Finland Is Giving Away Free Money to Reduce Unemployment
It’s not as crazy as you might think.
Finland is experimenting with a radical nationwide initiative that will put money into the hands of the country’s unemployed with no strings attached.
Called the Universal Basic Income, or UBI, the idea is simple: that people living in poverty should be able to have a reliable source of income while they search for stable employment.
The Nordic country’s pilot program will include 2,000 unemployed Finns aged 25 through 58 who will receive a monthly lump sum of 560 Euros (roughly $580 USD) over the next two years. If participants find a job, full- or part-time, during the experiment they will continue to receive the UBI for the duration of the trial period.
Proponents of the Universal Basic Income believe it has the potential to eradicate poverty, cut out bureaucratic restrictions that bog down the welfare state, and promote entrepreneurship. Detractors see it as an inefficient hand-out that encourages laziness and slashes competition.
Though Finland is the first country to test out this policy on a national scale, other countries around the world are testing it out locally as well.
The province of Ontario, Canada, plans to begin a similar pilot project in the spring of this year. In California, a startup incubator called Y Combinator will give a basic monthly salary of $1,000-2,000 to 100 Oakland families.
The cities of Livorno, Italy, and Utrecht, Netherlands, began testing UBI projects last year.
In Kenya, a US non-profit called GiveDirectly is investing $30 million over the next 10 to 15 years to test out a UBI project its founders believe can reduce poverty in sub-Saharan Africa. And in India, the government plans to produce a feasibility survey on the UBI in the coming year.
Support for the Universal Basic Income varies by country, but one study found that 68% of people across more than 20 European Union countries support the initiative. Alternatively, in Switzerland a UBI proposal was voted down last June by a 3-to-1 margin.
Despite early support for Finland’s initiative, questions of economic feasibility of UBI still remain, especially for larger countries. In Canada, the Guardian reports, “the same poll that suggested broad support for the policy also found that most would not be willing to pay more taxes to support such a program.”
The price tag on a nationwide Universal Basic Income project in the United States would run around $3 trillion a year, according to the New York Times.
President Barack Obama, in an interview with Wired, questioned the political feasibility of such projects: “Now, whether a universal income is the right model—is it gonna be accepted by a broad base of people?—that’s a debate that we’ll be having over the next 10 or 20 years.”
In Finland, on the other hand, with a rather homogeneous population and a struggling economy (employment is over 8% in Finland, compared to under 5% in the US), UBI will allow unemployed residents to retrain into new, higher-tech positions.
The two-year pilot program in Finland — which, as Fortune notes, is not actually “universal,” as it will only apply to 2,000 people, chosen at random — will allow policymakers to gauge the usefulness of UBI initiatives.
“Some people think basic income will solve every problem under the sun, and some people think it’s from the hand of Satan and will destroy our work ethic,” Olli Kangas, who oversees research at Kela, the federal organization running the UBI projet, told the Times.
Early returns from past projects suggest that it might be effective. A 3-year UBI project in Dauphin, a small village in Manitoba, Canada, in the 1970s showed some promising results — not only for the economy, but for public health.
“Hospitalisations, accidents, injuries and mental health issues had all declined when the stipend [sic] were flowing into the community,” the Guardian wrote.
Another UBI project from the 1970s, aimed at Ontario senior citizens, led to a 25% decrease in the poverty rate for that demographic.
Hugh Segal, a former Canadian senator and now a conservative political strategist, believes UBI can appeal to both the right and the left.
“This is not something which is in any way, in my view, the precinct of the left,” Segal told The Guardian. Rather, he said, it should viewed as a community engagement project that gives people “a floor beneath which they’re not allowed to fall.”