From 1 January 2017 to 31 December 2018, Finland ran the world’s largest and most comprehensive basic income experiment. The purpose of this was simple: to find out what effects, positive and negative, basic income can have on people. The government of the then Prime Minister, Juha Sipilä, decided to run the experiment, with researchers at Helsinki University carrying it out and analysing the results.
How the Experiment Worked
For the experiment, 2,000 randomly chosen people on unemployment benefits from across Finland received tax-free monthly payments of €560. Each participant received the same amount of money every month for the study’s duration, no matter who they were, where they lived or what their background or employment history was. Even if someone actually gained a job at some point during the experiment, they would still receive their monthly €560 payments.
The experiment also looked at a control group of 173,000 people, all of whom were receiv-ing unemployment benefits also. Just like the recipients of the basic income, these peo-ple were all randomly selected from all over the country.
Participation wasn’t optional as the experiment was written into the country’s legislation. If you were chosen, either as a basic income recipient or a control group member, you were legally required to take part and couldn’t opt out.
Employment Status Results
What’s important to point out is that in early 2018, the government introduced a piece of legislation known as the ‘activation model’. This made it harder for people to qualify for unemployment benefits. People in both groups – the basic income and control groups – were affected by the new, more stringent requirements.
Effects on employment from November 2017 to October 2018 were looked at. It was found that recipients of basic income worked an average of 78 days during this time, whereas those in the control group worked 73 days on average.
It should be noted that during 2017, before the activation model was introduced, basic income had a negligible effect on employment. Once it came into effect, those on basic income worked more compared with the control group.
Karl Hämäläinen, who is the Chief Researcher at the VATT Institute for Economic Re-search, concluded that basic income’s overall effects on employment were small. He also affirmed that for some people receiving unemployment benefits, the problem of not get-ting work isn’t down to financial incentives or bureaucracy.
Shortly before the experiment ended, a phone survey was carried out. The aim of this was to determine how people’s well-being had been over the last two years.
It was found that of those who responded, those who had received basic income felt bet-ter about their well-being than those in the control group. They reported feeling more sat-isfied about their lives and being more trustful of societal/governmental systems. They had also experienced less loneliness, depression and mental strain when compared with control group respondents.
Finally, those who had received basic income had a more positive attitude towards their finances. They felt better protected and felt their money situations were more easily man-ageable.
81 of the basic income recipients took part in interviews. Some reported that being in re-ceipt of basic income had a clear effect on their employment, whereas others said the ef-fect on employment was small. Many reported feeling better about working and more in-dependent. A number of those interviewed mentioned that they were able to participate in communal activities such as volunteering.
Not everyone responded positively, however. Some said that while they received basic income, they felt pressure to find a job and others struggled to cope even with the fixed payments coming in every month.
Helena Blomberg Kroll, a professor at Helsinki University, concluded that basic income didn’t seem to solve major life problems. It did, however, enable some to become more active and spend their time more productively.
Basic income isn’t a perfect solution to the problem of unemployment and low-income living by any means. While there are many potential pros associated with it, there are also some cons that people have come up with.
People feel better about their finances knowing there’s a fixed amount of money coming in every month no matter what. While that security can positively affect people’s wellbe-ing, the core problem of getting people into employment remains.
Those on basic income worked more than people on unemployment benefits, on aver-age. Therefore, providing some sort of basic income to people could be a way of boosting employment. The only downside to this, however, is that basic income recipients worked only five days more than those on unemployment benefits. Some would say this isn’t enough of a difference. Would just five days’ more work per person be enough for anoth-er basic income scheme to be given the go-ahead?
Hello readers! It’s finally time to highlight the main pros and cons of the idea for universal basic income. Of course, there is so much more to say than just three advantages and three disadvantages, but I’ll try to keep it unbiased. We all know how important it is for a business advisor to avoid taking a side when showing her opinion. So, check out this basicincome2013.eu blog post to the end and tell me what you think! Let’s get started on the three great pros of universal basic income. Here we go.
Basic income creates independence and promotes welfare. Let’s face it – it’s the men in most of the families who get the money, not the women. Even in the UK! That comes with a series of consequences such as more rights for the men to spread their expenses and what to do with the family budget. If you wonder how to increase the independence and welfare in some families – it would be with by the universal basic income!
How to reduce poverty? Introducing basic income as a solution to reduce poverty is certainly an unmatched advantage. For example, in India, according to informal data, there are nearly 200 million people who are poor or very poor and do not have bank accounts. Given the universal basic income pros and cons, the government of India couldn’t be more certain that the money reaches the poor people.
An act of fair game. Did you happen to ask yourself questions such as ‘Where does all the money that the government takes from the citizens go?’ or ‘How does a government spend the money it takes from its people?’ Well, it’s kind of unfair for the poor people to pay the same taxes, public service fees, etc. as the richer people do.
Basic income has its disadvantages that are also not to be missed. I can point out three main cons of universal basic income. They are:
Discourages citizens to work. With improved welfare and secure monthly income, citizens will not be more motivated to work more for a higher income. There would be even more people who will rely on easy income and grant money. I cannot see any advantage or benefit in this when it comes down to laziness and the unemployment rate!
Overtakes the idea of capitalism. Without a doubt, we live in a capitalist society which is proven to be the only self-developing governmental mechanism or ideology. It is hard to identify a dictatorship, socialist or even communist society that prospered throughout the years. Even China’s economy sees an enormous benefit after implementing the idea of capitalism. That said, the universal basic income might put a setback in the accumulation of capital, private property, and others.
Increases bureaucracy. Can a universal basic income reduce the government budget? Undoubtedly, it could! But where exactly will these basic income transactions fit in with government revenue and expenditure? Can you imagine all the bureaucracy necessary for managing such a complex and universal system of basic income?
These are only a few of the universal basic income pros and cons that I could highlight in a single blog post. If you want to talk more about benefits, disadvantages, social movements in the UK, how to’s, and other aspects of basic income – leave me an email or come back to my blog later. I’ll keep you posted!
The idea of basic income was the concept that sparked the motivation to start this blog. If you are new to the idea, allow me to give a very simplistic overview.
Basic income (also referred to as basic income guarantee, unconditional basic income, universal demogrant and basic living stipend) is a welfare program in which every citizen is given a regular sum of money with no obligation to seek employment. The amount given is enough to meet basic living needs and would be sufficient not just to survive, but to put you above the poverty line.
If a citizen does decide to work, the basic income amount is independent and wouldn’t be affected by any other sources of income.
The idea is certainly not new. As early as the 18th century the idea a social insurance was being penned by Marquis de Condorcet, a French mathematician, philosopher and political scientist. Whilst in prison for his part in the French Revolution, he wrote Esquisse d’un tableau historique des progrès de l’esprit humain in which he outlined his vision of a social insurance that would be paid to children, so that generation would be free from inequality, poverty and insecurity.
In the UK, the social movement for basic income gained momentum at the end of World War 1. After 4 years and 3 months at war, battle weary Brits were demanding change.
In 1918, Dennis Milner released a pamphlet entitled Scheme for a State Bonus. After serving in the Great War in the Ambulance Unit, he took up employment at the Rowntree’s chocolate factory in York. His interest in politics and especially social and welfare reforms grew to such an extent that he left Rowntree to work on his proposals full time.
His idea, which was written jointly with his wife, argued for the “introduction of an income paid unconditionally on a weekly basis to all citizens of the United Kingdom”. The pair claimed it was an ethical and moral right that everyone should have the means subsistence and this right should not be determined by an individual’s willingness to work.
At around the same time Clifford H. Douglas was also agitating for social change. Douglas was vocal in his belief that modern manufacturing was in violation of Ricardian economics.
Ricardian economics is a theory developed by English political economist David Ricardo. In his theories, Ricardo introduced the idea of comparative advantage which is the principle that under free trade an agent will produce more of and consume less of a good for which they have a comparative advantage. Douglas realised this model wasn’t working as employees couldn’t afford to purchase the goods they were making, despite a boom in British manufacturing. As a solution he proposed a “social credit”. This would include elements of a guaranteed basic income coupled with monetary reform.
The idea of basic income is certainly an interesting proposition. Main opposition for the idea centres on the fear that basic income discourages citizens to work, stifling growth. One example that does seem to suggest this notion is the scheme in operation in Alaska.
Since 1982, Alaska has paid all residence a share of the country’s oil revenue. In 2005 this amount was $2,072. Alaska has the United States highest rate of unemployment at 7.3% compared to the American average of 4.1%, could this just be a coincidence?
If you were given the chance would you introduce basic income? Do you feel this would reduce pressure on day to day life or would this just encourage laziness? Stay tuned for more articles soon.
Hi, Linda Solomon here, business brand advisor and self-proclaimed financial activist. Since childhood I’ve always been fascinated by money, not just spending it but the origins too. Why did we start using it? Do we even need it? And more importantly, how do governments spend the money they take from the little man?
In this blog I’m going to take a look at how the other half live, could it be that there is already a utopian society out there somewhere? Has anyone managed to reduce the disparity between the haves and the have nots or do the rich always get richer and the poor always get poorer?
Most of us here in the UK will have only ever experienced capitalism. A system that by its very nature is destructive. The dictionary definition of a capitalist is “a wealthy person who uses money to invest in trade and industry for profit in accordance with the principles of capitalism”. With capitalism there is no end game. Profit and wealth need to grow year upon year otherwise markets start to crash, and we have all seen the impact when that happens.
As we produce more, we consume more, and the environmental impact is huge.
China is a textbook example of the dangers of capitalism. Previously a hard-line socialist country with trading relationships with only friends and neighbours, they slowly embraced capitalist ideology, reaping rich rewards and today they are the second-largest economy in the world. They are expected to overtake the USA within the next 80 years. To keep up with demand they are building 700 new coal power plants.
This is scary stuff! So, in this blog I will look at different ways. I will explore exciting ideas such as basic income. Could Objectivism work or are Participatory Economics the way forward? Come join me on an exploration of socio-economic systems!