The initiative is targeted at helping individuals who have experienced a financial toll from COVID-19.
By Erica Sweeney
The COVID-19 pandemic has taken a financial toll on millions of American families, including job losses and reduced or lost income. The city of Minneapolis is giving some of its residents who’ve experienced these hardships an income boost via a new guaranteed basic income (GBI) pilot program.
“We know that the effects of COVID, whether it be social or economic, are broad,” says Mark Brinda, manager of the Minneapolis Employment and Training Program within the city’s Community Planning and Economic Development division. “That could mean losing a job, having reduced hours, or losing daycare because of the pandemic, or having costs increase.”
That’s why the city included a COVID-related impact into the eligibility requirements for the GBI pilot. Residents must also live in one of nine city ZIP codes and have an annual income at or below 50% of the area median income for Minneapolis, which is $52,450 for a family of four.
The city will provide 200 families with $500 a month for the next two years to spend however they choose. Brinda says they initially received 13,000 applications, but not everyone qualified. Once they identified applicants who met the criteria, they narrowed it down to 200 using a randomization process.
The families are in the process of completing their enrollment and the payments will start going out in May, he says.
GBI programs have popped up across the country recently, including in Los Angeles and Shreveport, Louisiana, as a way to offer financial support to residents. GBI programs usually target specific demographics who need funding the most and differ from universal basic income (UBI) programs, which offer monthly payments to all citizens.
Researchers say GBI can reduce food insecurity and increase health, as well as reduce the racial wealth gap and increase equity.
“This is about low-income families — communities that have been marginalized or those who've been left out of opportunities to build family-sustaining wealth — what are opportunities that could potentially bridge that gap?” Brinda says.
Minneapolis will gather data over the next two years to see what impact the payments have had, he adds. “We have lots of questions and we have ideas of what we would hope to see, but we have to study more.”
Many low-income households are unbanked, and having a bank account isn’t required to participate in the GBI pilot. But, local CDFI Royal Credit Union stepped in to provide accounts to any participants who want to establish a relationship with a financial institution, says Brittany O’Malley, financial education supervisor at Royal.
“There has been a historic mistrust with financial institutions, especially with low-income populations causing many people to be unbanked,” she says. “We hope by offering these accounts that participants will be able to begin to build good financial habits with an accessible savings and checking account, limiting the need to use check-cashing services, and in turn hopefully helping to build the trust in the community again.”
Along with the residents receiving monthly payments, Minneapolis is also creating a comparison group, which is a voluntary group of residents who will participate in surveys during the GBI pilot timeframe and be paid for their time. The city hasn’t yet decided how much these individuals will be paid to complete surveys, but Brinda says it will likely be about $100.
The comparison group will help shed light on how the GBI funds are making an impact compared to those in a similar environment who aren’t receiving the guaranteed payments, Brinda explains.
There’s no monthly check-in with the residents receiving GBI payments, but Brinda says they hope to assess how the funding truly helped people at the end of the pilot. Long-term, the city wants to examine how GBI could help achieve other policy goals around increasing equity and access to homeownership, a good job market, training, or other programs.
“We want to see how this monthly stable income can help somebody choose their own path to whatever that stability looks like for their family,” Brinda says. “Are there changes that are happening around employment, housing stability, mental health, access to dependable childcare and transportation?”
This story is part of our series, CDFI Futures, which explores the community development finance industry through the lenses of equity, public policy and inclusive community development. The series is developed in partnership with Next City.