With Universal Basic Income, Stockton Reimagines Economic Development

This is a guest post by David Zipper, resident fellow at the German Marshall Fund.

A couple months ago I spent several days in Stockton, a city that may have received more positive press in the last year than it did in the previous several decades. The bulk of that coverage has revolved around the dynamism of Michael Tubbs, Stockton’s 27-year old, Stanford-educated mayor and the novelty of the universal basic income (UBI) demonstration he arranged with $1 million from Facebook cofounder Christopher Hughes.

That demonstration, which will give selected Stocktonites $500 per month for a year, is the first city-supported test of UBI’s ability to mitigate the risk of future joblessness due to automation. If you want to learn more, you can take your pick from many national media outlets including the AtlanticCNN, and CBS News.

This deluge of largely laudatory coverage is a novelty for Stockton, a city of 300,000 that just six years ago was bankrupt and reeling from some of the highest rates of foreclosures and crime in the country. Without question, potential lessons from the city’s UBI demonstration are of national importance. But its implications for Stockton itself are deep, too—regardless of whether the experiment sparks a broader movement or fades into an historical footnote. For a city with limited resources available to invest in its future, the UBI demonstration is a savvy and creative approach toward local economic development.

To understand why, you have to appreciate the myriad challenges Stockton faces. Only 18% of adults in surrounding San Joaquin County have college degrees—compared with over 50% in San Francisco—while third grade reading scores lag 10 percentage points behind the state of California. Stockton’s rate of violent crime has fallen in the last decade, but it remains more than triple the state average.

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Corporations are wary of moving to Stockton due to concern they can fill skilled and managerial positions. An exception are the distribution and logistics companies that have continued to invest in the city—including Amazon’s recent announcement for a new facility bringing 1,000 jobs—but most of those positions are entry-level. A recent study questioned whether distribution hubs offer viable pathways toward wealth for a city or its residents, especially as automation puts those jobs at risk.

While education and public safety require substantial investment, Stockton’s financial resources are constrained compared with other cities. 2012’s bankruptcy remains a recent memory, and a watchful eye from the municipal bond market leaves the city little budgetary room to maneuver. In other cities local foundations often step in to provide catalytic investments, but Stockton has a dearth of them. Significant contributions come mainly from the countywide Community Foundation of San Joaquin that has an annual budget around $1.3 million. For comparison, the San Francisco Foundation—a foundation serving a community with just 20% more residents than San Joaquin County—bas a budget 68 times as large. And there are no Fortune 1000 corporations headquartered in Stockton, removing another financial resource commonly found in other cities.

In spite of these constraints, Stockton does have two unique assets. One is Mayor Tubbs himself, whose charisma, youth, and compelling personal story have earned him national plaudits and a campaign donation from Oprah Winfrey (her third, she says, after giving to Senator Cory Booker and President Barack Obama). The other is Stockton’s close proximity to the Bay Area, a global economic powerhouse and a hotbed of new business formation.

Although local residents have historically considered themselves to be in the northernmost city of the Central Valley, nascent ties to Silicon Valley are growing. In particular, the Bay Area’s astronomical housing costs are nudging service workers and some creatives over the Altamont Pass toward Stockton. Today some 68,000 people—more then 10% of the labor force—commute from the Northern San Joaquin Valley to the Bay Area.

In this environment, the UBI demonstration lets Stockton capitalize on its strengths to achieve several goals at once. Most immediately, it attracts net new money to a city with limited internal sources. For context, the $1 million invested in the UBI experiment is almost as much as the total grants given last year by the San Joaquin Community Foundation. And that money flows straight to residents, protecting Mayor Tubbs from critiques of outsider influence that dogged initiatives like Mark Zuckerberg’s $100 million pledge to reform the Newark Public Schools.

And the UBI funds are coming from Silicon Valley, the booming tech megaregion next door. As close as Stockton is to the Valley—just over an hour’s drive without traffic—very few linkages have historically tied the city to the Valley’s business community. But Silicon Valley’s position as the “epicenter” of the UBI movement means many heads turned east toward Stockton when Mayor Tubbs announced the experiment. That funding is connected to Facebook, based in Menlo Park, can’t hurt either. UBI is not the only Stockton initiative that Mayor Tubbs as pitched to outsiders; Silicon Valley has already become a key source of funding for Stockton Scholars, which promises tuition assistance to public high school graduates.

In the long run, these kinds of ties between Silicon Valley and the city of Stockton could pave the way for corporate expansions and perhaps even relocations. The city did not succeed in attracting the Tesla factory that was eventually built in Reno, but creative companies have already started moving to Stockton to escape soaring Bay Area rents. Artistic communities being harbingers of tech communities is a common phenomenon; support from Silicon Valley could speed that process in Stockton.

Perhaps most importantly, the past UBI experiment provides a new and uplifting narrative for Stockton that runs counter to stories of crime, foreclosure, or bankruptcy. Even though the city’s public safety, housing market, and finances are all improving, it’s better for Stockton if the UBI narrative nudges those topics entirely out of the national spotlight.

Like a gambler, a mayor must shape his economic development strategy with the hand that’s been dealt. Michael Tubbs was hardly handed a flush in 2016, when he became the youngest mayor in Stockton’s history. But with the UBI demonstration, Tubbs has made a wager that’s all upside for his community. At worst it will bring new money to local residents; at best it just might spark the economic renaissance that his city has been waiting for.

D87D7096-AA00-430E-8F78-4E3E7080ACAE.JPGAbout the Author: David Zipper is a resident fellow at the German Marshall Fund. He is also an innovation advisor to the Mayor of Akron, OH and the Greater Washington Partnership. David works with numerous smart cities startups and writes frequently for The Atlantic’s CityLab.