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Could Finland’s Universal Basic Income Ever Work In The U.S.?

Finland is reviewing a measure to give every citizen Є800 per month. Could such a policy work in the United States?

Could Finland’s Universal Basic Income Ever Work In The U.S.?

There’s a movement in Finland that may soon approve a basic income for all citizens. The Finnish Social Insurance Institution (Kela) would pay everyone regardless of income level Є800 (around $876) a month free of any government charge. That means that each citizen would be given that monthly payment even if they weren’t working, or if they were already in another job. Any additional income earned would be taxed.

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Doing this would replace other benefits people receive under the country’s social welfare system. A proposal for this basic income will be prepared by November 2016. If it works, Finland would become the first country to offer a universal basic income. Finland’s prime minister is in favor of the idea because it would simplify the country’s social security system.

Critics say the plan is “unrealistic.” In an editorial for Bloomberg View, Leonid Bershidsky provides one big practical reason: the cost. Around Є52 billion per year exceeds the Є49 billion in revenue the government projects for next year, Bershidsky points out, as well as that “Finland has one of the European Union’s shakier economies. It has been in recession almost continually since mid-2012 and lacks growth opportunities.”

Where Universal Income Stands Within Scandinavia’s Other Social Programs

In spite of its uncertain economic prospects, Finland already shells out a lot of cash and benefits to its citizens, as many social democracies do. High taxes fund health care and enable universities to be tuition-free, which is just one reason why implementing a plan like this might not work in the U.S.

For example, Fast Company recently reported on the staggering differences between the Nordic country’s paid parental leave and support packages for new parents.

Nine months of paid leave is granted to new parents of either gender in Finland, and their job is secure. Not everyone takes advantage of the full benefits.

According to Kela, the average total amount of paternity leave benefits accumulated by new Finnish dads is 33 days and Є2,800 ($3,143). For maternity leave, new Finnish moms took an average of 257 days and Є15,300 ($17,176).

Kela also pays a tax-free, monthly “child benefit” for each child up to age 17. The benefit starts at Є95 ($106) per month for a first child and goes up gradually for each additional child. For a third child, for instance, the benefit is another Є135 ($151) per month.

As we’ve reported, in the U.S., there is no federally mandated paid parental leave. The current Family and Medical Leave Act only guarantees up to 12 weeks of unpaid leave with the existing job held for the employee’s return. The policy has been supplemented in individual states, but the U.S. is still one of only three countries among 185 not to offer public policies for paid leave.

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Democratic presidential hopefuls support 12 weeks of paid leave, but other paid benefits, when offered, are at the discretion of the individual businesses providing them.

Legislation alone doesn’t guarantee change. Despite the Equal Pay Act of 1963 and the Lilly Ledbetter Fair Pay Act of 2009, wage inequality persists between genders, and minority women bear the brunt of that disparity.

The Effect On Unemployment

Finland stands to gain if this measure passes, because its unemployment is at a 15-year high of 9.53% and would encourage people to take lower-wage jobs. Right now, citizens who take such a position would receive a lower amount of welfare benefits, and the universal income could help fill that gap.

The U.S. has the opposite problem, with 5% unemployment at its lowest rate since the beginning of the recession in 2008, and the demand for jobs in areas such as nursing and information technology far exceeding the number of skilled candidates.

Finland, like other European countries such as Switzerland and the Netherlands, favors the basic income proposal because it would be a safety net for the fact that job growth isn’t keeping pace with automation, and people won’t be able to keep up by getting a degree or skills certifications.

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Universal Income In The U.S.?

According to the Atlantic, in the U.S., there is a small but growing movement for a universal income, in the face of increased automation. However, the government is far from being ready to support such a measure, what with the debates to expand or contract Social Security and Medicare benefits for seniors and the future of health care reform still raging. It’s not likely that this will be added to the docket any time soon–even though in the past its advocates included Richard Nixon and Martin Luther King, Jr.

Welfare was reformed in 1996 to reduce federal spending and encourage a transition to economic independence. Critics of the existing system in the GOP say: “Each year, this system dispenses nearly $1 trillion in taxpayer funds across a maze of approximately 80 programs that are neither coordinated nor effective in solving poverty and lifting up families.” They believe that benefits just perpetuate joblessness.

Even with universal basic income, the Atlantic report notes that pilot studies conducted by Guy Standing, a professor of development studies at the University of London, don’t result in people not working. Instead, he says, once people are no longer afraid of making ends meet, they become productive.

Finland still has a year to go before the proposal is even reviewed. We’ll be watching for the results.

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About the author

Lydia Dishman is a reporter writing about the intersection of tech, leadership, and innovation. She is a regular contributor to Fast Company and has written for CBS Moneywatch, Fortune, The Guardian, Popular Science, and the New York Times, among others.

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