co-founded the Economic Security Project, which advocates for a basic income. But Hughes says it’s not a magic bullet: $500 or $1,000 a month isn’t nearly enough to overcome the exploding costs of housing, health care, education and child care. Still, he says, a growing body of research, as well as the pandemic payments, show that a little extra can keep families stable.

“I think a good place to start would be to have a guaranteed income if things get tough,” he says. For that reason, Hughes suggests that automatic payments could be triggered when a rise in unemployment signals a recession.

But turning no-strings cash into national policy would face strong opposition, with some states even banning it.

“Contributing 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.

While research to date shows the impact on employment is limited, Strain worries that a permanent basic income program could reduce employment rates for certain groups in the long run.

A better idea, he says, would be to significantly increase tax breaks for lower-income workers. For example, say someone loses a $40,000-a-year job to automation, and the only other job they can find pays $25,000. “What if we live in a world where the government gives you that $15 grand?” Strain says. “You only get it if you take the job. But the government will try to, you know, chip in enough to make it worth it.”

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