Finland is ending its universal basic income experiment

I've been meaning to write about universal basic incomes for a while, particularly since it is something that we discuss in my ECONS102 class each year (and something I cover in regular courses for officials from the Vietnamese Social Security Administration). There are several current experiments in universal basic income (including GiveDirectly's experiment in Kenya, some pilot programmes in India, and several others). However, one of the headline experiments in Finland may be coming to a close, as the New York Times reported last month:

For more than a year, Finland has been testing the proposition that the best way to lift economic fortunes may be the simplest: Hand out money without rules or restrictions on how people use it.

The experiment with so-called universal basic income has captured global attention as a potentially promising way to restore economic security at a time of worry about inequality and automation.

Now, the experiment is ending. The Finnish government has opted not to continue financing it past this year, a reflection of public discomfort with the idea of dispensing government largess free of requirements that its recipients seek work.

The biggest argument that people make against a universal basic income (UBI) is cost. For instance, paying every adult in New Zealand a weekly income of $200 (note: that's not exactly a generous basic income at all!) would cost around $36 billion per year, which is about 7% of GDP and would more than double government transfers (currently total social security and welfare payments are about $30 billion).

However, an under-appreciated argument against a UBI is how taxpayers (who would foot the bill for the UBI) would feel about it. And it appears that disquiet among taxpayers (and importantly, voters) is at the heart of the reconsideration of the Finland experiment:

Many people in Finland — and in other lands — chafe at the idea of handing out cash without requiring that people work.

“There is a problem with young people lacking secondary education, and reports of those guys not seeking work,” said Heikki Hiilamo, a professor of social policy at the University of Helsinki. “There is a fear that with basic income they would just stay at home and play computer games.”

The Finnish data on the experiment is supposed to come out next year. It will be interesting to see what they find, even though the experiment itself is over. Importantly, are the work disincentive effects as large as people are worried about? Or do the recipients get jobs even though they're being given free money? It's especially important that these experiments are rigorously evaluated, given that many are arguing that a UBI might be a solution to the loss of our jobs to robots. We need to have a good idea of their effects in order to make an informed decision about whether a wider roll-out is appropriate.