What If Everyone Got a Monthly Check From the Government?
One afternoon in the final days of 2016, Steffie Eronen got a phone call from her husband, Juha. The Eronens had spent Christmas with relatives in Savonlinna, Finland, and Juha had just made the two-hour drive home so he could return to his job as an electrician. The couple live with their 5-year-old daughter in a cozy, two-bedroom apartment in Mikkeli, a quiet, midsize city in the southeastern part of the country. Juha was calling to let his wife know he was home safe, and oh, by the way, an important-looking letter had arrived for her from the Social Insurance Institution of Finland—or, as everyone calls it, Kela.
“Open it,” Steffie said.
There was a pause as Juha tore into the envelope. Then he laughed.
“You got it!” he exclaimed.
“Basic income,” Juha told her. “You’re in the program!”
Earlier that year, Finland had announced an unprecedented socio-economic experiment. Two thousand residents would receive €560 a month (about $670) for two years, with no strings attached, and the government would study how the money affected their lives. Specifically, Finland wanted to know if the payments, called basic income, freed up people to take part-time or freelance work as they looked for something permanent—stopgap measures that the country’s existing benefits system tends to discourage. To that end, it selected participants who were unemployed and poor.
Steffie, 38, was both of those things, and for months she and her husband had joked that she might make the cut. Chances were slim; the names were being drawn from a pool of about 177,000 people.
“Ha-ha, very funny,” she told Juha over the phone.
No, really, he said.
The couple have been together for seven years and married for four, and they have the kind of affectionately antagonistic banter that develops when two people are raising a small child in a small apartment. They went on like this, Juha insisting and Steffie telling him to stop it, until Juha finally cried “Oh, for f---’s sake!” and hung up. A few days later, Steffie came home and read the letter herself. Over the next two years, Finland was going to give her €13,440 (about $16,000). With it, she could do whatever she pleased.
Basic income is, as the name implies, simple and earnest in its intentions. It assumes that a society thrives when its members are cared for and so seeks to provide them with the means to care for themselves. A robust economy—with jobs, yes, but also the freedom to advance and innovate—allows most people to prosper on their own. But skills become obsolete. People are laid off or get sick. Basic income furnishes a regular stipend so their fundamental needs will be met no matter what.
In its truest form, universal basic income, or UBI, money would be given to everyone. Warren Buffett would get it. LeBron James would get it. So would drug addicts and convicts and people who create Instagram hashtags for their dogs. Technically, Finland’s experiment wasn’t universal, but if the government liked the results, the hope was for the system it eventually implemented to be so.
Historically, the idea of basic income crops up when people want to right an economic wrong. It’s there in Thomas More’s 1516 book Utopia, which describes a society that has no crime because it can “provide everyone with some means of livelihood so that nobody is under the frightful necessity of becoming … a thief.” There it is again, in a 1796 pamphlet by American political theorist Thomas Paine, who argued for the creation of a “national fund” out of which “every person, rich or poor” would receive £15 once he or she turned 21 and £10 every year thereafter. Earth’s resources were supposed to be available to everyone, Paine argued, so people deserved “compensation in part for … the system of landed property.”
With the U.S. facing growing income inequality, a tenuous health-care system, and the likelihood that technology will soon eliminate many jobs, basic income has been catching on again stateside. If predictions from places such as the consulting firm PwC and the McKinsey Global Institute are right, tens of millions of Americans will see their jobs become automated within the next decade. These losses would be in addition to the 7 million manufacturing jobs the U.S. has shed since 1980.
Such pressures have prompted business leaders like Richard Branson, Elon Musk, and Mark Zuckerberg to praise the idea. “There is a pretty good chance we end up with a universal basic income … due to automation,” Musk said on CNBC last year. “I’m not sure what else one would do.” In July, Hawaii became the first state to legislate a formal study of basic income. “We have a heavy reliance on tourism and other service-related sectors of the economy, which are more susceptible to automation. This is an effort to look at possible solutions to that,” says Chris Lee, a Democratic state representative, who introduced the bill after reading about basic income on Reddit.
Y Combinator Research, an offshoot of the Silicon Valley incubator, is also planning a five-year study involving 3,000 residents of two yet-to-be-announced states. This project will be bigger and longer and will involve larger payments ($1,000 per month) than Finland’s, but its $60 million price tag will be privately funded and administered—an approach that would be nearly impossible to scale. “We’re free from political whims,” says Elizabeth Rhodes, Y Combinator’s basic income research director, “but we can’t do this without the government’s help.”
That’s where Finland comes in. So far, it’s the only country willing to try.
It’s cold in Finland. And in the winter, very dark. Ask a Finn what the weather’s like, and she won’t tell you how hot or cold it is outside, but how light or dark. The country has only five and a half million people, most of them clustered in the south—a sensible choice considering its northern third is inside the Arctic Circle. Finland is also the easternmost of the Nordic countries, wedged between Sweden and Russia, both of which, at one time or another, have invaded and taken it over. As a result, Finnish culture is a pleasant mix of Scandinavian (they’re whizzes at sweetbreads and lingonberry jam) and Russian (ditto herring and vodka).
Three-fourths of Finland is forested, and after World War II the country supplied lumber, paper, and other raw materials to rebuilding European economies. Within decades it had transformed from the continent’s bumpkin cousin into a sleek, modern, wealthy country. Adjusted for inflation, the average income for a Finnish family doubled from 1948 to 1979. Things improved further in 1992, when Nokia Oyj introduced its first mobile phone. At its height, the company accounted for 4 percent of the country’s gross domestic product.
With its wealth, Finland created a network of social institutions designed to ensure that everyone enjoyed a certain quality of life. Kela was founded in 1937 to administer a national pension program and has since expanded to encompass roughly 40 services. There’s child-care assistance. Money for housing. Stipends for college students. Unemployment. Retirement benefits. Paid parental leave for mothers and fathers, guaranteed for at least one year. “We do have many benefits compared to other places,” says Marjukka Turunen, director for change management at Kela. Turunen has short, closely cropped blond hair and speaks with the crispness of a person who values method and organization, necessary traits for her job.
The country pays for its social programs with relatively high taxes. Finland’s progressive income tax tops out at about 31 percent, but local taxes and pension contributions can push the effective rate closer to 50 percent. Kela redistributes about $15 billion every year, helping give Finland one of the lowest levels of income disparity in Europe. The richest 20 percent of Finns earn four times what the poorest 20 percent earn, compared with eight times in the U.S. The median annual income is about $43,000—about a quarter less than in the U.S. but well above Italy’s and Spain’s.
In other words, most Finns are financially secure. Even in the capital, Helsinki, you won’t find much homelessness or panhandling. Most families own a house and a car and take regular vacations. The trade-off is that quotidian purchases can be expensive. (Ever paid $8 for coffee? I have. In Finland.) And the wealthy are often frustrated by how much of their earnings is siphoned off. “I don’t spend much time in Finland anymore,” says Bjorn Wahlroos, chairman of three of the country’s largest companies, forestry conglomerate UPM-Kymmene Oyj and two banks, Nordea and Sampo Group. “Too expensive. I still have a home there, but I spend most of my time in France and Sweden.”
Finland has other problems, too. Like the U.S. and the rest of Europe, it’s suffering from manufacturing job losses and general economic sluggishness. On top of that, Nokia’s demise in the face of smartphones coincided with the 2008 recession, twin crises from which the country hasn’t recovered. The unemployment rate is 7 percent, almost twice the U.S. figure. With more people relying on Kela, public debt almost doubled from 2008 to 2015. Last year, Finland reduced the amount of time people could receive unemployment benefits, hoping to save about €200 million a year.
“The welfare state was never perfect, but it used to work,” Wahlroos says. “Now we’re looking at a future labor force with a lot of irregular and low-paid jobs. Given that, I think it’s intellectually dishonest to maintain that our present system of social security can be fixed.”
Previously, Finns’ complaints about the system related mainly to its sluggish bureaucracy. Think waiting in line at the DMV is bad? Try working with a federal agency running 40 programs, each with its own recipient database and payment system. “The administrative burden, it’s too much,” Turunen says. “Somehow this has to be gotten rid of.”
Take those unemployment benefits, for example. If you lose your job in Finland, you’ll receive two types of unemployment: Most of your salary is covered by a union, to which you probably paid dues while employed. (Some 70 percent of Finns are unionized.) Kela will cover the rest for 400 days—down from 500—or until you get another job. Remain unemployed, and you’ll be shifted to what’s called a labor market subsidy, which doesn’t pay your full salary but has no end date. All the while you’ll have to prove to Kela that you’re looking for work. Be careful, though—if you find temporary or freelance employment that brings in more than €300 per month, your benefits will be reduced. And when that work ends, you might have to wait weeks or months for your full benefits to resume.
The country has been trying for years to remove the incentive to remain on unemployment. Every once in a while, a newspaper columnist or academic floats basic income as a possible solution. Wahlroos first publicly suggested it in 2001, inspired by the conservative, free-market economist Milton Friedman. Friedman supported the idea of a negative income tax, in which people who earn less than a certain amount receive money at tax time rather than owe it. (This exists in the U.S. as the earned income tax credit.) Basic income is essentially the same thing, Wahlroos argues, but paid monthly. “In the U.S., you might think this idea is socialism,” he says. “I don’t think Milton Friedman would like you to say he was a socialist.”
In the winter of 2015, the government, which is dominated by the right-leaning Centre Party, announced a formal study, run by Kela, to see if basic income was viable. The public adored the idea. In national polls, almost 70 percent of Finns supported it. Asked what level of income would be sufficient, on average they suggested €1,000 a month, almost one and a half times the minimum retirement pension in Finland. But the plan didn’t go over well with the Central Organisation of Finnish Trade Unions (SAK), the country’s largest union. “It takes social policy in the wrong direction,” Ilkka Kaukoranta, chief economist of SAK, told Bloomberg News last year, arguing that people would stop working.
Wahlroos says that isn’t the point. “I don’t mind if someone says, ‘OK, pay me hundreds of euros, and I’ll just start painting ugly pictures or writing bad poems,’ ” he says. “We are actually paying many of those people more in other benefits right now. And it’s possible many of those paintings won’t be that bad.”
Kela designed Finland’s experiment with help from think tanks and economists from around the continent, following parameters set by the government. The payments would start in January 2017 and run for two years, concluding in time for parliamentary elections in 2019. Kela’s then head researcher, Olli Kangas, oversaw the project.
Kangas is a lithe man with thick-rimmed glasses who got his start studying social security systems in Sweden and Denmark. He says he almost panicked when Finland’s prime minister, Juha Sipila, announced the timeline. “Preparing a law like this usually takes years. We had three months,” he says. “It was a nightmare, honestly. Happily it happened toward summer, when days are very long.”
Kangas assembled a team of about 10 Kela economists and social scientists, including Turunen. They started by studying trials conducted in other countries. There was one run by a nonprofit in Kenya, but it took only $22 a month to lift people out of poverty there. Iran had given its citizens monthly cash payments from 2011 to 2016, but they were temporary, designed to offset the rising price of gas as the government phased out subsidies to fuel companies. It turned out that the most robust studies, and those most closely aligned with Finland’s goals, had been conducted by a country unlikely to implement basic income anytime soon: the U.S.
In January 1968, President Lyndon Johnson set up a commission to examine alternatives to America’s welfare system. The panel eventually recommended a “basic income support program” in which every adult citizen would receive $750 per year (about $5,200 today), with an additional $450 granted per child. This never happened, of course. But the idea floated around Washington for years—Richard Nixon included it in his 1969 Family Assistance Plan, which never took effect—and inspired several city and state experiments to test low-income families’ responses to different taxation and benefit levels. The largest, in Denver, lasted from 1971 to 1982 and involved 4,800 families.
Chances are you’ve never heard of these studies. That’s because their results were often misconstrued, causing them to be written off as failures. Early analyses claimed that basic income led to a dramatic rise in the divorce rate. This was later disproved, but not quickly enough to keep U.S. senators from decrying the idea on the Senate floor or the New York Times from running an article in 1979 that linked basic income with the demise of the family unit. Opponents also argued that recipients would spend their newfound money on alcohol or drugs; in later reports, researchers found that hadn’t happened.
What few changes did occur were minor: Participants spent more money, but mostly on necessities, and young people worked fewer hours, largely because they went back to school. The cash didn’t pull people out of poverty or otherwise dramatically change their lives. By the time the experiments concluded in the early 1980s, President Ronald Reagan was seeking to reduce federal welfare programs rather than expand them, and the country moved on.
Still, the studies were the best thing Finland had to go on. Kangas liked their focus on low-income families. Turunen suggested narrowing the scope to those who were also unemployed, since Kela already had their names and income information.
Initially the agency hoped to involve 10,000 people and give them monthly payments ranging from €450 to €750 so it could study the influence of income level on behavior. Participation would be compulsory, which meant the country would be forcing some people to take less money than they were receiving, while others would get more. But then Finland’s constitutional law committee ruled that randomly raising or slashing people’s benefits violated the constitution, which prohibits treating one group of citizens differently from another. The committee and Kela compromised: Participants’ unemployment checks would be replaced with basic income payments of €560, the average given to someone on unemployment. If a participant had been receiving more in unemployment, he or she could apply to have the balance reinstated. All other benefits would continue as planned. Then, to keep costs manageable, the Parliament slashed the number of participants to 2,000.
Kangas hated these changes. Including other benefits made basic income’s effects harder to quantify. And 2,000 people was way too few to be worthwhile. “I don’t know how that number was reached. It was a very complicated process,” he says. “There was this constant political game going on behind the curtains I couldn’t see.”
Juha Jarvinen knew it was naive to hope for basic income, but he couldn’t help it. “I read about it in the papers and was wanting it,” he told me when I visited him at his home in rural Finland. Jarvinen and Steffie Eronen had agreed to let me track their first year on basic income and see what, if anything, it changed.
Jarvinen, 39, had been out of work for six years when Finland announced its experiment. His career, such as it was, had started two decades ago when, just out of high school, he found work at a cable and wiring factory in Helsinki. “It was a lot of standing around and pushing buttons, watching machines do everything,” he said. “I was making €20 an hour, but I thought, I have to find something else.”
Jarvinen has an ashy brown beard and likes to wear a top hat. He calls himself an “idealistic hippie,” and when he gestures the beaded bracelets on his wrists jingle. After quitting his factory job in 2003, he left Helsinki with his wife, Mari, eventually settling in Jurva, a village of about 5,000 people in southwestern Finland. They bought a ramshackle house set back on a rolling country road, surrounded by fields and forest. They had six kids, and after each one, Mari went back to work as a nurse. “My wife, she’s into women’s equality and always wanted to work,” Jarvinen said. “So I said I’d work from home.”
In 2004 he started a company making custom shutters and windowsills for homes. For a while he did well. “I sold to very rich people, powerful people, in Finland and Russia. I could have made a lot of money, but it turns out I’m a bad businessman,” he said. He didn’t pay his taxes on time. Sometimes he refused an order. (“If I didn’t like a customer, I’d tell them to f--- off.”) Then came the recession. The company started losing money. Jarvinen was so stressed he stopped sleeping and eating. He spent weeks in bed. Eventually the country’s tax office forced him to declare bankruptcy. “They sold my machines to pay taxes,” he said. “I’m not bitter at them, just sad. The closure of my business made my depression worse.”
Jarvinen had been on unemployment ever since. He got about €640 a month, plus an €800 child-care credit. His wife pulled in an additional €1,700 from nursing. That worked out to the equivalent of about $45,000 a year, not much for a family of eight. The children wore used clothing. The family’s furniture was either secondhand or handmade by Jarvinen. He owned one pair of shoes.
Jarvinen wanted to start another business but worried that it, too, would fail. He recalled the four or five months it had taken for his unemployment benefits to kick in the first time, when the family couldn’t pay utility bills and had to borrow money from one of his brothers. “I can’t do that again,” he said. What little part-time work he’d been offered always paid too much for him to take it without losing his benefits.
In December 2016, he’d received a letter from Kela. He was in the experiment. “It was like Christmas morning,” he said of receiving his first payment, even though it would be fewer euros than he was getting before. “Yes, I have 100 less each month, but I’m free,” he said. “I can really start working and then”—he paused—“I don’t know!”
When Eronen got her letter, she was a year into an online training program that, if she passed, would allow her to apply for a full-time social services program at a university. It wasn’t going smoothly. Originally from Germany, she’d moved to Finland in 2011 to be with her husband, and she didn’t speak Finnish well. She’d tried to learn, but in 2013 she was diagnosed with breast cancer. The subsequent years of treatment, on top of caring for her daughter, left her with little energy or time to study a new language.
Eronen had also never graduated from high school. “I was lazy. I didn’t see a point,” she said, shaking her head at her teenage decision. “But now I have no jobs I can take, and I have to go back to school.” She could complete her coursework just fine, but she tended to get flustered on group assignments and timed exams because she couldn’t read Finnish fast enough. Her unemployment benefits, which came to about €950 a month, had been tied to her enrollment in school; they’d be canceled if she didn’t pass her classes. “But basic income is no strings attached,” Eronen said. “Even though the amount of money is less, there’s a sense of freedom. I could get a part-time job.”
In March, two months after the payments started arriving, she applied for positions at a supermarket, a post office, and a few shops, work she couldn’t have taken while remaining on unemployment. She didn’t get the jobs. By June her excitement about basic income had waned. “I haven’t decided if I like it or not,” she said. “If I don’t find work, then nothing has changed.”
Jarvinen was also struggling to transform his feeling of freedom into meaningful change. He talked often about “starting my new company,” but six months on he still hadn’t decided what it should do. Instead, he took up odd jobs. He renovated a neighbor’s house. He fixed another’s computer. He was also surprised to find a market on Etsy for large wooden drums that he makes in the style of Finland’s indigenous Sami people.
At Kela, meanwhile, the first change Turunen noticed was that many participants had gone back to school, as had happened during the U.S. trials in the 1970s. She also discovered that people reported feeling less stressed. “One person called us and said, ‘Is this really for real? I don’t have to take a job?’ ” she recalls. The caller, a woman, was caring for her elderly parents full time and had struggled to prove to Kela that she was looking for work. Now she could focus on her parents. It wasn’t exactly what Finland was aiming for, but Turunen was pleased anyway. “That is the point of this basic income,” she says. “You can do with it what you need to.”
Kela’s researchers originally envisioned the experiment as the first in a series that would help them understand the implications of expanding basic income nationwide. “With basic income, there will be a lot of winners, but there will be a lot of losers also,” Kangas says. “We have to study the losers.” For one thing, he points out, to provide Finns with the level of financial security they enjoy under their current system, basic income payments would have to be at least twice those of the trial. And to pay everyone, the country would have to change its tax structure.
In their proposals for further studies, the researchers estimated that a flat tax of about 55 percent would be required. Kangas says they tried calculations involving progressive taxation but worried that another showdown with the constitutional committee would result. Benefits are taxed in Finland just as income is, and the researchers didn’t think the committee would allow basic income payments to be taxed at different rates when the whole idea was to ensure people received the same amount.
The wealthiest would be relatively unaffected by such a change because their taxes are already high, but a swath of middle- and upper-middle-class Finns would pay more in taxes than they’d get back in basic income. In national polls, when the possibility of a 55 percent flat tax was raised, the percentage of Finns who supported basic income dropped from 70 to about 30. “We would need to implement another study for the whole population to understand it,” says Miska Simanainen, a tax specialist who was part of Kangas’s team. No such studies are planned.
The government has also become less gung-ho about basic income as the trade-offs have become clearer. Turunen and Kangas were pulled off the trial partway through last year. Kangas is now one of Kela’s directors, while Turunen is spearheading the reorganization of Finland’s 300 municipalities into a system of 18 regions. Prime Minister Sipila declined an interview request, but in speeches he too has backed off basic income, instead emphasizing the need to spur people like Eronen and Jarvinen to find part-time jobs.
Last year, the government passed new restrictions on unemployment payments, penalizing people who refuse positions that are below their education and experience levels or within a certain distance from their homes. “I still believe in the experiment,” says Pirkko Mattila, minister of social affairs and health and one of the parliamentarians who worked with Kela’s researchers on the study. “The government has a goal of employment, so whether it’s restrictions or this experiment, it’s worth a try.”
“Whatever happens in this experiment, it’s unrealistic to think that basic income will be implemented in this country,” Kangas says. “Politics is often much stronger than scientific results.”
Finland also still struggles, despite its receptiveness to wealth redistribution, with the idea of giving people money without requiring anything in return. Eronen says she’s gotten a few nasty responses from acquaintances. “My study mates were saying it was just free money,” she says. “It’s frustrating, hearing them say basic income people are lazy.” Jarvinen has similar stories: “People say to me, ‘You don’t want to work.’ I want to work. I think every person wants to do something with their life.”
Trust is perhaps the most radical aspect of basic income. Handing out money requires a government to have faith that people know what’s best for themselves—that, on the whole, they have enough intelligence and foresight to put their financial resources to good use. In almost every basic income study conducted so far, this faith has been borne out. The little money wasted on vices is more than offset by what is spent on groceries or child care. But trusting that this will hold true universally requires an even bigger leap of faith. In 2016, Switzerland’s citizens overwhelmingly voted down a proposal that would’ve given them each the equivalent of $2,555 a month. Surveys showed they didn’t think it was right for people to be given something for free.
Finland won’t wrap up its study for another year. By then, Y Combinator Research’s larger experiment will be under way in the two U.S. states. It will be based on a preliminary study of six low-income Oakland residents who received $1,500 a month for a year. When Rhodes, the organization’s basic income director, sat down with participants afterward, she says, she didn’t hear that anyone had made a big, life-changing purchase or quit a dead-end job in a huff. Instead, people had simply taken a financial sigh of relief.
“We had this student who was also working multiple part-time jobs,” she says. “At first she told us that basic income hadn’t changed much for her, since she was still working and still in school, but then she mentioned feeling less worried about being able to pay for school. She’d joined a band. She became involved in her community. She started to think of her life more holistically rather than just, can I make rent?”
That kind of hard-to-quantify change might not be enough to persuade a government to adopt a controversial new welfare system. Even Rhodes isn’t sure basic income is viable. Or at least not as most people envision it. “In this country, it’s talked about as a replacement for work, closely tied to the idea of automation, or what we’ll all do when robots take over our jobs,” she says. “But that’s not how this works. Someone who makes $80,000 a year and has a mortgage isn’t going to quit his job just because the government pays him $1,000 a month.”
In Finland, Turunen agrees. “It’s too dramatic for our social security system to just wipe the whole table clean,” she says. “It doesn’t remove our problems. Some, but not all.”
It took Jarvinen the better part of a year, but in May he finally landed on an idea for his new business. “I’m going to do video work!” he announced. The next month he formally registered a digital marketing company that would make commercials and online ads for local businesses. “In the countryside, no one is doing any social media marketing or anything,” he explained.
His experience in this arena was limited, though, to posting videos of his children to YouTube and Vimeo, and two months later he still hadn’t booked any clients. “The footage I have, it’s shaky, and it’s not good. I need some new cameras,” he said. He’d also had trouble finding rural businesses that needed social media campaigns. He applied for a regional grant to make promotional travel videos but didn’t get it. “Nobody even replied, it’s a bit sad,” he said. An offer to make props for a television show about Vikings also went unaccepted. Instead, he continued selling his handmade drums for as much as €900 apiece on Etsy.
Eronen spent most of last year looking for part-time work, learning Finnish, and plugging away at her online courses. In the summer she underwent long-planned reconstructive surgery for the mastectomy she’d had during breast cancer treatment. She took two months off to recuperate, which, if she’d been receiving unemployment, would have required her to transfer to the sick-leave benefit system. Instead, her basic income payments kept coming.
When she returned to school, she initially found it difficult to catch up. She wouldn’t have been doing well enough to remain on traditional unemployment, but basic income allowed her to support herself and stay in school. She kept at it, and in November was accepted to a social services program at Lahti University of Applied Sciences, about 80 miles from home. In January she moved with her daughter to a small apartment in Lahti that she’ll keep during the school year; her husband will stay behind in Mikkeli. “I will miss him terribly, of course,” she said. “But it’s just one year, and then hopefully I can transfer to the university at Mikkeli.”
If everything goes according to plan, Eronen will graduate with the equivalent of a college degree in three years and become a social worker. She used to speak of a career helping other unemployed people look for work, but now she isn’t sure. Maybe a kindergarten teacher? A child services caseworker? A health-care worker? She’s never had so many careers to choose from. “I’m excited,” she says, speaking by phone from her new apartment in Lahti. “It’s a lot of possibilities.” Her classes start this week.