Finland is Handing Out Free Money to its Citizens, No Strings Attached
On the 1st day of 2017, Finland began experimenting with a radical new initiative called the Universal Basic Income, or UBI. It involves paying a base wage to all of its citizens, no strings attached. The UBI aims to eradicate poverty, combat rising unemployment rates and promote entrepreneurship.
The Finnish government will pay a guaranteed stipend of 560 euros per month to a sample group of 2,000 unemployed Finns aged 25 to 58. If they find stable employment during the experiment, they’ll continue to receive the UBI for the duration of the 2-year trial period.
Kela, the organization running Finland’s social security systems and this experiment, believes that the UBI will boost employment. They suggest that the current system potentially discourages unemployed Finns from finding work, in fear of loosing their current benefits.
The theory behind the UBI is that having a guaranteed income to cover life’s necessities will help to reduce the government’s spend on welfare and end poverty. Also, supporters predict that it could encourage citizens to experiment boldly with employment. Hopes are that the UBI will provide the financial security required to pursue entrepreneurial projects and further education.
Activists in Switzerland set a Guinness world record for the largest campaign poster leading up to the UBI referendum in June 2016.
A Hung Jury
Unsurprisingly, the idea has been polarizing. In a report on UBI last year, economists Howard Reed and Stewart Lansley expressed their support.
“A universal basic income would provide a much more secure income base in an age of deepening economic and social insecurity and unpredictable work patterns… It would offer much greater financial independence and freedom of choice for individuals between work and leisure, education and caring while recognizing the huge value of unpaid and voluntary work.”
Detractors of the UBI however see it as a risky, expensive and inefficient hand out. They claim that the UBI will encourage laziness and destroy work ethic and competition.
“If you pay people to do nothing, they will do nothing,” Charles Wyplosz, economics professor at the Geneva Graduate Institute, told the AFP news agency.
This contrasting opinion of the UBI presents itself again in wider studies conducted across the globe. One study found that 68% of people across 20 European Union countries support the initiative. In Switzerland, however, 78% of voters rejected the proposal last June.
But interests in the idea have not wained. While Finland is the first country to trial the UBI on a nationwide scale, other countries are trying it out locally as well.
A map showing places where Universal Basic Income has been implemented or where pilot programs have been initiated.
In the Netherlands, there are plans to trial different versions of the scheme with a range of restrictions and sanctions across different cities. Utrecht began trials last year. Livorno, Italy followed right after.
In Spring this year, Ontario, Canada will host a similar experiment. The Californian start up Y Combinator will also begin a 6 -12 month trial of giving a monthly salary to 100 Oakland families. Kenya, India, and Scotland are making similar movements, feasibility studies and plans for their own UBI trials.
Not A New Idea
Past UBI projects and experiments have shown promising results, not only for the economy but for public health. In the 1970’s, the UBI was tried in small, targeted populations in Canada. The Guardian reported on a 3-year trial in the small village of Dauphin, Manitoba. They wrote that, “recipients of the basic income suffered less from ill-health and mental stress,” and that “children from recipient families were less likely to drop out of high school.” Another study in Ontario, trialed on senior citizens, saw a 25% decrease in the poverty rate among subjects.
Regardless, many economists believe that the widespread implementation of the UBI would have catastrophic social and economic consequences. To name a few: a large increase in personal tax, and an inflation of product prices that may soak up the UBI, rendering it ineffective.
The World Watches On
As the debate continues, however, Finland takes the first leap into the unknown. Supporters, detractors, and everyone in between, all around the world, watches on with baited breath. Finland will review and analyze the results of the UBI experiment in 2019. They will then decide to expand the initiative or scrap it all together. Until then, all that can really be counted on is that the UBI experiment in Finland will have a lasting, global impact one way or another.