Guaranteed income for all citizens not supported everywhere
As BBC reminds, the revolutionary economic experiment began in January 2017 in Finland. The country's government will pay two thousand people a guaranteed minimum income of 560 euros ($600) monthly for two years. Participants, randomly selected from among those receiving unemployment benefits, will receive this amount even if they find a job.
The Finnish project is the largest experiment of its kind, aiming to find out what happens if every citizen has a guaranteed source of stable income. This social concept is known as "unconditional basic income." "We expect that basic income will give participants confidence in their financial stability and enable them to better plan their lives," says Marjukka Turunen, a representative of the Finnish social insurance institution KELA, which is conducting the experiment.
The concept seems quite simple, but it is actually revolutionary. Not everyone likes the idea of the state handing out money left and right for nothing. And some worry that if everyone has a guaranteed income, it will be impossible to find candidates for socially necessary but unpopular jobs.
Nevertheless, the idea of unconditional basic income is gaining popularity worldwide, from Silicon Valley to India. Now, after the global financial crisis of 2008, many see guaranteed income as an optimal way to reform social security systems that in their current form can no longer cope with the burden, as well as a response to the serious economic difficulties faced by most countries.
The concept of guaranteed income is not new. In the late 1960s, U.S. President Richard Nixon first tested it in practice, and the experiment was successful. Nixon considered basic income as an effective tool for reforming the social security system. However, it did not lead to full-scale implementation – Republicans opposed it.
Influential economists of the last century, Milton Friedman and Friedrich von Hayek, believed that guaranteed income in one form or another is the best way to combat poverty. In his book "Law, Legislation and Liberty," von Hayek describes it as a source of economic freedom for all citizens: "The assurance of a certain minimum income for everyone, a kind of floor below which nobody can fall even when he is unable to provide for himself, appears not only to be a wholly legitimate protection against a risk common to all, but a necessary element of the Great Society in which the individual no longer has specific claims on the members of the particular small group into which he was born."
Amid growing financial and political pressure on social security systems, some believe that introducing unconditional basic income would be a logical solution. It could indeed be more economical than existing social security mechanisms, mainly because it is cheaper to administer and monitor. However, the main reason many are returning to the concept of basic income today is that they see it as a way to protect ordinary citizens from global economic shocks.
The world has not yet recovered from the effects of the 2008 financial crisis. Moreover, there is growing concern about labor automation – robots and artificial intelligence threaten to deprive many people of jobs. Basic income could give citizens the opportunity to reconsider their place in the renewed labor market. "We hope that participants in our project will look for part-time work or start their own businesses," says Turunen.
According to some evidence, such an outcome is possible. In 1968, Nixon ordered an experiment in which 8,500 participants received a guaranteed annual income of about $1,600 for a family of four (which in today's money would be about $10,000). These "free money" had almost no effect on participants' employment: those who worked less spent the freed time on other socially significant activities.
According to Dutch historian Rutger Bregman, a proponent of basic income and author of "Utopia for Realists," Nixon's experiment had a great impact on participants: "One woman, a mother, earned a degree in psychology and got a job as a researcher. Another took acting classes, and her husband started composing music." The second woman told researchers that she and her husband had realized themselves in the arts. Scientists also concluded that young people who did not have to earn a living mostly spent more time on education.
A similar experiment was conducted in Canada in the 1970s: 30% of the population of the town of Dauphin in Manitoba received $15,000 per person. An analysis of the results, conducted in 2011 by economist Evelyn Forget from the University of Manitoba, showed that among children who participated in the experiment, the number of those who completed high school increased, and the number of hospitalizations among participants decreased by 8.5%. The employment rate among adult participants did not change.
Despite the success of these projects, political changes in the US and Canada prevented them from evolving into larger programs. Is something like this possible today?
Experiments similar to the Finnish one are planned in the Canadian province of Ontario, in Oakland, California, and in Utrecht, the Netherlands. In Scotland, the authorities of two cities – Glasgow and Fife – have also announced their intention to test the concept of basic income. The idea is supported by politicians in various European countries, including British Labour Party leader Jeremy Corbyn.
But can positive results be expected? In the UK, approximately five million people receive unemployment benefits. In 2015, the country's social security budget was £258 billion ($320 billion). If this amount were divided equally among approximately 50 million adult citizens, each would receive £5,160 ($6,400) per year.
This amount is much less than the £13,124 ($16,280) per year that can be earned from a full-time job at the minimum wage set by the British government. To many, such a size of unconditional basic income would seem too modest. It is even less than the benefits currently paid to some unemployed people – the benefits that, according to the design of most models, the guaranteed income is intended to replace.
In the UK, unemployed people over 25 can receive up to £3,800 ($4,714) per year in jobseeker's allowance, and an average of £4,992 ($6,192) per year in housing benefit. Nevertheless, according to a recent survey, 64% of the population in Europe and 62% of the UK population would vote for the introduction of a basic income if given the chance.
However, not everyone likes the idea. In 2016, Swiss voters rejected a proposal to pay every adult citizen 2,500 francs ($2,418) per month, and minors a quarter of that amount. Opponents of the idea cited the prohibitively high costs associated with it, and also claimed that it would encourage people to quit work – especially low-paid manual labor. Who would agree to work as a cleaner or garbage collector if a basic income allows them not to?
But supporters of basic income argue that it could make society reassess the importance of low-status types of work, as well as the wage levels of those who perform them. Indeed, having a guaranteed source of income, even if only supplementary, could change our attitude towards the postulate that only working people are full members of society.
The concept of employment is central to modern society. Work is seen as an integral part of a person's self-identification. However, unpaid productive labor – volunteering, housekeeping, and caring for dependents – remains undervalued.
Godfrey Moase, a civic activist and deputy secretary of the Melbourne branch of the National Union of Workers in Australia, argues that the introduction of a basic income would fundamentally change our attitude towards work. In an article published by the British The Guardian in 2013, he writes: "Imagine how much creative energy would be released, what a surge of innovation and entrepreneurship would occur if every citizen were guaranteed a certain standard of living. People could start social enterprises and cooperatives, engage in small business without fear of losing their livelihood."
There is even an opinion that having a guaranteed income could positively affect the situation of people working on staff. If a person is not forced to grab the first offer that comes along, they can demand higher wages and better working conditions.
However, the concept also has critics. Dmitry Kleiner, author of the "Telecommunist Manifesto," argues that introducing a guaranteed income could fuel inflation, as people would start spending more money. There are also concerns that time-limited experiments cannot reflect the true social changes that the introduction of a basic income on a permanent basis could bring. It is possible that participants in such projects use the freed-up time for study or retraining precisely because after the experiment ends, they will have to look for work again.
Furthermore, selecting participants from among people on benefits is not indicative, as it does not give an idea of what might happen if a guaranteed income were guaranteed to everyone. The impact of the basic income concept on our ideas about employment can only be assessed if it is implemented universally.
At the same time, the Finnish experiment is criticized for the modest size of the payments. In Finland, with its high standard of living, the 560 euros per month that participants receive will not last long.
Despite the above, both supporters and opponents of the idea will closely watch the Finnish project and other similar experiments to find out what having a source of small guaranteed income might lead to. It is possible that employment in its current form will soon come to an end.