Today I am going to blog about this basic income research that is currently in the preliminary stages, helmed by KELA and a few distinguished professors in Finland. KELA is like this social welfare institution in Finland which runs social benefit programs.
This “Basic Income” research has totally been milked by major news outlets via click baits. It’s quite funny really:
- [Mashable] Finland plans to pay everyone in the country $876 a month.
- [Quartz] Finland plans to give every citizen a basic income of 800euros a month.
- [The Independent] Finland plans to give every citizen 800 euros a month and scrap benefits.
So these titles are giving the impression that “WOW! Finnish government is totally giving free money to everyone every month!!”
The truth however, is that this is an ongoing research involving a tiny part of the Finnish population (in KELA’s slides it gives a percentage of 10%), so that probably involves less than 500,000 people living in Finland. Assuming adults above 21 take 70% of this 500,000, this would mean 350,000 folks, randomly chosen in Finland, will get the 20billion Euros benefit over 2 years, from 2017-2019. So this does not mean that Finland will really go ahead to implement Basic Income anytime soon.
I’d argue that it depends on two factors: (1) How this project is going to be funded and whether it is sustainable; and (2) The actual results–do lifestyle change? what will frictional employment levels be? would there be more people joining the workforce? how would this affect levels of entrepreneurship and chronic unemployment?
This research actually is a highly ambitious economic experiment which will probably put all economists and statisticians in a state of crazy ecstasy. Because the scale is unprecedented. As an economics-trained person, it is very exciting to me and I can’t wait for the results in 2019!
My current and immediate thoughts about this little experiment is basically–Exactly where is this 20billion Euros going to come from?! Well, Finland is undergoing its 4th year recession now, isn’t it? Assuming that this sum is going to come from debt and government borrowing, it will reduce the credit ratings of the country. Though I think borrowing to stimulate the economy will not be anything bad at all, because it will lead to increased consumption (currently consumption levels are low).
But the overall economic intuition of basic income is this: If you have had this basic income very month, would you not take more risk and YOLO? Would you then have the courage to pursue your life goals? Would you then be more free?
Of course all these depend greatly on consumers’ and investors’ confidence as well. If the future outlook is bleak, then no matter how much basic income one has, they will save. So I guess this has to be taken into consideration in the evaluation too.
In addition, this Basic Income project is exciting because of its effects on the community. The Vox report states it very well:
“The idea is to see what happens to a community under a basic income, rather than just to individual people. Having a whole town get benefits could have cascading effects as households escape poverty, as some people use the income guarantee as insurance so they can take risks and form companies, as universities see increased enrollment from people better able to afford supplies, etc.”
But nonetheless this is a research project that I’d be extremely interested in. ^-^ Kudos!! If executed well, this IS the way a country can make changes to the world!