Text size

As the idea of giving every American a monthly check migrates from the political fringes toward the center of policy debates, one hedge-fund executive is contributing research on whether, and how, such a scheme might actually work.

Every weekday evening we highlight the consequential market news of the day and explain what's likely to matter tomorrow.

Bob Jain, 48, created the Jain Family Institute, a nonprofit applied-research organization, in 2014 to investigate, among other things, programs for “guaranteed income.” Better known as Universal Basic Income, the idea is to give money to people, regardless of income bracket, at regular intervals.

The concept of UBI has gained traction in recent years, particularly on the political left. It has both popularized and been popularized by presidential candidate Andrew Yang, an entrepreneur who has centered his campaign around a UBI proposal he calls a Freedom Dividend. The idea also has resonated in certain corners of Silicon Valley, among those on the more comfortable side of the inequality divide. The growing interest in UBI is an outgrowth of concerns about rising inequality and threats to job security from robotics and artificial intelligence.

Michael Stynes, chief executive of the Manhattan-based JFI, sees greater adoption of robots exacerbating an already-widening wealth gap. He notes that 40 million Americans live in poverty, two-thirds of them children.

“Everyone has a right to a material existence,” he says.

While hedge-fund managers and other financiers support a plethora of philanthropies, such as the Robin Hood Foundation, Jain’s approach is arguably both more practical and more abstract. He started JFI to examine what he considers the most urgent and solvable social problems, and fill in gaps in research—currently in guaranteed income, digital ethics, and higher-education finance.

Jain created JFI while working at Credit Suisse. In 2016 he joined the $38 billion hedge fund Millennium Management as co-chief investment officer alongside founder Israel Englander, 70. Millennium is one of a shrinking pool of funds that still delivers strong performance for clients and can still charge the fat fees that clients have balked at elsewhere.

With populism on the rise on the left and right, Jain isn’t alone among his finance peers in seeing the urgency of addressing economic inequality. Even as the U.S. unemployment rate has plummeted to historic lows, the wealth gap has widened between the richest and poorest Americans, particularly since the financial crisis of 2008-09.

Hedge-fund billionaire Ray Dalio has recently ramped up media appearances to declare the wealth gap a “national emergency,” arguing that it will end badly if not addressed properly. He’s expressed skepticism about UBI, however, saying in answer to a question at the Summit conference in Los Angeles last November that if such a program were to be prioritized over, say, education, he’d “want to make sure that the money, the cash, is being given for an effective purpose, that [the recipients] will use [it] well.”

“If you’re a good decision maker and know you’re going to spend that money and allocate the resources effectively, it’s a better way of operating,” he said. “But there is a large percentage of the population [for whom] it can do more harm than good.”

Other critics of guaranteed income have argued that giving people “free” money removes incentives to work, and would reduce productivity. Some fret that it would add another government entitlement program that the country can ill afford, and that it might reduce other government programs that help lower-income people.

JFI sits at the increasingly crowded nexus of billionaires and public policy. To reach resource-scarce legislators, private citizens have found it effective to provide them with expensive research and fully designed policy. Recent legislation on prison reform can be traced, in large part, to the efforts of industrialist Charles Koch and his associates, while Napster co-founder Sean Parker helped create Qualified Opportunity Zones, a program tucked into the tax bill in 2017.

“We aren’t the Gates Foundation; we don’t have billions of dollars to give away, but we have our brains to give away,” says JFI’s Stynes. The foundation began researching guaranteed-income initiatives in 2016.

The following year JFI became a research advisor to a project in Stockton, Calif., that says it is the first public/private basic-income demonstration in the U.S. JFI is helping to examine results from the experiment, in which 130 residents receive $500 apiece per month for 18 months. The demonstration, funded by private donors and the Economic Security Project, says it will begin releasing preliminary data this fall.

JFI is also working with Newark, N.J., to create a task force for a basic income pilot, which Mayor Ras Baraka announced in March. In addition, the foundation is the principal research advisor for a soon-to-be-announced pilot in a large East Coast city.

Recent studies have dispelled some concerns about basic income. Evidence reviews, including one published in 2014 by the World Bank—found that recipients in some pilot programs didn’t increase consumption of “temptation” goods such as tobacco or alcohol; Another study, by labor economist Ioana Marinescu, found that cash transfers resulted in improved mental and physical health, and better school attendance and grades, especially for younger and poorer children.

JFI sees its role as testing different designs and structures, and examining the outcomes to learn what, if anything, might provide the biggest benefit to participants and the economy. “The point of the pilots is to study what people do with the money,” Stynes says, “to put to rest the idea that people are naturally unproductive.”

Write to Mary Childs at mary.childs@barrons.com