A man skates past a row of RVs where people live and sleep in the heart of Silicon Valley in Mountain View, California. Marcio Jose Sanchez/AP Photo

Santa Clara County, home to Silicon Valley, is considering a basic-income pilot that would give $1,000 per month to young adults transitioning out of foster care.

High housing costs and a lack of affordable housing have made these adults vulnerable to homelessness.

Like the basic-income trial in Stockton, California, the pilot would test whether guaranteeing free money to citizens improves their quality of life.

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Silicon Valley seems to be ever more curious about basic income.

The idea of providing a financial safety net in the form of free money has gained favor among Facebook co-founder Mark Zuckerberg, Slack co-founder Stewart Butterfield, and former Y Combinator president Sam Altman.

Now, the county government may try it out.

Santa Clara County is considering a basic-income pilot for young adults who have either left or are preparing to leave the foster-care system, The Mercury News reported. The county has suggested giving these residents $1,000 per month for one to two years to them help start their adult lives.

Another California city, Stockton, is already trialing a basic-income program by delivering monthly payments of $500 to 125 residents.

"When I first announced we were doing this pilot almost two years ago now, people thought of it as scary or crazy," Stockton's 29-year-old mayor, Michael Tubbs, told Business Insider in December. "It has now become mainstream in a way. People are really debating its merit."

Presidential candidate Andrew Yang has thrust basic income into the national spotlight; Yang promises to deliver payments of $1,000 per month to all US citizens over 18 if elected. His proposed program would require some Americans to choose between a monthly stipend and their existing needs-based assistance (though retirement benefits like Social Security would be preserved and veterans and differently abled citizens would keep getting their current benefits).

Basic income in Stockton and Santa Clara

The basic-income trial in Stockton is meant to test whether guaranteeing free money to citizens on a regular basis can limit their financial hardship and improve their overall quality of life.

To qualify for the program, residents had to be at least 18 and reside in a Stockton neighborhood where the median household income was the same as or lower than the city's overall: $46,033.

For Tubbs, it was important that participants continued to receive their existing welfare benefits from the government.

"I would oppose any policy that will get rid of the existing safety net and replace it with a cash transfer," he said.

Early results from Stockton suggest that participants so far are spending most of their money on food. Critics of basic income argue, however, that regular payments could encourage people to make frivolous purchases or undermine their motivation to find work.

A homeless encampment in San Jose, California. Beck Diefenbach/Reuters

The pilot idea in Santa Clara differs from Stockton's program in that it would offer regular payments to residents who are losing a social service: foster care.

The county estimates that nearly 60 people in Santa Clara transition out of foster care each year. Foster care typically ends when a person turns 18, though some people are eligible until they're 21. Nearly 200 young adults per year receive "extended foster care" - including housing support and financial assistance for college tuition - beyond age 18 in Santa Clara, according to county estimates.

So the basic-income trial proposed by the Santa Clara County Supervisors would target one of two groups: either young adults ages 18 to 21 who are still eligible for extended care, or young adults ages 21 to 24 who have aged out of the system.

If the program were limited to the nearly 60 residents who are transitioning out of foster care, the county told The Mercury News, it could cost around $700,000.

Basic income has been tested many times, with mixed results

Neither Stockton's program nor Santa Clara's proposed trial abide by the purest definition of universal basic income, since only a small portion of the population is eligible for the stipend.

The US has never conducted a nationwide universal-basic-income trial, but it has tested a few welfare experiments since the 1960s.

From 1968 to 1982, the US experimented with a negative-income tax, which allowed low-income citizens to receive money from the government instead of paying taxes. The trials ultimately involved about 9,000 citizens in New Jersey, Iowa, North Carolina, Indiana, Seattle, and Denver. The results showed a decrease in employment by the end of the program, but the experiments were considered too small to generate significant conclusions.

Alaska runs what many see as the country's largest basic-income program: the Permanent Fund Dividend, which has been distributing cash to state residents since 1982.

Other non-government basic-income trials have found it difficult to get off the ground.

In 2016, Y Combinator conducted a small basic-income test that gave 100 Oakland families monthly stipends of $1,500. Before stepping down as Y Combinator's president in March 2019, Sam Altman had plans to expand the program to give $1,000 monthly payments to 1,000 participants across two states.

Skye Gould/Business Insider

But that hasn't happened.

"It's harder to give away money than you might think," Elizabeth Rhodes, the research director for Y Combinator's basic-income test, told Wired in 2018.

Santa Clara's foster youth are vulnerable to homelessness

Young adults aging out of the foster care system are at high risk of becoming homeless, according to a 2013 study. That's because these adults are quickly cut off from access to a permanent residence.

In Santa Clara County, the median sale price of a home is more than $1.1 million and the average rent for a 900-square-foot apartment is around $2,900 per month. That makes it difficult for many residents to afford a place to live.

The latest estimates of Santa Clara County's homeless population suggest around 9,700 live on the streets - an increase of more than 30% since 2017.

Recipients of the county's proposed stipends wouldn't have to put them towards housing, though. The idea is to allow young adults to make their own decisions about money.

"It's not prescribed specifically to health-care deductibles or medical costs or registration for school or groceries," County Supervisor Dave Cortese said at a meeting in August. "It is the idea that, much like the few UBI pilots that are out there, it is a much more fungible or flexible fund."

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