Chicago Experiments With $500/Month Guaranteed Income Payments

What happened

Five thousand residents of Chicago and 3,250 residents of the surrounding suburbs of Cook County are seeing $500 payments hit their bank accounts as part of a universal basic income initiative. Eligibility for the program is earning 250% of the federal poverty level. That's $36,450 a year for individuals and $75,000 for a family of four. However, the program targets the city's neediest, such as veterans, caregivers, and those experiencing homelessness.

Similar programs already exist in different cities throughout the U.S., and the hope is that this program will allow low-income Chicago residents to better manage their expenses and maintain a reasonable standard of living.

So what

As many as 176,000 people applied for the grants, which are being funded by money previously sent to local governments in 2021 for pandemic relief through the American Rescue Plan. GiveDirectly, a company better known for helping people in developing countries, is running both Chicago and Cook County’s plans.

“University of Chicago researchers are using surveys, in-person interviews and economic, labor, criminal, legal and educational data to track recipients of the money and an even larger control group not selected for the grants,” The New York Times reported.

When funds from the American Rescue Plan run dry, Toni Preckwinkle, president of the Cook County Board of Commissioners, said the county project will use revenue from newly-legalized cannabis sales as well as other revenue streams to keep the programs going.

"What’s happened in this country historically is these ideas get tried out at the local level, in cities and counties and states, and when there’s enough momentum, they get adopted by the federal government,” Preckwinkle said. “So that’s what we’re hoping will happen."

Now what

The concept of universal basic income is simple: It's meant to provide people with a certain level of income to ensure they're able to meet their basic needs. Ideally, it can also provide financial support during periods of crisis, like recessions, when job loss tends to be widespread.

In the case of Chicago's program, an extra $500 a month could help push some households out of poverty and ensure they're able to cover expenses like rent, utilities, and food without having to skimp or resort to debt. And it could also give residents a lot more leeway than existing government programs.

Some lower-income households, for example, may be eligible for food benefits through SNAP but lack access to housing assistance. Getting a $500 monthly payday that can be spent anywhere could greatly alleviate that burden.

What’s more, those $500 monthly payments could allow those who have never had an opportunity to build savings to finally set up an emergency fund. Consumers are commonly advised to save enough to cover at least three months of bills. For lower earners, that target often isn't feasible. Now, they have more of an opportunity to build themselves a financial safety net.