basic income

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The Finnish government started the new year with its first basic income trial. About 2,000 citizens who were previously receiving unemployment benefits will now be awarded a monthly stipend of US$587 (€560). There are no strings attached and for the next two years, each participant will receive the sum regardless if they find or even attempt to seek a job or not.

Why Finland is handing out free cash

It seems counter-intuitive at first, but studies suggest basic income can actually improve productivity. In fact, the idea has been around for some time. As early as 1795, American revolutionary Thomas Paine called for a Citizen’s Dividend to all U.S. citizens for “loss of his or her natural inheritance, by the introduction of the system of landed property.” Napoleon Bonaparte echoed this liberal idea, being quoted as saying ”man is entitled by birthright to a share of the Earth’s produce sufficient to fill the needs of his existence.”

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Pilots programs ran so far have been largely successful. The ‘income maintenance experiment’ was a form of basic income disguised under a negative income tax which would increase as the available income increased, i.e. people got employed. The experiments that included poor American families from Seattle and Denver in the 1960s and early 1970s found the participants still sought to get employed despite the unconditional monthly income. Later, a program from 2008 ran in Ojivero-Omitara by the Namibia BIG Coalition found basic income led to a decrease in poverty, an increase in economic activity, reduced crime, reduced child malnutrition and increased school attendance as well as other positive effects after basic income was introduced. Two pilot programs made in India in 2010 reached similar conclusions.

All of these studies suggest that the fears like poor breadmakers turning into slackers living on the dime of taxpayers money are unfounded or, at least, require more scientific validation. Moreover, massive globalization and increased automation of mundane tasks mean basic income might become a necessity in the coming decades. Half of all current jobs are poised to disappear in the coming two decades, a famous study found. Millions of people currently employed as drivers, clerks or even lawyers could find themselves out of jobs and with little time on their hands to repurpose their skills. For these people, basic income is their only shot and the money would come from taxing the massive productivity gains that information technology will yield.

The pace of change is rapid, however, and it’s not yet clear if basic income will indeed work. This is why all eyes are set on Finland for the next two years while their pilot program runs. During this time, each participant will receive $587 — money which will be deducted from any benefits they already receive. There are no reporting requirements on how the participants decide to spend their money and can still earn their basic income if they get a job. The average wage in Finland is $3,600 per month.

“It’s highly interesting to see how it makes people behave,” a spokesman from KELA, the Finnish governmental authority in charge of the basic income pilot program, said. “Will this lead them to boldly experiment with different kinds of jobs? Or, as some critics claim, make them lazier with the knowledge of getting a basic income without doing anything?”

Besides the Finnish unemployed participants, two pilots programs are also currently underway in two Dutch towns, where the monthly check is far larger ranging from €900 ($1,000) to €1,300 ($1,450). But even if these programs prove successful, skeptics will likely not be convinced the findings can be translated to the American labour market, which is why new programs need be tested in the U.S. as well.