The Finnish government is currently drawing up plans to introduce a national basic income. A final proposal won’t be presented until November 2016, but if all goes to schedule, Finland will scrap all existing benefits and instead hand out 800 euros per month—to everyone.
It sounds far-fetched, but it’s looking likely that Finland will carry through with the idea. Whereas several Dutch cities will introduce basic income next year and Switzerland is holding a referendum on the subject, there is strongest political and public support for the idea in Finland.
A poll commissioned by the government agency planning the proposal, the Finnish Social Insurance Institution or KELA, showed that 69% support (link in Finnish) a basic income plan. Prime minister Juha Sipilä is in favor of the idea and he’s backed by most of the major political parties. “For me, a basic income means simplifying the social security system,” he says.
But for those outside Finland, the plan raises two obvious questions: Why is this a good idea, and how will it work?
It may sound counterintuitive, but the proposal is meant to tackle unemployment. Finland’s unemployment rate rose to 11.8% in May (though it was back down to 8.7% in October) and a basic income would allow people to take on low-paying jobs without personal cost. At the moment, a temporary job results in lower welfare benefits, which can lead to an overall drop in income.
Previous experiments have shown that universal basic income can have a positive effect. Everyone in the Canadian town of Dauphin was given a stipend from 1974 to 1979, and though there was a drop in working hours, this was mainly because men spent more time in school and women took longer maternity leaves. Meanwhile, when thousands of unemployed people in Uganda were given unsupervised grants of twice their monthly income, working hours increased by 17% and earnings increased by 38%.
One of the major downsides, of course, is the cost of handing out money to every single citizen. Liisa Hyssälä, director general of Kela, has said that the plan will save the government millions. But, as Bloomberg calculated, giving 800 euros of basic income to the population of 5.4 million every month would cost 52.2 billion euros a year. The government expects to have 49.1 billion euros revenue in 2016.
Another serious consideration is that some people may be worse off under the plan. As the proposal hasn’t been published yet, it’s not yet known exactly who will lose out. But those who currently receive housing support or disability benefits could conceivably end up with less under national basic income, since the plan calls for scrapping existing benefits. And as national basic income would only give a monthly allowance to adults, a single mother of three could struggle to support herself compared to, for example, a neighbor with the same government support but no children and a part-time job.