Universal Basic Income: Some Negative Findings from the Finnish Experiment

A few days ago, the preliminary report on The Basic Income Experiment 2017–2018 in Finland was published. The report is freely available online and, given its brevity, well worth a download and read.

Allow me to quote from the summary section of the report:

On the basis of the register data analysis, there is no statistically significant difference between the groups as regards employment. However, the survey results showed significant differences between the groups for different aspects of well-being.

This neatly summarizes the substance and tone of the report’s findings. The substance is effectively that UBI has no positive impact on employment, and the tone is one of authors trying to salvage the experiment from utter dismissal. Since the stated aim of the experiment was to test whether UBI could make “the social security system of Finland more inclusive and further increase the labour supply,” the findings on employment are prima facie devastating.

As the report progresses, and it becomes clear that the central purpose of the experiment—i.e. of getting people into the workforce—is not enhanced by UBI, a shift occurs towards the theme of well-being. As the report outlines, some well-being indicators, such as confidence in public institutions, did indeed increase. However, it is not strange that people receiving UBI register an increase in confidence in the state. This is hardly a good reason to promote UBI—it certainly does not compensate for its lack of positive effects on employment.

The study then points to other factors of well-being, such as a decline in perceptions of poor health and stress and an increase in perceptions of concentration. I highlight the word perceptions since, despite the report’s use of the phrase “the test group experienced significantly fewer problems related to [… the] ability to concentrate,” the actual reporting tested how participants answered questions on this and other points. This is significant, as the study and statistical analysis of such things as stress levels and concentration abilities is not straightforwardly derivable from questionnaires and surveys. This point is particularly acute with respect to ascertaining abilities “to concentrate.” When the findings discuss issues such as the relationship between UBI and “satisfaction with life,” the report loses significant credibility. I fail to see how such a notion can be conceptualized or measured or how the relationship between UBI and satisfaction with life can be correlated or gauged, and how this can therefore be a factor in the study.

One area that the study identified as an aim in piloting UBI was reduction in bureaucracy. UBI is touted as a solution to the bureaucratic nightmare of welfare. By providing an unconditional amount of money to each citizen—and thereby eliminating specific welfare claims, such as housing, health and disability claims—UBI, it is claimed, would end the need for the extensive exchange of information between citizen and government, means testing and delays to welfare claims made in retrospect. Again, the study employed a questionnaire/survey/interview methodology to establish that the perception is indeed that UBI decreases bureaucracy. This is hardly a surprising result. The problem comes when UBI is considered in terms of factors that go beyond the individual. For example, what about people with families? What about people with large families? The report raises these points, but it offers little in the way of speculative analysis.

If UBI is the panacea that it is touted to be, these concerns surely need to be addressed. There are plenty of cases in which a person will require significantly more, by way of welfare, than UBI will provide. This is true not only of some large families, but also in cases such as those of parents of children with disabilities and adults with disabilities themselves (we have a moral obligation to provide them with far more than UBI). Proponents of UBI may argue that UBI in no way prevents additional welfare being paid to those who require more than UBI will cover. However, in that case, the problems of bureaucracy and inefficiency will be re-introduced—but with the additional inefficiency of vast numbers of people, who are in no need of welfare whatsoever, receiving UBI. This is a central problem: millions who do not need UBI will receive it, and millions who require more will be in a deficit—the latter still effectively caught up in the bureaucracy UBI is, in part, trying to resolve. This is the addition of layers of inefficiency.

Towards the end of the report, the authors state:

In previous research, the amount of support for basic income in Finland has been gauged through a general question on whether the person is in favor of a basic income or not. Percentages as high as 70 per cent in support of a basic income have been obtained. When the respondents are informed of the necessary changes to the income taxation in order to finance basic income, the level of support dwindles considerably [emphasis mine].

This goes to the core of the debate: proponents of UBI need to think very carefully—and be open about—how radical an overhaul of the structure of society UBI would require. One central concern is where the money will come from. Some have suggested taxing automated means of production; others have suggested simply taxing higher income earners more. Both solutions lack the systematic thinking which is needed to give UBI a chance of succeeding.

Such utopian thinking needs to end. Society is not a laboratory in which to experiment with undeveloped social programs. The welfare state is a significant achievement, which reflects a maturity of civilization and functions as a means of dispensation with respect to our moral duties towards those in need. However, we must also bear in mind the moral maxim that value should be rewarded in proportion to labor. We would be far better advised to put our efforts towards to creating new, well-paid employment, while remaining conscious of our social obligations to those in need. Let’s spend this time and money on education and re-skilling, rather than in the pursuit of what is fast becoming fantastical thinking.

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13 comments

  1. “One central concern is where the money will come from.”

    Yet the author notes that unemployment did not increase. Indeed he spin doctors the data to suggest that if unemployment did not decrease significantly that is a disappointment. In my view the reduction in bureaucracy is sufficient to justify UBI so long as it does not increase unemployment. In short this article backfires on me and increases my support for UBI.

    1. … and here’s a rather weak remark:

      “Society is not a laboratory in which to experiment with undeveloped social programs.”

      Where else but in society would one experiment with social programs? Society has never been free of experiments.

  2. “There are plenty of cases in which a person will require significantly more, by way of welfare, than UBI will provide. This is true not only of some large families, but also in cases such as those of parents of children with disabilities and adults with disabilities themselves (we have a moral obligation to provide them with far more than UBI).”

    Wait, what? Where is the moral argument for this claim that we have a moral obligation to pay for the well-being of other people? Taking my money from me on the threat of violence because you decide someone else would be better off with my earnings is far from just.

    “The welfare state is a significant achievement, which reflects a maturity of civilization and functions as a means of dispensation with respect to our moral duties towards those in need.”

    Wait, what? The welfare state is a burdensome mess that has displaced community engagement and charity toward one’s neighbour in place of an inefficient bureaucracy deciding for us who we should help and to what degree. Calling it a “significant achievement” needs an argument in defence of such a dubious claim. And you’re sneaking in this “moral duties” claim again, without support.

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    1. From the earliest hunter-gatherers, every society has had some notion of helping those down on their luck. As you say, charity has been part of that, which Ayn Randinan people like because since they’d rather not contribute they don’t — since altruism is evil. But a society can design itself any way it wants and modern societies design themselves to include some level of social support. We can’t have different rules for everyone so you are stuck with the fact that if you ever need some form of public support it will be there for you. I’m stuck with the fact that some of my tax money goes to the army whether I like it or not, so thereyago. The next guy has his personal beef with the system as well. We are all free to leave if we don’t like it.

      1. All fine points about the way societies are organized. But where is the moral argument? From where I sit, I think societies should promote helping those in need. They should promote a spirit of charity. But government should not force people to contribute to whom, and in the manner, that politicians and bureaucrats choose.

        Involuntary transactions like this are unjust. I own my labor and have the right to direct the fruits of my labor as I see fit (which does and would include a lot of community engagement and generosity). If they want to confiscate my money and donate it to people/causes that they think deserve it more than me, the person who earned the money, then there should be a very strong moral argument in favor of this forced redistribution. This article assumes it, rather than providing it. And this argument is not obvious, nor should it be taken for granted.

        1. All governments “force” you to contribute to things you don’t directly decide. All functioning governments involve involuntary transactions in the form of taxes, fees and fines. If you aren’t paying those then you are living in an anarchy (which sucks) which will quickly devolve into a kleptocracy once some warlord or oligarch seizes power. So taxes and such aren’t unjust, they are the price you pay to live in a half-way decent society. If you don’t like it you can move, and if it’s too expensive and impractical to move, well… congratulations, you’ve just discovered one reason why a Pareto efficient society of pure voluntary exchanges is a fiction that can’t describe the real world.

          I don’t think the purpose of this article is to lay out an ethical theory of welfare. Nonetheless, it seems perfectly just for a society to say, e.g., “Yes, it’s more important to prevent childhood hunger and poverty than for you not to pay taxes.” You live in the society, you benefit from it in many ways, including your ability to make money from your labor, including your ability to be educated above the level of subsistence farmer, your access to technology and other services, etc. etc. Society has every right to say, “Paying for a social safety net is part of the deal.” We can argue about what programs are a good use of government power, whether they are efficient and so on, but there is no valid moral principle that says you ought to get as rich as you can within a society and then pick and choose your participation in the collective efforts that help sustain it.

          1. “”Nonetheless, it seems perfectly just for a society to say, e.g., “Yes, it’s more important to prevent childhood hunger and poverty than for you not to pay taxes.””

            This just seems patently false.

            If you had said, “It’s just to tax you to pay for shared transport infrastructure and security services..” then I would be right there with you, as those are constituents of a minimal state required to maintain stability (to your worry about anarchy). But suggesting it’s just to take my money to give to someone else because you estimate that they need it more is obviously wrong (compounded by bleeding much of it off in bureaucratic waste). If there is a child going hungry, those around the child ought to help out. But nobody should be forced to.

            We don’t need government to take care of everyone. People are well able to build communities of support without coercion or force on the part of a heavy-handed government.

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  3. It’s difficult to understand UBI as anything but an attempt to rid ourselves of these troublesome democracies that keep producing inconvenient results like Brexit and Trump. A democracy cannot exist as a permanent form of government. It can only exist until voters discover that they can vote themselves money out of the public treasury. Creating an entire class of people wholly dependent on their government for income means that they will always support the party that promises them a raise in their salary. That will literally be their job, as they have no reason to be a citizen otherwise. Work your ass off under some jerk of a boss, or relax all day long with weed and Xbox? I know which one 20-year-old me would have chosen in a heartbeat. Let those idiots who still think working is valuable pay for me, I would have laughed all day and night at their stupidity at supporting me.

    “What I’m not saying is that all government spending is bad. It’s not – far, far from it, but there is no free lunch, as a former colleague of mine used to say. There is no public tooth fairy. Father Christmas does not work on the Treasury staff this year. You can never bail someone out of trouble without putting someone else into trouble.”

    — Arthur Laffer

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    1. Did we read the same article? The very study it cited said that there was “no statistically significant difference between the groups as regards employment”. So if you’re going to claim that UBI would cause people to sit around all day playing Xbox, then you’re going to have to provide evidence that’s at least as strong as this study showing that UBI has a negative effect on employment (although any evidence at all would be nice).

    2. I’m not a big UBI backer, but please inform yourself before you spout off. UBI has nothing to do with Trump or Brexit, it’s an idea that was floated long before either was a twinkle in a xenophobe’s eye, and the purpose is to make a better/more-efficent welfare system. Whether it works as intended is of course debatable, but the motivation is clear. The point isn’t to create a dependent class, (poor people already exist you know); and it isn’t to give out a cushy life of leisure. It’s to give people enough money to get by in hard times without all the inefficient jumping through hoops. Of course there will always be freeloaders, but that’s true of any system. Luckily not everyone is the sociopath you describe your 20-year old self as, and democracy, with various forms of social safety nets, has survived.

      Incidentally, poor Arthur Laffer! His curve is about the most discredited concept in modern economics.

  4. Hold on, one of the most common arguments against UBI is that it would destroy any reason to work (this was an implicit part of the argument made in the last Areo article criticizing UBI). I don’t think I’ve ever heard anyone claim that it would actually increases employment. So, it seems to me that the findings that UBI had no effect on employment would strengthen the case for UBI, not weaken it.

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    1. You need to understand the Finnish context for this claim. We have this thing called “kannustinloukku”, which is hard to translate, but I guess “incentive trap” would the literal translation. It means that the increase of income you receive from taking on a job is so small when compared to your unemployment benefits, that it does not cover the loss of free time due to the job, and that them people rather just stay unemployed. It was argued before the test program, that if everyone received UBI, then all jobs one might take on is just more income. Thus increasing employment was one of the main goals of the test program.

  5. Free wheat and circus games to Roman citizens! The only problem that those who get free wheat they are not citizens anymore. But who cares?

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