The Finnish Experiment

Around the world, there is a lot of buzz around the idea of universal basic income (also known as “unconditional basic income” or UBI). It can take different forms or vary in the details, but in essence: UBI is the idea a government would pay all citizens, employed or not, a flat monthly sum to cover basic needs. This funding would come with no strings attached or special conditions, which would remove any potential stigma associated with receiving it. In short: it would be free money.

UBI advocates argue that many jobs don’t pay enough to even make rent and buy groceries: people can work full-time and still be below the poverty line. It’s easy to understand why people on the left would advocate for a guaranteed income, but a version of this concept is also popular among libertarians, who see UBI as a way to shrink the welfare state. For example, you could take away food stamps, medicare, and housing subsidies, and replace all of it with this one flat sum.

People in tech are also interested in the concept of basic income, and they feel a certain urgency about it due to increasing automation. In a world where jobs are scarce, they argue, everyone will need a financial cushion. In that future world, a UBI could also free people up to start businesses or go back to school.

Founding Father Thomas Paine

The idea of a universal basic income has been around for a long time — Thomas Paine, a founding father of the United States, talked about it centuries ago. As recently as the 1960s and 70s, limited UBI studies were run in parts of the US. President Nixon even brought up the idea of an income floor for families in a State of the Union address.

There’s been a lot of recent excitement around the idea, especially after an experiment launched by the Finnish government started in early 2017. It has the public and the media wondering: how will recipients react to getting this unconditional source of income?

The experiment itself is fascinating, not just because of what Finland is testing but also how they are testing it. Finland is trying out a unique, design-oriented way of thinking about government. Rather than rolling out laws on a massive scale, they are trying to craft legislation in stages, with user feedback, just as one would create a piece of design.

Experimental design diagram courtesy of Demos Helsinki

Every good design is made to fill a need or solve a problem. In the case of the Finnish basic income experiment, the problem they are thinking about is not automation. And they are not trying to see if people will stop working if they can collect basic income. They are trying to see if basic income will make Finns start working. The problem is unemployment.

The unemployment rate in Finland is around 8.8%, which is about double that of the United States. Residents of rural areas, like Sanna Leskinen of Joensuu, have a particularly tough time finding jobs outside of big cities. Leskinen is 39, and she’s been unemployed for a little over two years. She has a master’s degree in history and worked as a researcher until her project ran out of funding.

In Finland, unemployment benefits can last for around two years, and even after those run out there are other assistance programs that citizens can apply for. Here’s a catch: recipients generally cannot earn additional income without putting their benefits at a risk. “You cannot take a part-time job,” explains Leskinen, “because then you are gaining money [and] it’s counted against you. You lose that little bit of support.”

Unemployed Finns don’t want to risk that loss by trying to pick up part-time jobs, gigs or freelance work. Some people even do small jobs for free in order to avoid compromising their benefits (this was the case with the sound engineer who helped us record interviews for this episode). The government of Finland has comes to realize this system accidentally discourages willing and capable citizens from taking small jobs or maybe even starting businesses of their own.

There are different ways to potentially address the problem, but the Finnish government wanted to start simply and then elaborate slowly, They wanted to design and test policy, in a process very similar to the way designers come up with new products. They wanted to use design thinking.

Six-step process reflecting three phases of design (express, test and cycle)

Design thinking is a process that goes a little something like this: first, designers come up with ideas and prototypes. Next, they try those out with a model or sample. Then they get feedback, review outcomes and incorporate that into the next iteration, and the process starts all over again. Among designers, a shorthand for this is “express, test, cycle.”

Applied to government, this approach involves thinking “about policies as kinds of design objects or design services,” explains Roope Mokka, founder of Demos Helsinki, a Helsinki-based think tank, which “means that you do iterations and tests.” Demos was contacted by the office of the prime minister to help them apply design thinking at a national level.

Demos helped establish an “experimentation unit” for the prime minister’s office to create prototypes of laws, deploy them in a controlled fashion and see what’s effective before scaling them up. In order to run these experiments, Finland actually had to pass a law to ensure that they were not in violation of the constitution, “because all the constitutions of democratic countries in the world say that you have to treat people equally,” explains Mokka. And, by definition, running experiments on citizens means treating them unequally.

Session Hall of Parliament of Finland by Hteink.min (CC BY SA 3.0)

With that in place, one of the first experiments the Finnish government decided to try was with basic income. Instead of attempting to modify the extensive and complicated welfare system already in place, this experiment is performed on a sample segment of the population sample in a randomized and automatic fashion. Basic income just gets deposited in participants’ bank accounts every month.

The program is currently overseen by Marjukka Turunen, who works for a government institution called KELA. This agency helps oversee the over forty different kinds  of benefits Finns can receive, including student support, parental care, pensions and other subsidies. In January of 2017, KELA picked 2,000 unemployed Finns from all over the country. They ranged in age from 25 to 58 (too old for student support, too young for a pension), and they were selected completely at random. They didn’t volunteer for the experiment — at the beginning of the year, they just got a letter that explained they were to be part of the test, and would now receive 560 euros a month.

Sanna Leskinen was one of those selected, and she was excited about the news. The amount is slightly less than she got through her unemployment benefits, but this basic income is guaranteed, and will be unaffected by her employment status. “Finding a job is very important to me,” she says. “So now I’m able, if I find a job … [to] take it and not lose the support money.”

Normally, to collect unemployment in Finland, Sanna would have to go to job training meetings and check-ins every few months. Under the basic income experiment, Sanna and the other test participants scattered around the country don’t have to do anything at all to get their 560 euros every month.

At the end of the experiment, KELA will look and see if this group of unemployed people who got basic income took on work, and compare it with their control group: the rest of the unemployed people.

This test could bring basic income one small step closer to becoming a reality in Finland, but it has its critics. “I don’t think it is going to happen,” admits Marjukka Turunen, who is overseeing the experiment at KELA. “I think that it would be too dramatic,” she says. “We would wipe out all of these social security systems we have been building for decades.” Turunen imagines that a basic income wouldn’t be sufficient for, say, people who care for parents or children with special needs, and don’t have ability to seek part-time work. “And of course,” she asks “Who would pay for it? Who would finance it?”

It is really hard to say how much basic income would actually cost the average taxpayer (were it to be instituted) or exactly how it would affect the economy or inflation rates. So much would depend on the terms of its implementation, and there are a number of factors to consider. There is no exact math on this.

“If someone truly claims that they know how much more expensive basic income” would be, says Roope Mokka, “they’re lying. It’s such a systemic shift that if we decide to start paying everyone a lump sum of money it will change the economy in such a way that the whole system changes.” Basic income would save money by cutting back on bureaucracy, but, regardless, it would be expensive to fund. “But that’s almost technical if you know?” Mokka argues. “If you need money, you raise money. It’s what politicians do. They change the way budgets are arranged. ”

Senate Square, Helsinki, Finland by Matti Mattila (CC BY SA 3.0)

Mokka thinks politicians could find a way to make basic income work, if it’s proven to make citizens more engaged and active. He says that’s why they have to test, before anything else, if basic income would really increase productivity, and improve general well-being. At this point, basically, Finland is testing to see if basic income is worth more investigation.

This experiment, however, is not a test of UBI, in that it’s not actually universal. It’s only for unemployed people. “I think what we’re experimenting with now is called partial basic income,” says Mokka. “This is of course a limited experiment. I don’t know how relevant it is, because a lot of groups are missing.” If so, then in a future test, basic income will also have to be given to people who are already employed, to see if they quit or change jobs.

Critics of the experiment also argue that 2,000 people is too small a sample size. Two Finnish economists published an Op-ed in the New York Times called “Why Finland’s Basic Income Experiment Isn’t Working.” They accused it of being poorly designed and over-hyped, citing its potential to drive people into low-paying jobs.

The experiment is far from perfect, but it’s not supposed to be a final product. Truly, it’s the first draft. If this test yields meaningful results, it should lead to another experiment, then another and another.

Finland isn’t just designing experiments with basic income. There will be experiments for what languages to teach in schools, how to change childcare and other things. According to their website, the experimentation office is working on 26 key projects nationally.

Slowly, Finland will use these experiments to solve problems, and  express, test and cycle new ideas in this iterative, design-minded way.

Credits

Production

Producer Avery Trufelman spoke with Roope Mokka of the think tank Demos Helsinki;  Sanna Leskinen, resident of Joensuu and recipient in the UBI experiment; Marjukka Turunen, who works for a government institution called KELA and is overseeing the UBI experiment. Experimental design diagrams above courtesy of Demos Helsinki.

Music

Original music by Sean Real

Comments (11)

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  1. This was an interesting story as always! But, you neglected to mention one of the currently-operating, not-quite-UBI-but-close examples in the United States, Alaska’s permanent fund dividend (PFD). The PFD is a manifestation of the state constitution’s requirement that the state’s resources be used “for the benefit of all Alaskans,” interpreted to mean current and future residents. It is a distribution of investment income from the Permanent Fund, which has been built up over time from state oil revenues (leases and production taxes). It has been paid out for 35 years (first in 1982), and has ranged according to the performance of the Permanent Fund (average of last 5 years of returns), with the highest being over $2,000 per person, and lower during the recent recession due to dip in stock market – it isn’t directly tied to performance of oil anymore but is an investment portfolio. It is paid out every year in early October to everyone who applies and can show they have been a resident for a least a calendar year. There has been controversy recently in the context of our state budget crisis, the governor capped the PFD payment, which as you can imagine has generated a lot of pushback (I am personally fine with it, we have to pay for government services somehow and we currently have no sales or income tax). Historical dividend amounts: https://pfd.alaska.gov/Division-Info/Summary-of-Applications-and-Payments
    But, it has two other big benefits: first, a recent study shows that it is effective in reducing poverty, especially for low income families with multiple children, with some implications for a UBI. Summary of study findings: http://www.iser.uaa.alaska.edu/news/?p=1466
    Second, because the state collects everyone’s address information each year on the application, we have pretty solid in-state migration data and can provide decently accurate population estimates using PFD records, birth and death records. This is important because we are a very rural state and the decennial Census has limits, and trying to do annual estimates from an already small and dispersed population is tough.
    A third benefit, for the state anyway, is it provides an automatic wage-garnishing option if you don’t pay a ticket or otherwise owe the state money. Again, we have no income tax so don’t have many mechanisms to hold people financially accountable.

    Anyway, it’s not technically UBI but it is worth a mention in this context, I think! The history of the PFD might be an interesting episode too… the governor who conceived of it also warned against getting rid of our state income tax, but now here we are! Or about the Alaska state constitution in general, apparently it’s considered a model governing document that others have replicated. Built-in values of sustainability, even back in 1959.

    1. Mahlen Morris

      I was just coming here to bring this up. Here’s a link to some recent info on it:
      https://www.marketplace.org/2016/03/12/economy/alaskas-annual-dividend-residents-adds
      I’m also half remembering that some oil-rich Middle Eastern country had a form of this, but that may be a myth.

      But to the episodes larger point, imagine making government by having goals and iterating on ideas about how to achieve those goals until they work well or you decide that won’t work. Now that would REALLY be running a country like a company. :)

  2. Croft

    This isn’t basic income. This is a different way to give people unemployment money – less money than they get through traditional channels. It’s a perversion of the idea of basic income, which is to give everybody a basic income even if they’re already working – or if they’re not.

    This smells more like a right-wing idea to remove the programs already in place with something that has less administration and also less security – giving people a lump sum means they now have to make sure they don’t accidentally buy too much food so they can no longer cover their other expenses; a more regimented welfare system has benefits too which is why there is more administration involved with it.

    It’s not a valid basic income experiment at all. It’s merely a modified benefits system and the benefits are not necessarily done for the benefit of the recipients but for the benefit of lower state expenditures, and it should be treated and considered as such.

    In no way is this proper actual basic income, and frankly I find the whole setup alarming. It’s disguised as something basic income like when it is in fact nothing of the sort.

    I’m also amazed that the woman running the thing apparently wonders who’s going to pay for it. Is she an idiot? This would cost less than the current real social security net, because it is less of a help than the current system, most likely, and there would be vastly less administration. Which is why this is being tested now, as I said – it’s an attempt to see if the state can get away with helping less than it is helping now. It’s not really about finding a way to improve things for the unemployed.

    Actual universal basic income would be financed by taxing the heck out of the rich, of course – wealth redistribution. Until we switched to a sane cooperation based system in society, anyway, and stopped using money altogether.

  3. Nick

    I have read two books that broach this subject.
    They’re quite left wing, obviously, but rather interesting.
    These are ‘Post Capitalism – A Guide To Our Future.’ By Paul Mason.
    ‘Utopia for realists – And How We Can Get There.’ By Rutger Bregman.

    I would question some of the assumptions, figures and ideas’ outlined in both these booms and in this episode of the podcast.
    This is because the statistics used are often the usual massaged, deliberately misinterpreted and misleading offerings, heard so many times before.
    They also represent a naivety, that is, while charming, potentially dangerous to any state that chooses to indulge upon it.

    It also sounds very much the old communist ethos that, if paid more, the worker will be able to buy more.
    The effect being hyper inflation. I believe the last proponents of this theory were the Kim Regime in North Korea, during the Nineteen Nineties.
    (North Korea- Life In The Failed Stalinist Uopia. Andrei Lankov)

    1. Yichao

      Actually it’s Venezuela, the paradigmatic utopia of Bernie Sanders.

  4. Melody

    After listing to this story, I can help thinking that, if the Government is sending out all this money to help people. Instead of a “free hand out”, spend that money by sending their citizens to school. Give them a sense of accomplishment. Self-worth! There are many things that come to mind. Pay for a trade school of some sort. We will always need, plumbers, an electricians, or carpentry, just to name a few. Robots are not taking those jobs! Nursing, Culinary Art, this list can go on and on!

    1. mememe

      Trade school is great if you have a place to live and food to eat. Basic income isn’t supposed to solve everything, just help provide bare a minimum for survival. How would you feel if you were homeless and instead of shelter and food you were offered school? How would you sleep well and focus without a place to live or something to eat?

  5. Royal

    This may have been my least favorite episode ever and I don’t have least favorite episodes of this podcast….not because I’m opposed to the idea but it just didn’t have substance and stay true to the idea of this podcast (look at the icons at the bottom of this webpage). If it stayed focused on the experimental government with more examples maybe… but it felt like a total stretch and it really felt like the secondary theme. It felt like something better done on some other podcast about government policy or politics. It wasn’t about something obscure but cool. UTBAPH Baby!!!

    1. Tim

      I understand what your are saying and agree that this was less of a ‘usual’ 99pi topic. Although one of the things I love about 99pi is that since it has expanded form one episode every two weeks to weekly, it has experimented with topics further from its core subjects. Sometimes this works and sometimes not (and opinion will be thoroughly split as to when this happens). I think we still get the same amount of 99pi gold but now it comes with some more unexpected episodes that, although they may appeal to a smaller portion of their listeners, are still beautifully produced and stimulating. I think we would all prefer to have the occasional dud (which by the way I don’t think this episode was) from a brave podcasting team then be served the ‘conservative 99pi’ topics every week.
      Keep surprising me…

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