Money for nothing and cheques for free


With the economies sliding past the Great Recession 2 towards the Great Depression 2 and with tens of millions suddenly unemployed throughout the developed world (with hundreds of millions throughout the rest), governments are finding themselves throwing any fiscal restraint to the wind – not that most of them had any before – and doling out trillions of dollars in order to make sure the legions of the jobless and their dependents don’t starve and businesses (those that still operate) don’t lay off even more staff. In Australia, millions of workers and ex-workers are now beneficiaries of such welfare and/or subsidies. In the United States, the Democrats in the Senate want to give each American $2000 per month. In many European countries, the governments are subsidising a large percentage of people’s earnings in order to keep them in jobs.

Not surprisingly, the COVID crisis is bringing to the fore the old debate about the universal basic income: the state granting (in most versions) every adult a certain minimum weekly payment with no means testing and no strings attached, and irregardless of if and how much they otherwise earn in employment. In Spain, the pandemic and the recession have brought forward existing plans for such minimum allowance.

For a couple of years, Finland had conducted the largest scale trail of UBI so far in the world. I blogged about it more than a year ago, but now the final results are out – and they’re neither unexpected nor different from the interim conclusions last year:

A landmark study conducted in Finland shows that giving the unemployed free money doesn’t provide the boost to the jobs market that some had hoped it would. But it does raise happiness levels…

Participants in the study received 560 euros ($600) per month. Those included were part of a randomly selected group of 2,000 jobless people aged between 25 and 58, who got free money from the state from 2017 to 2018…

“The scheme did not have negative effects on employment,” said Anthony Painter, chief research and impact officer at the Royal Society for the encouragement of Arts, Manufactures and Commerce, a U.K. charity. “If anything, it was positive — an important rebuke to those who think it would lead to more people being lazy.”
In the first year, 18% of study participants found work, roughly in line with the control group. In the second year, 27% of those getting a basic income worked, just 2 percentage points more than the control group. The results in 2018 are somewhat skewed by a model introduced by the government penalizing jobless people who didn’t actively seeking work.

It might not have led to more people being lazy, but it did not lead to more people not being lazy either. Some (a small minority in the Finnish study) can and want to work – and do manage to find work – in order to have more money and lead a more prosperous life. Most, however, are happy to coast with minimum rewards but also minimum effort.

In many ways, the debate over work and UBI exposes the old divide between (broadly speaking) the left and the right and their radically differing values and visions of what constitutes human dignity and good life. For the right, most if not all people should work; partly, to be “productive members of society” and contribute to the wealth and well-being of their own persons, families and communities, and partly, because work is considered essential to human fulfillment. For the left, it’s much more a matter of the old Marxian “from each according to his ability, to each according to their needs”, though unlike Marx and traditional communist, the modern left does not anymore think that everyone should be a worker. The workers’ paradise, or its soft, social democratic iteration, becomes a matter of work or don’t work, as long as no one is poor. So money really does bring happiness. The difference between the left and the right is about whether it needs to be earned.

Finland won’t be introducing UBI any time soon; it’s too expensive, even in a high taxing/high welfare Nordic state. Instead, the government is considering a negative income tax, which only targets low-income earners. As Margaret Thatcher once famously said, the problem with socialism is that sooner or later you run out of other people’s money. Until such time that the left manages to genetically engineered trees on which money grows (while at the same time not creating a hyper inflation), UBI and similar schemes will remain in the realms of theory. If there is one thing, however, we can take away from the concept in the meantime it’s the quest for simplicity and simplification: the idea of UBI, after all, is to replace myriads of different welfare payments with their own rules and exemptions. It’s the flat tax of the welfare system. We might not be able to afford it, but we can certainly try to simplify welfare, reducing not just complexity but ideally the accompanying bureaucracy.