In what must be one of the most unsurprising stories of the
day, researchers said that Finland’s trial universal basic income program did
not lead to higher employment. Although the program did not lead more people to
productive work than traditional social entitlements, participants did report
that they were happier and less stressed.
In recent years, the concept of universal basic income (UBI)
has become popular among some economists as an alternative to means-tested welfare
programs and social safety nets. The idea is that a country would guarantee
every citizen a minimum income level without meeting qualifying factors such as
age, income, or dependents.
In theory, this strategy would encourage upward mobility and
decrease self-defeating behaviors that are often associated with government
entitlement programs. For instance, some entitlement programs have income caps
that discourage recipients from getting jobs. Programs that are based around
payments to support dependent children encourage recipients to have more out-of-wedlock
children. By eliminating these requirements, it was hoped that the UBI would
encourage people to make good decisions and improve their lives. Because the
UBI also has no time limit, proponents argued that it would help people survive
while they retrained for new jobs in industries that were not affected by
Although first proposed in 1516 by Sir Thomas More, the UBI
faced its first real test in Finland. Under a pilot program that ran from
January 2017 through December 2018, the Finnish government gave 2,000 unemployed
Finns a flat monthly payment of 560 Euros ($634) through the Social Insurance
Institution (Kela). The trial was watched with interest by economists around
the world and now that the results are in, they are disappointing. Per the BBC,
Miska Simanainen, one of the Kela researchers behind the Finnish study, said
that participants in the study were no more likely to find work than those in a
control group that was given traditional unemployment benefits.
If this result was not surprising, neither is the fact that participants
who received the free money with no strings attached liked the program because it made
their lives less stressful. Tuomas, an out-of-work newspaper editor,
said, “I am still without a job. I can’t
say that the basic income has changed a lot in my life. Okay, psychologically
yes, but financially – not so much.”
Mr. Simanainen stopped short of calling the experiment a
failure, saying, “This is not a failure or success – it is a fact, and [gives
us] new information that we did not have before this experiment.”
It isn’t clear whether the UBI payments would save Finnish
taxpayers money over the cost of traditional entitlement programs. It is
possible that unconditional payments could reduce the bureaucracy associated
with registering and following up with recipients of entitlement programs.
It does appear, however, that UBI, like other government
programs, removes the incentive of recipients to find work. By funding a
minimal income level that makes unemployed Finns more comfortable in their unemployment,
the government makes it easier for them to remain unemployed.
UBI payments also promote a culture of getting paid for
doing nothing. As Ulrich Spiesshofera Finnish
business executive, told the Financial Times prior to the trial in 2016,
“economic rewards should be based on actually creating economic value.” UBI
payments are merely one more way of transferring wealth from those Finns who
work to those who do not.
It is not clear what the next step is for UBI advocates.
There are smaller scale trials being conducted in a Kenyan village and the city
of Utrecht in the Netherlands. However, these programs are on a smaller scale than the Finnish study and the results will not
be known for several years. The Kenyan study lasts until 2028. A Swiss referendum
on UBI in 2016 was opposed by 77 percent of voters.
In the United States, a Gallup
poll conducted in 2018 found that 48 percent of Americans support the idea
of a universal basic income. Support was strongest among Democrats (65 percent)
and 18-35-year-olds (54 percent). The cost of providing all working-age Americans
with a $10,000 salary would be more than $3 trillion annually.
Unless and until more encouraging results come out of future
trials, it will be difficult for UBI advocates to persuade policymakers and voters
that the universal basic income is an idea whose time has come. That is
unlikely to stop them from trying, however.