Finland will be ending its trial program of an unconditional monthly payment to 2,000 unemployed Finns. The program had come about with the support of a coalition of Greens, centrists, libertarians, the Centre party, and the far-left, and faced opposition from unions, social democrats, and mainstream conservatives. Participants received € 560 each month, to do with as they saw fit; it was seen as at once a welfare-reform effort, an employment program, and an experiment. The Finnish trial was the first basic-income experiment in a developed country, though nonprofits have been trying out direct cash aid in developing countries, as a market-friendly approach to charity.
Some version of the “basic income guarantee” concept, as an alternative to the present system of welfare provision, has been floated about for a while. The theory is that a direct cash payment, provided without conditions, is likely to avoid both the one-size-fits-all nature of targeted antipoverty programs and the welfare trap. As such, it has garnered support from figures on the right and left alike, as its political supporters in Finland suggest.
Olli Kangas, who helped design the Finnish trial and now runs it raised concerns a year ago, citing lawmakers’ fading interest in the idea after enacting it, as well its limited sample size and the focus on solely the unemployed. After all, part of the argument for basic incomes is that they serve as an effective subsidy and incentive to take entry-level jobs, by providing an amount that is not sufficient on its own but beneficial on the margins. To some extent, it did seem to encourage work, with many participants citing earlier experiences of being unable to take anything but high-paying jobs because entering employment would cancel out their existing benefits.
Milton Friedman’s negative-income-tax concept could also be viewed as an example of an income guarantee (though his idea was a replacement for the existing welfare program instead of being an addition as it is in the U.S. and U.K. today). Scholars from the centrist-libertarian Niskanen Center have sketched out ways in which a basic-income program could be implemented in the U.S., taking into account progressive attachment to the welfare state and conservative skepticism of transfer programs. Some economists who had previously advocated a basic-income program have turned against it, and I find myself on that side of the debate.
Even so, I think it is worth experimenting with alternative approaches to the safety net, and to that end I’m interested in seeing these experiments carried out effectively. The city of Stockton in California will be trying out an 18-month privately funded basic income for a few dozen families, who will receive $500 a month. Alaska has its own long-running version, whereby residents who plan to live in the state permanently receive a portion of the state’s oil revenue, and a recent study of it showed no decrease effect on aggregate employment, though it did show an increase in part-time work.
Kangas worries that the short tenure of the trial (designed to end before 2019 elections) means that limited actionable information will be gained, but researchers plan to follow the trajectories of participants over the next decade. It will be worthwhile to compare their paths to those in the welfare system.