The government of Finland is hoping to kick-start its stagnant economy by investing €20bn in a two-year trial, involving 100,000 people, for a system known as “universal basic income”, or UBI. Instead of the current complicated and bureaucratic system, fraught with rules, means tests and alleged opportunities to cheat the system, the government plans to simply hand out the same set weekly allowance to everyone in the programme. This enlightened idea would do away with the dreaded “welfare gap” but wouldn’t be so big as to provide a disincentive to find and keep a job.
Any job you accepted, from a short-term computing contract to taking a minimum wage job as a street cleaner, would give you extra money on top of your weekly government allowance. Big questions remain, of course – above all, whether the payment can be set in such as way as to make it both effective and affordable.
It’s hard to see how this would work without raising taxes, and those taxes would be collected from a shrinking number of people in work (because of increasing automation and robotisation). But it has the benefit both of simplicity and fairness. The semi-employed or unemployed would have sufficient money for (very) basic food and shelter, and would spend all of it because of the high marginal propensity to consume.
The Finnish government is a centre-right government, and Finland is accepting of social equality and relatively high taxation for the general good. As such the Finns tend to be good Epicureans, even if they are not aware of the fact. But suggest such an idea in the US or UK and resistance would be immediate. I personally love the idea and am very happy to pay taxes so that people worse off than I am have more pleasant lives. Unfortunately, this is not a view shared by the “robust individualists” who oppose tax wherever they find it (unless it benefits them personally, of course). It wouldn’t surprise me to discover that Prime Minister Teresa May supports “universal basic income”, but getting it off the ground would be a huge political problem for her. The United States? Probably best forget it.