What if, instead of a series of complicated bureaucracies issuing welfare checks, food stamps, and tax credits, social benefits were distributed to everyone without regard to income or employment status?
That’s exactly what the government of Finland is contemplating. The Finnish government is investigating whether it might make good financial sense to make a tax-free monthly payment of about 800 euros ($871.86 US) to all adults in the country, regardless of income, employment status or qualification for other kinds of benefits. Those other benefits would largely be eliminated.
It’s far from being a done deal: at this point, it’s only a preliminary study. The study is being conducted by Kela, the Social Insurance Institution of Finland, which operates under the supervision of Finland’s Parliament.
The study began in October at the request of the Finnish government. It’s a collaborative effort between the Research Department at Kela; University of Helsinki; University of Tampere; University of Eastern Finland; University of Turku; Sitra Innovation Fund Tänk (a Finnish think tank); and VATT Institute for Economic Research. The project is headed by Professor Olli Kangas, director of research at Kela.
The purpose of the study is to find new ways to improve the current system, including making it more efficient. The study, which has been referred to as “a universal basic income experiment,” has as a primary goal, incentivizing going back to work; some in the present government believe that the current system serves as a disincentive to look for work. Finland’s unemployment rate is a whopping 9.5%, about twice the rate in the United States (which currently sits around 5.0%).
An additional consideration is the total economic impact of making monthly payments to all adults. From an expense perspective, the current government believes that it might save a considerable amount of money by reducing the types of benefits offered to its citizens and replacing it with a fixed amount. The current bureaucracy is expensive because of all of the moving parts.
If every adult receives the benefit, the program could cost more than $44 billion per year ($871.26/month for an adult population of roughly 4.2 million). It’s important to note that the amount of the payment hasn’t been settled: the 800 euros is an example of what might work. The total amount would be determined after an analysis of the study.
The program would be funded in the same way that benefits are funded now: through government revenue raised largely from taxes under the existing tax structure. The monthly payments would be tax-free and would resemble what we would consider welfare: the difference, however, from a traditional welfare system is that everyone would receive the benefits.
If the experiment goes forward in Finland, it would be launched in 2017.
Finland isn’t the only country considering such a plan. Switzerland is also mulling a variation on a national basic income. The Swiss government isn’t a fan of the proposal, but the proposal will nonetheless go up for a vote: the Popular Initiative for Unconditional Basic Income is scheduled to take place in 2016. An early poll suggests that more Swiss support the proposal than are opposed. Additionally, in the Netherlands, four municipalities (Utrecht, Tilburg, Groningen, and Wageningen) have expressed interest in trial versions of a basic income payment; Utrecht could debut a variation of the experiment as early as January 2016.
It’s not a completely novel idea: a similar experiment was conducted in Manitoba, Canada, between 1974 and 1979. A lack of real data hampered efforts to make a concrete analysis about whether the experiment was a success. An after-the-fact examination (downloads as a pdf) of the experiment found that a broadly implemented form of the policy “may improve health and social outcomes at the community level.”
(Author’s note: I’ve reached out to Dr. Kangas for comment and as of this writing, have not received a response. I will update as information becomes available.)
