May 15, 2020 - 9:00 pm
A large study of the “universal basic income” handout in Finland found exactly what you’d expect. Giving people “free” money makes them marginally happier but not noticeably more productive.
In 2017, Finland selected 2,000 unemployed residents to receive 560 euros a month — approximately $600 — for two years. Researchers wanted to test the results of a policy now eagerly pushed by American progressives that calls for providing every adult a guaranteed minimum income courtesy of the taxpayers. The Finland experiment was the first UBI study to be nationwide, randomized and authorized by statute.
UBI proponents theorize that having a guaranteed stream of income will produce a host of benefits for individuals and society. Andrew Yang, who based his long-shot Democratic presidential bid on giving Americans $1,000 a month, believes instituting the policy would increase employment. Many welfare programs reduce benefits as participants earn more money. That’s a real problem. If a welfare program is poorly designed, a person can lose more by working than going on the dole. That creates a perverse incentive to stay unemployed.
Yang also claimed that UBI would increase entrepreneurship. The theory is that people would take more business risk if they knew they’d have a source of income to fall back on if things went south. It’s also theorized that free money would improve recipients’ physical and mental health and increase worker bargaining power.
It’s an idea that has attracted interest for people ranging from Sen. Bernie Sanders to Mark Zuckerberg to conservative economist Charles Murray.
But in Finland, the projected boost in employment never came. UBI recipients worked an average of only five more days in a year.
This shows that for some unemployed people “the problems related to finding employment are not related to bureaucracy or to financial incentives,” Kari Hämäläinen, chief researcher at the VATT Institute for Economic Research, said. This suggests that the best way to help most healthy adults find work is to encourage them to change their personal behavior, not ply them with cash.
The study did find that participants “experience less mental strain than the control group. They also had a more positive perception of their economic welfare.” You would hope so. But that’s a far cry from the promised economic benefits.
“This was a big carrot, and we can see it didn’t fully work,” Mr. Hämäläinen said. Expanding the program nationwide would require a substantial tax increase, Mr. Hamalainen said, meaning it “would be unsustainable.”
The universal basic income is an interesting theory that keeps crashing headlong into the brick wall of reality.