Welfare: The latest “big idea” in the U.S. is the Universal Basic Income — a guaranteed income for all. Progressives of course like the idea, but even some conservatives and libertarians do, too. Only one problem: It doesn’t work.
Ask Finland, a highly progressive Scandinavian country that has an ongoing guaranteed income experiment, but is abandoning it.
Starting in 2017, the two-year Finnish program selected a random group of 2,000 unemployed people and gave them a monthly income roughly equal to about $678 for doing … nothing. The government hoped that many participants would flood back into the labor market.
But Finland is already backing off. As the New York Times put it, “Many people in Finland — and in other lands — chafe at the idea of handing out cash without requiring that people work.”
Imagine that. Taxpayers upset about subsidizing other people to do nothing, while expanding government.
Basic Income Hubris
It’s comforting, we suppose, that Finnish social planners have no more common sense than those in the U.S. Neither group seems to understand the economic truism: What you subsidize you get more of, and what you tax you get less of.
In Finland’s case, they were literally paying others not to work. Meanwhile, as working Finns figured out, such a system would lead to massive tax increases. Even the OECD, not known as a bastion of free-market thought, in a study of Finland found that a guaranteed income to replace welfare (the ultimate goal of all basic income programs) would have to be “financed by increasing income taxation by nearly 30% or around 4% of GDP.”
So it should be no surprise why average Finns, some of the best educated people on the planet, would reject such an idea. Yet, here in the U.S., it continues to grow in popularity. The city of Stockton, Calif., for instance, will launch its own basic income program this August, backed by a $1 million grant from Facebook co-founder Chris Hughes. Others are toying with the idea.
But we’ve already tried it, as Mimi Texeira of The Daily Signal noted recently: “In the 1970s, the (U.S.) government ran four random control experiments across six states to try the negative income tax, a similar policy proposal (to the basic income) that was popular at the time. In each test, the work disincentive effect was disastrous. For every $1,000 in added benefits to a family, there was an average reduction in $660 of wages from work.”
That’s right. A basic income would tax work to the hilt so that others could be paid to do nothing. Common sense dictates that you reward work, not punish it. The Finns figured it out. Why haven’t we?