What Can Finland Tell Us About the Future of Welfare?
In January of 2017, Finland ventured into a largely unexplored welfare policy realm - universal basic income. Praised as cutting edge, this program was the first national government-supported experiment in universal basic income. The world has waited to see the results. However, on Monday, Finland’s government refused to extend or expand the program. The experiment will come to an end in January 2019.
In its purest form, universal basic income is a payment made by the government to all residents of a country, regardless of income or employment status.
Finland’s universal basic income experiment was a two-year endeavor. The government randomly selected 2,000 unemployed citizens to receive a tax-free, no-strings-attached payment of $690 a month. In the second year (2018), they planned to extend the payments to a sample of employed people; the heads of the government however refused this planned expansion.
The Finnish government had hoped the universal basic income would lift its citizens out of poverty. Among policy experts and citizens, the perceived effects of basic universal income are controversial. Proponents of universal basic income claim it will lower poverty rates, while critics claim it discourages recipients from seeking jobs. Damon Jones from the University of Chicago writes that “the possible reduction in employment seems to be offset by increases in spending that in turn increase the demand for workers.”
Many hoped that Finland’s venture would provide new research, but Finish expert Olli Kangas told reporters that “two years is too short a period to be able to draw extensive conclusions."
The Finish government already has plans to try new welfare systems as soon as the universal basic income experiment ends next January. Prime minister Petteri Orpo suggested to reporters that Finland will try universal credit. Introduced in the UK in 2014, universal credit is similar to universal basic income, but the amount a person receives is dependent upon one’s income level. A study by the OECD found that a universal credit system could cut poverty rates from 11.7% to 9.7%.
Advocates for universal basic income have not been deterred by Finland’s fallout with the program. Many tech leaders believe that universal basic income is necessary as automation increases. Other national governments are conducting small-scale plans and have put these plans into experiment within communities depressed by industries that are replacing workers with automated counterparts. For instance, in Alaska, residents receive 2,000 dollars from the state which is funded by excess oil reserves.
Long-term results are to be determined. In Europe, many EU citizens are beginning to see universal basic income as a valid option, with support growing as high as 68% according to some studies. As automation increases and Finland kicks off its another welfare experiment next year, other countries will likely follow suite, venturing into previously unexplored areas of public policy initiatives.