Can the basic income work?

Finland launched a globally unique experiment on 1 January: It is testing an unconditional basic income for the unemployed. For two years, 2000 randomly selected people will receive 560 euros every month. Payments like housing benefit will continue, and the test subjects will be allowed to earn money on top of their basic income without deductions. The press sees this as an exciting pilot project.

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Kaleva (FI) /

Experiment should finally bring clarity

The idea of a basic income will hopefully be further developed, Kaleva writes:

“The experiment should provide an answer to the burning question of whether a basic income will boost employment or not. The goal of a basic income is to simplify the social security system, to remove obstacles to motivation and to reduce the stifling bureaucracy that tends to lead to passivity. The relationship between incomes and social benefits is currently a complex one, where everything affects everything else and there is no incentive for personal initiative. … Hopefully the experiment being conducted by the social security agency Kela will finally produce some information about whether the assumption that a basic income will have a stimulating effect is correct or whether the scenario will result in a moral catastrophe. … The model is still at the teething stage, and further experiments will be necessary. But at least now a start has been made. ”

NRC Handelsblad (NL) /

Unrealisable in practice

The experiment is well intended but impracticable, NRC Handelsblad believes:

“The basic income is too low to be able to draw comprehensive conclusions from the test. The basic amount is probably too small to really change the behaviour of those receiving it. And even if it did, these changes would not be far-reaching enough, because those participating know that the experiment will be over in two years' time. That is a pity. ... The idea is attractive, but the main problem is its practical implementation. One can think up wonderful ways to change the system, but they remain what they are: an attempt to transform an entire, complex, integrated system into a different one. A smooth transition is difficult to achieve.”

La Tribune (FR) /

Don't underestimate consequences for consumption

La Tribune is likewise sceptical about the experiment and believes that the introduction of a basic income nationwide would have considerable repercussions:

“If a large part of the population were to decide to live on limited means, a labour shortage would ensue. This would have negative effects on the economy, and a dynamic economy is precisely what is required in order to be able to introduce a basic income in the first place. … Were such a programme to be introduced nationwide, one would have to radically raise taxes in order to finance it, which would hit the middle classes in particular. Finding their purchasing power reduced, they in turn might decide to reduce their working hours and hence their salaries, yet the new wealth gained from the basic income would at least in part be cancelled out by taxes. At any rate the consequences for the entire economy would be considerable, since consumption is a factor that furthers growth.”