Universal Basic Income: Although the concept of a universal basic income has been debated for years, new studies from Finland provide possible evidence that the complex principal could be implemented to the benefit of citizens. According to an article published in the Annual Political Science Review by Dr. Juliana Bidadanure, Universal Basic Income (UBI), is defined as “a radical policy proposal of a monthly cash grant given to all members of a community.” As a theoretical concept, UBI has been a topic of discussion for decades, but of the experiments that have been conducted thus far, very few have been located outside of North America or have had enough evidence to support one view or the other.
As of today, Finland has proven to be the only country that has conducted a randomized control trial that examined the efficacy of a basic-income program and where the research included “literature reviews, microsimulations, surveys, data linking, in-depth interviews and media analysis,” as reported by an article written by Allas et al. published in 2020 by McKinsey & Company. Although there are still many questions to answer, particularly when it comes to how to fund a nationwide UBI, Finland’s UBI randomized control trial (RCT) is the first experiment that provides quantitative evidence that offering periodic, unconditional payments to citizens can have a variety of benefits, including a “small increase in employment, significantly boosted multiple measures of the recipients’ well-being, and reinforced positive individual and societal feedback loops.”
Conceptually, a universal income has a variety of complexities that can inhibit implementation and experimentation across the board. These complexities have posed many questions for policy makers to consider, as they contemplate how to realistically implement and fund a basic income, including housing benefits, healthcare, and tax policies that are already in place. The McKinsey & Company article continues to explain that the Finnish study controlled for these factors by allowing members in the trial to be “eligible for housing allowances but not for social-assistance payments.” For the trial, Finland established a modest income of €560 per month for 2,000 randomly selected participants who were unemployed. A control group was formed from the other unemployed people, who were eligible for the standard unemployment benefits in Finland. Since the trial consisted of unemployed individuals, the impact on employment was the central hypothesis the trial was exploring.
A main critique of implementing a UBI is the assumption that citizens would be disincentivized to find new employment, since they can subsist on an unconditional income each month. However, the Finland study found the opposite to be true. Although the differences between employment among the trial and control groups were small, the results were still statistically significant that having a guaranteed income positively impacted employment rates among the trial group.
Nevertheless, the most promising findings of the Finnish study is that the people in the trial group were significantly better off on several metrics, including an increased trust in the government and mental and physical well-being. For example, the McKinsey & Company article the participants in the trial group reported, “average life satisfaction…was 7.3 out of 10, compared with 6.8 in the control group.” The lift in life satisfaction was so significant that while on the UBI trial, the difference in life satisfaction between employed and unemployed groups was ameliorated. Additionally, the positive benefits of a basic income had a wide impact, and participants reported increased confidence, decreased stress levels, and a higher amount of trust, in both themselves and in society generally.
As countries and governments continue to grapple with the long-term effects of the global pandemic, shuttered economies, and a heightened awareness of economic inequality, they should consider the ancillary benefits of a universal basic income, beyond the improved rates of employment. The Finland trial shows that a basic income can begin two positive cycles, both on the individual level in the form of better life satisfaction, and on the societal level through improved trust in government institutions. While some, such as John Hoffmire, of the Center on Business and Poverty, will continue to worry that the UBI will detract from the basic value of work, I feel that it is worth seeing more experiments performed related to UBI.
By: Elise Clark
Elise Clark writes for the Center on Business and Poverty
Bidadunure, Juliana Uhuru. May 2019. “The Political Theory of Universal Basic Income.” Annual
Allas, Tera, Jukka Maksimainen, James Manyika, and Navjot Singh. September 2020. “An experiment to
inform universal basic income.” Mckinsey & Company: Public & Social Sector. https://www.mckinsey.com/industries/public-and-social-sector/our-insights/an-experiment-to-inform-universal-basic-income