Free Money at the Edge of the Tech Boom

A 27-year-old mayor is implementing a $1 million experiment in guaranteed income for residents of a poor city just outside the Bay Area.

A portrait of Michael Tubbs, the mayor of Stockton, California
Stockton Mayor Michael Tubbs (Alexis Madrigal)

The latest experiment in a universal basic income will be coming to Stockton, California, in the next year.

With $1 million in funding from the tech industry–affiliated Economic-Security Project, the Stockton Economic-Empowerment Demonstration (SEED) will be the country’s first municipal pilot program. As currently envisioned, some number of people in Stockton will receive $500 per month. That’s not enough to cover all their expenses, but it could help people with rising housing costs, paying student loans, or simply saving for life’s inevitable problems.

Last year, Stockton rents rose more than 10 percent, putting the city’s rental price growth among the top 10 in the nation. This is quite a surprise in what Time called “America’s most miserable city” just three years ago. The average rent remains a modest-by-Bay-standards $1,051, but Stockton has a per-capita income of just $23,046, more than $6,000 less than the U.S. median and a full $8,500 less than the California median. If you made the per-capita income of the city, average rent alone would eat 55 percent of your income.

As the tech boom that began in the mid-00s continues, its financial blast radius keeps expanding. Tech workers have been streaming into the Bay, yet few homes have been built in the Bay Area’s cities. Home prices and rents have exploded. Longtime residents and newcomers alike have been getting pushed ever further out. And in recent years, Stockton—once one of the cheapest cities to live in California—has become the eastmost outpost of the insane Bay housing market.

“There’s not a shortage of housing. There’s a shortage of money to buy housing,” said Fred Sheil, a member of STAND Affordable Housing in Stockton. “Unless you’ve got Bay Area income, they aren’t interesting in talking to you.”

That’s garnered the attention of city leaders, especially Mayor Michael Tubbs, who became the youngest-ever mayor of a medium-sized city when he won a landslide election in 2016. Tall, gregarious, often besuited with a trim beard, Tubbs could become the new face of universal basic income, or as people abbreviate it, UBI.

Stockton won’t be the first UBI project in the Bay (pilots are already in the field in West Oakland and San Francisco), but it would be the first public attempt to show what a basic income can do for people. Unlike the secretive other projects, both the local government and the participants will be reporting what the cash does for them. And the project will be occurring within the context of a regular city government, with all the community engagement that entails.

“The [UBI] conversation is not being had with the people who are going to be impacted,” Tubbs said. “Mark Zuckerberg don’t need $500 a month.”

So, in Stockton, they are planning a six- to nine-month design process to incorporate the city’s residents into the program design, including precisely how the cash stipends will be awarded.

“My bias is that it should go to people who need it the most, but that’s not truly universal. That’s targeted,” he said. “The way our country is now, for something like this to work, everybody has to feel like they are a part of it.”

One idea they’re kicking around is that a specific number of slots would be reserved for what they call their “promise zone” in south Stockton, where they’ve done a lot of existing economic research and development work.

Tubbs, too, approaches the idea of a minimum income from an entirely different place than Silicon Valley’s scions. Most of the tech proponents of UBI have approached the topic through the lens of automation and the massive devaluation of human labor that they think could result from further developments in artificial intelligence. While giving cash to everyone has an egalitarian ring, when the message is delivered by the ultra-wealthy of Menlo Park and San Francisco, it can feel as if UBI is the crumbs being swept off the real-money table to buy off the masses.

But Tubbs referenced a strain of African American thought expressed by no less a leader than Martin Luther King Jr. “The solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income,” King argued in 1967. Though Tubbs didn’t mention them, the previous year, the Black Panthers came out with their famous 10-Point Program. And there it is in point number two: “We believe that the federal government is responsible and obligated to give every man employment or a guaranteed income.”

Perhaps it’s not surprising that different black thinkers in the 1960s came to the conclusion that a guaranteed income would be an effective way to fight the poverty that resulted from structural racism. They’d just seen a generation of federal programs make white Americans much, much wealthier, while also seeing how those same policies discriminated against them. The big programs that were created during the New Deal were boxed in by what historian Ira Katznelson calls “the Southern cage.” In exchange for creating socialistic Federal programs, the then-Democrats of the south required policies that would reinforce the racial hierarchy of the country. Black people’s freedom and economic prospects were the bargaining chip that Franklin Delano Roosevelt and the Congresses he worked with slid over to former slave states in exchange for their support of sweeping legislation.

For example, FDR would create the Federal Housing Authority, but segregation and redlining would combine to create disinvestment in increasingly segregated black neighborhoods across the nation. FDR would get Social Security, but many job categories in which black people predominated would be exempted from inclusion. The GI Bill might have helped black people get an education, but they could not take equal advantage of the Veterans Administration housing benefits because of racist real-estate practices. Job and social programs might seem nice, but the experience of what could happen to nice ideas within American bureaucracy might have made simple cash payments seem more racism-proof than the alternatives.

But Tubbs is not a theoretician or activist. He is the mayor of a poor city, and he knows that people in Stockton need money not just to survive, but to try to lever themselves out of the lower-income brackets through education or entrepreneurship.

In preparation for the UBI project, Tubbs had a convening in his old city-council district (where he grew up) in south Stockton with upper-income, middle-income, and poor people.

“We said, ‘What would you do with an extra $500 a month?’” Tubbs said. “One woman said, ‘It’s summer, so that’d be great because my kids are coming back from college and my bills go up. One person said, ‘I’d probably save that up to start a business. One person said, ‘I’d go back to school.’ It wasn’t: ‘I’m gonna buy a TV or a car.’”

For the poorest people in Stockton, it could help them transition from being on the streets into some kind of housing, or from temporary housing into something more permanent. Extra cash could help people stay in their homes, rather than getting evicted. “Don’t get me started talking about Evicted,” he told me, referencing the surprise hit book by Harvard sociologist Matthew Desmond about the lives of poor people in Milwaukee.

“There was one line where he said, ‘Poor black men were locked up. Poor black women were locked out,’” Tubbs said. Locked into prison, locked out of homes from which they’d been evicted.

The lessons of the book hit close to home. He grew up in south Stockton, spending his elementary-school days in Louis Park Estates, a few blocks of nearly identical two-story condos just across the water from Rough and Ready Island. (Yes, that is its real name.)

“I’m not sure why they call it ‘estates.’ It’s a bunch of condominiums with stray cats walking around,” Tubbs jokes. “Growing up, when I'd throw out the trash, I’d toss it and dart because all the cats would come running. That’s why I still don’t like cats.”

On a recent afternoon, there were kids playing in the small and connected front yards, a few older folks perched on plastic chairs. An ancient gentleman in a brown zoot suit that might have been purchased in that cut’s heyday stepped creakily out of a Cadillac. It was closer to idyllic than dystopian, but every window had a set of heavy bars, even the second-story ones. And on one lawn, a family’s possessions were scattered everywhere, around a U-Haul that had been driven up onto the grass. If it was not an eviction, the scene spoke of some kind of hasty retreat.

* * *

Soon, there will be 1,000 more jobs in South Stockton. Amazon recently committed to building a 600,000-square-foot facility in the area.

That’s on top of a million-square-foot facility in a huge and developing logistics hub in Tracy. That’s about 20 minutes down I-205, right at the base of the Altamont Pass, which separates the Central Valley from the East Bay.

Once a sleepy agricultural area, it finds itself a logistics hub for dozens of companies. The wealthy Bay Area is nearby. There is great highway access. The Port of Oakland is through the pass. The land is cheap. And most importantly, the companies want to access “a laborshed” that extends outside the Bay.

A single developer, the logistics-focused real-estate investment trust Prologis, is developing 1,800 acres next to existing facilities for Costco and Safeway. Their first big lease went to Amazon, which snapped up a million-square-foot building that was the first warehouse to be built in the Central Valley after the Great Recession. Now thousands of people work in the warehouse alongside a fleet of robots.

A newly constructed warehouse in Tracy (Alexis Madrigal)

“When I got in the business 10 years ago, people cared about how many truck stalls do you have, how many doors do you have, what’s your clear height,” Ryan George, the Prologis investment officer working on the Tracy project, told me. “That’s all still important, but what drives the discussion now is where is my labor? How do I compete to attract and retain labor?”

Several logistics-industry publications back up George’s assertion. There is a widely acknowledged labor “shortage” in logistics, which has been exacerbated by Amazon’s growth. That’s driven up wages beyond traditional brick-and-mortar retail jobs, but not high enough to retain employees in high-cost regions.

And that’s why Stockton and the surrounding small towns are so attractive. “Some companies are trading transportation advantages for locations that have a desirable labor pool,” wrote Logistics Management in August of this year.

At the same time, a report from the Material Handling Institute and Deloitte Consulting found that many companies expected a major increase in adoption of automation and robotics over the coming years in part because of how hard it is to find the cheap workers that make e-commerce go.

“The fact is that there are 600,000 [warehouse] jobs that are going unfilled in the United States and that gap is getting bigger and bigger,” Fetch Robotics CEO Melonee Wise told me late last year. “The turnover rate for any manufacturing or warehouse job is about 25 percent. And so, there is a need for automation because people aren’t showing up to do the work.”

And ever more e-commerce, which requires a ton of shipping, has added a new wrinkle to the structural problems: It’s highly seasonal. That’s where places like Tracy come into the equation. It’s close enough to serve the Bay Area’s wealthy, but can tap the labor pool not just in Stockton and Sacramento, but all the way out to the migrant workers of the Central Valley.

“The Central Valley in general has a big advantage. To put it in the simplest terms, there are folks out there picking tomatoes in the summertime,” George told me. “They don’t have anything to do in November, December, January. So that’s when they are helping when Amazon triples their employees. And it’s not unique to Amazon.”

Faced with these labor-market conditions, companies have a few options. They can pay out more in wages and offer more perks. They can add tech, in the form of robotics, trying to drive down the amount of labor they need. They can reduce the amount of training and responsibility the average worker needs, so all the people who churn through are roughly interchangeable.

The problem is that that latter two decisions usually make the jobs even worse, exacerbating the wage problem.

George takes me on a driving tour of the vast development. Out here in the back end of e-commerce, drought-tolerant plants line the boulevards, fed only by recycled water. There are bike paths and glassy office parks and little hints of the area’s previous life: an irrigation canal, a railroad crossing.

George stops so that we can watch the construction of a perfectly flat plane onto which concrete will be poured to create the foundation of another enormous building. We talk about how the town of Tracy has received the new development. Though the city has been supportive, some residents don’t want the new development.

“People don’t realize this is where the future is. No one’s going to shopping malls. Shopping malls are going into here, right?” he says, pointing at the soon-to-be building.

A warehouse under construction (Alexis Madrigal)

Looking around, this does seem like the perfect place for a warehouse. We’re surrounded by highways, a wind farm, huge transmission lines, aqueducts. This is the shadow infrastructure of the Bay Area, the place where the physical systems that underly even the most phone-dependent life take shape. There are jobs in making those systems work, but they may not be ones that people want to do.

It’s a fascinating paradox. While Mayor Tubbs worries about how to structure UBI and get decent jobs into his city, the logistics people are fretting about not having enough workers to fill the slots and how to purchase more robots to reduce the need for human labor.

Even out here, two hours from Silicon Valley on a good day, the tech industry is shaking up civic and economic life. Would a truly universal UBI make hiring even more difficult, thereby driving even more automation? Given that not enough people seem to want warehouse jobs, is that necessarily a bad thing?

In San Francisco, the idea of a universal basic income can drive derisive snorts as a payoff from the tech overlords, but in Stockton, they’ll take all the help they can get.