Small trial of paperless unemployment pay in Finland

[houlahound]

No more unemployment benefits. Trial already in Finland where everyone gets an equal payment from gov regardless of whether you work or not, want it or not. Wealthy and poor all receive the same UBI to do what they want with, other income streams won't affect your UBI.

Thoughts on UBI?

Edit by mod: Please read this link to explain that it is just taking away their unemployment payment and returning it to them (trial of 2,000 people only) without the paperwork

http://www.latimes.com/business/la-fi-finland-guaranteed-income-20170102-story.html

 

[berkeman]

No more unemployment benefits. Trial already in Finland where everyone gets an equal payment from gov regardless of whether you work or not, want it or not. Wealthy and poor all receive the same UBI to do what they want with, other income streams won't affect your UBI.

Thoughts on UBI?

Do you have a link? Some reports seem to imply you must be jobless to get the payments...

http://www.nytimes.com/2016/12/17/business/economy/universal-basic-income-finland.html?_r=0

 

[OmCheeto]

Here we go again...

Universal Basic Income
Evo; "This thread has gotten nowhere in 4 pages, time to close it down. It's is just not realistic in the near/distant future in the US."​

bolding mine

ps. Greg still has an open thread on the topic: We should give free money to the homeless
Same general idea, IMHO, with different wording.

 

[Evo]

We can discuss Finland, but Finland only because it is unique. We cannot speculate about other countries, so please post only about Finland, also, we do not allow discussions of politics.

 

[OmCheeto]

We can discuss Finland, but Finland only because it is unique. We cannot speculate about other countries, so please post only about Finland, also, we do not allow discussions of politics.

Finland?
There are only about 18 people that live there.
Much too small a sampling for a valid scientific discussion, IMHO.

Evo, we need to talk...

 

[Evo]

Finland?
There are only about 18 people that live there.
Much too small a sampling for a valid scientific discussion, IMHO.

Evo, we need to talk...

That's why it works for Finland.

It will be interesting to look at the situation there in a few years. Hey, I'm all for free money.

 

[Ygggdrasil]

To a very small scale, this is done in Alaska (though the amounts, $1-2k/yr, are nowhere near the amounts needed for a UBI):
https://en.wikipedia.org/wiki/Alaska_Permanent_Fund#Permanent_Fund_Dividend

 

[Helios]

It's easy to guess that Finland currency isn't backed by gold. Give-away schemes like this are just going to devalue the currency. People will invest in some more-valued currency and spend the cheap native currency. Prices go up. Arbitrage traders know how to profit from these things, should they have the foresight or insider information.
The political party will advertize their superficial good intentions but the people will catch on to the corruption. When the people begin to suffer from the reduction of their personal weath, they will purge that political party for a more responsible one. This same old story gets played out over and over again.

 

[Vanadium 50]

. Give-away schemes like this are just going to devalue the currency.

Finland uses the Euro. Finland is less than 2% of the Euro economy.

 

[john101]

Wouldn't it just redistribute taxed income upwards. A bit like a guaranteed tax return far above tax paid in most cases. While it might sound like a guarantee for poor, any money a poor person has belongs to someone else anyway. It goes to paying various organisations that in toto maintain life so that one is around to get more money to do the same again and again.

It seems just a ploy to bolster a failing system in the short term while widening the gap between poor and wealthy. I don't trust the idea, particularly when right wing extremists support it.

 

[vela]

It's easy to guess that Finland currency isn't backed by gold. Give-away schemes like this are just going to devalue the currency.

You're assuming the program is funded by printing money instead of taxes. If it's simply a redistribution of wealth from one group to another, it's not going to devalue the currency.

 

[houlahound]

No economist but why is a devalued currency necessarily bad?

Lower dollar promotes tourism and foreign investment, foreign students, keeps interest rates low...

I remember when my country's dollar beat the US dollar, things went to poo. Our dollar dropped and tourism etc went nuts.

 

[vela]

Ino economist but why is a devalued currency necessarily bad?

It promotes tourism and foreign investment.

It causes inflation because imported goods become more expensive. Traveling to other countries would also be discouraged.

 

[houlahound]

Yeah but its more dynamic than high dollar value = better, It doesn't especially if your country exports more than it imports or you have a big tourist industry or a multimillion dollar education industry for foreign students.

 

[vela]

Do you have a link? Some reports seem to imply you must be jobless to get the payments...

In Finland's trial, the government is giving money to 2000 unemployed people, but the general idea of UBI, as mentioned in the article, is that everyone gets a check regardless of whether they're working or not. The current system provides an incentive to not work because if a person earn too much, their benefits get cut, leaving them worse off economically. With the UBI, because you receive it regardless of whether you work or not, it removes the incentive to not work. I don't recall it being mentioned in the article, but it would seem that UBI needs to replace the current system to achieve its intended goals.

I'd think that negative income tax would make more sense. The lower a person's income, the more help the person gets, and people above a certain income don't receive money that they don't really need anyway. Any increase in income reduces the benefit, but still leaves the person better off. The earned income tax credit works like this.

 

[vela]

Yeah but its more dynamic than high dollar value = better, It doesn't especially if your country exports more than it imports or you have a big tourist industry or a multimillion dollar education industry for foreign students.

Of course. With any change, there are going to be winners and losers.

 

[Evo]

Here's what Finland is trialing.

In a social experiment, Finland starts giving a $587 monthly income to 2,000 citizens

Finland has become the first country in Europe to pay its unemployed citizens a basic monthly income, amounting to 560 euros, or $587, in a unique social experiment it hopes will cut government red tape, reduce poverty and boost employment. Olli Kangas from the Finnish government agency KELA, which is responsible for the country's social benefits, said Monday that the two-year trial with the 2,000 randomly picked citizens who receive unemployment benefits kicked off Monday. Those chosen will receive 560 euros every month, with no reporting requirements on how they spend it. The amount will be deducted from any benefits they already receive.

http://www.latimes.com/business/la-fi-finland-guaranteed-income-20170102-story.html

 

[Ygggdrasil]

FiveThrityEight had a nice piece summarizing various studies on the effects of a UBI (http://fivethirtyeight.com/features/universal-basic-income/). All studies were limited and had flaws, but if you're interested in the topic, it's a nice read. Here are some relevant passages with links to the studies discussed:

It’s not clear exactly what work effects would materialize under a basic income scheme. However, over the last 50 years there have been numerous attempts to study this question. Between 1968 and 1980, the U.S. ran four major negative income tax experiments in which families were assigned into treatment and control groups, given cash and tracked over several years. The experiments were located all over: in New Jersey and Pennsylvania; Iowa and North Carolina; Gary, Indiana; and, the largest, in Seattle and Denver.

“We learned an enormous amount from those experiments,” said Karl Widerquist, a Georgetown University-Qatar professor who has studied the NIT experiments extensively. But the results “were a political failure.” The core question unanswered by either side: What is an acceptable decline in work? Unsurprisingly, work effort did decline. Some NIT recipients cut back their hours, but the declines were modest: no more than 5 to 7 percent among primary earners, and a bit more for secondary earners.

But participants quitting altogether didn’t happen, and people who did cut back their hours used their newly available time to pursue other goals, including going to school. “Some of the experimenters said that they were unable to find even a single instance of labor-market withdrawal,” wrote Widerquist in his 2005 paper summarizing the studies.

The closest research we have to how a universal basic income could work comes from a small town in Canada. From 1974 to 1979, the Canadian government partnered with the province of Manitoba to run an experiment on the idea of providing a minimum income to residents. The result was MINCOME, a guaranteed annual income offered to every eligible family in Dauphin, a prairie town of about 10,000, and smaller numbers of residents in Winnipeg and some rural communities throughout the province.3 MINCOME remains one of the most influential studies of basic income in a rich-world country.

Evelyn Forget, now an economist at the University of Manitoba, was a student in Toronto at the time. “I knew this was happening in Manitoba. I just stopped hearing about it,” she said. When Canada’s governing party changed midway through the MINCOME experiment, funding dried up and the researchers were told to archive their data for later analysis. No database was created, and the results of MINCOME were not examined.

Decades later, Forget started digging for the data. She unearthed 1,800 dusty cardboard boxes — with information on each family receiving MINCOME — at Canada’s National Archives. Forget digitized the materials and matched MINCOME records with those in the database of Canada’s universal health insurance program, which was introduced around the same time. That allowed her to compare the health of those receiving MINCOME to the health of similar people who didn’t. It resulted in a blockbuster research paper, decades in the making: “http://public.econ.duke.edu/%7Eerw/197/forget-cea%20%282%29.pdf,” published in 2011.

Give Directly, which is launching the basic income pilot in Kenya, has previously run RCTs to examine the effects of giving cash unconditionally; those experiments have shown that cash works wonders, and the http://www.princeton.edu/%7Ejoha/publications/Haushofer_Shapiro_UCT_2013.pdf have won over economists. The children of recipients are healthier and get more education; adults earn more income by using the cash to plan investments over a longer horizon; spending on alcohol and other vices — a worry some critics of cash grants raise — stays flat or even declines.

 

[russ_watters]

Some reports seem to imply you must be jobless to get the payments...

It appears to me that the media outlets are playing whisper-down-the-lane with this story and parts of it are morphing or getting dropped. The ideas that the study is targeting unemployed people and that employment doesn't disqualify someone from being in it are not mutually exclusive. However, if they truly are targeting unemployed people with the study, then the study appears pointless because it is excluding from the study the group that most needs to be studied; people who already have jobs. And it sets itself up to be capable of returning only positive results.

 

[russ_watters]

...the general idea of UBI, as mentioned in the article, is that everyone gets a check regardless of whether they're working or not. The current system provides an incentive to not work because if a person earn too much, their benefits get cut, leaving them worse off economically. With the UBI, because you receive it regardless of whether you work or not, it removes the incentive to not work.

Well, that isn't comlpetely true. The problem is that "Universal Basic Income" is more of a catchphrase than a program/plan and the less pleasant details, including the disincentive part arising from the fact that it is not actually "universal" tend to be glossed over when describing it. The details of the plan are what determine the incentive levels and who actually gets this "universal" benefit and who instead pays for it*. The cutoff between receiving the benefit and paying for it is where the disincentive starts, no matter what. Eliminating the exclusion of workers receiving the benefit doesn't eliminate the incentive, it just moves it somewhere else -- a somewhere else that generally isn't specified.

For simplicity of illustration, let's assume half the population gets the benefit and the other half pays for it. That sets up a specific cutoff income above which the program disincentivizes work. Depending on the level and the person, the courses of action incentivezed could be anything from quitting your job (including early retirement) to not seeking additional overtime to not seeking promotions and other growth opportunities -- essentially incentivizing mediocrity. It may be that the incentive to quit your job is small, but it is non-zero, and the other related incentives are very significant.

You can add a gradient for the phase-shift from payer to payee, but that doesn't change the overall magnitude of the disincentive, it just spreads out and masks its effect.

In other words: the fact that it is not, in fact, "universal"** is what ensures there will always be a disincentive somewhere.

*I suppose you could set up a system where everyone receives a check and then some portion of the country sends back a bigger check, thereby making the receipt truly universal, but that would just be a meaningless and cumbersome gimick. Since part of the claimed benefit of such programs is they simplify welfare programs, adding that layer of complexity would be counterproductive.

**Except in places with positive cash flow without personal income taxes, such as Alaska and countries with extreme oil wealth.

 

[Evo]

Please stay on the subject of the Finland experiment.

Thanks!

 

[russ_watters]

Fair enough: to connect my previous post more directly to the Finland experiment:

The Finland experiment is heavily flawed in part due to the fact that it excludes testing of the remaining disincentives: The test assumes the program is free.

 

[Robertphysics]

Well what can I say , I've been to Finland some times as its not far from where I live. I drank their vodka this Christmas and I like it just as much as Russian vodka. :d
Probably the best drinks of their kind in this world.

This plan could only really work in countries like Finland and maybe some other small but wealthy countries that have a high standard of living and what's also important where the society is more or less monolithic , also I believe this system only works if the majority of the society living in the specific country are of high morale and work ethic , otherwise I have to agree to russ that such programs only make the lazy ones even lazier and empty the budget for no reason.
Finland indeed has great infrastructure and as much as I and my friends tell me cool people , work is seen as something of a benefit instead of sitting on handouts so such systems might work for them. I also know that in many European countries there are large benefits for the disabled. My grandfather is disabled as he is old and it requires quite some time and effort to help him both with his life and his medical needs , in countries like Finland the relatives who do that work or in other cases hired persons from aside get quite decent payments , and everyone is fine.

I believe that such a system would fail catastrophically in a country like US. Simply because the number of unemployed people is so large compared to the unemployed rate in small countries like Finland and also multiculturalism and different ethics and ways of life and problems with illegal immigrants , all this would probably fail such a system easily. I'm not mathematician but a few simply calculations tell me that such or similar system in US would empty the national budget and create and even higher debt.

So I really guess such "universal" system are actually not universal at all , each society is different with different standards and so require different approaches.

 

[Vanadium 50]

In Finland's trial, the government is giving money to 2000 unemployed people,

OK, so that's around half a percent of their unemployed population and a total cost of $28M. $28M won't break the bank. Expanding it to all unemployed Finns would be a 30% budget increase. Expanding it to all Finns would be a 300% increase.

 

[Evo]

OK, so that's around half a percent of their unemployed population and a total cost of $28M. $28M won't break the bank. Expanding it to all unemployed Finns would be a 30% budget increase. Expanding it to all Finns would be a 300% increase.

@Vanadium 50 The Trial is just for 2 years, at only $587/mo AND is deducted from the benefits that they are ALREADY receiving, so there is no cost to the government at all.

In a social experiment, Finland starts giving a $587 monthly income to 2,000 citizens

Finland has become the first country in Europe to pay its unemployed citizens a basic monthly income, amounting to 560 euros, or $587, in a unique social experiment it hopes will cut government red tape, reduce poverty and boost employment. Olli Kangas from the Finnish government agency KELA, which is responsible for the country's social benefits, said Monday that the two-year trial with the 2,000 randomly picked citizens who receive unemployment benefits kicked off Monday. Those chosen will receive 560 euros every month, with no reporting requirements on how they spend it. The amount will be deducted from any benefits they already receive.

http://www.latimes.com/business/la-fi-finland-guaranteed-income-20170102-story.html

So they are SUBTRACTING the $587 from their existing benefits and paying it back to them, the only difference is that the recipients do not have to jump through the legal hoops they normally would.

It's not costing Finland a penny and actually saving them money due to the decreased human resources needed to monitor and process unemployment paperwork.

Does NO ONE read what I post?

REALLY?

NO ONE?

 

[Bystander]

REALLY?

NO ONE?

I read (past tense) it, but it makes absolutely no sense; "Rob Peter to pay Paul. Rename Peter as Ringo. And Paul as George ..." ∴, "?," QED.

 

[Evo]

I read (past tense) it, but it makes absolutely no sense; "Rob Peter to pay Paul. Rename Peter as Ringo. And Paul as George ..." ∴, "?," QED.

Well, that's kind of the whole point, they aren't giving away free money, they are simply deducting the unemployment wages paid to people and simplfying the paperwork. Instead of pointless interviews and tons of paperwork, the Finnish government decided to do a small trial, give them the same money they get from unemployment, but don't require the paperwork and follow up. See if it makes the unemployed more incented to find work or if it makes things worse. It's just a 2 year trial with only 2,000 participants.

 

[houlahound]

I think a good experiment would sudsidise, thru tax breaks, employers for employing people.

 

[Evo]

I think a good experiment would sudsidise, thru tax breaks, employers for employing people.

Lots of problems with this, what will these people do? You realize that in the US, the employer would have to offer health insurance (depending on size), and for full time employees have to match social security payments. That's why many small businesses and franchises do not offer full time work so that they can avoid these costs.

 

[houlahound]

There would skills training advantages, self esteem advantages, networking, participation back in society, productive habit forming, work ethic building...so many broader benefits.

Many unemployed drop out of life, with a leg up instead of a handout I have seen them return to society with a vigour and lust for life again. Many have just lost their confidence and self esteem.

 

[john101]

I thank you evo for contnuing to bring things back on track. I think I got it now. It's not the UBI that various sources mix up in reporting this trial. What Finland is doing in this trial is actually not such a new idea. Back in the 70's the dole in Australia was administered similarly. I believe Sweden also has done it in a similar way. In Australia the benefits have gone through a lot of changes, basically a big drift away from the 70's model. This time in Finland it is a deliberate study so it can be followed. It'll be interesting to see how it goes.

 

[vela]

So they are SUBTRACTING the $587 from their existing benefits and paying it back to them, the only difference is that the recipients do not have to jump through the legal hoops they normally would.

An important difference is that the recipients won't lose this income even if they get a job. Under the regular system, getting a job could cause a person to lose more in unemployment benefits than what they earned, leaving them worse off as a result of working.

 

[russ_watters]

...$587/mo AND is deducted from the benefits that they are ALREADY receiving, so there is no cost to the government at all...

It's not costing Finland a penny and actually saving them money due to the decreased human resources needed to monitor and process unemployment paperwork.

I don't think that's completely true. There are two parts to the difference between the UBI and unemployment. One is the lack of requirement to be looking for a job (and associated admin overhead), but the other is that if you find a job, you still get the money. So presumably it would cost a little bit of money to fund extra benefits for people in the study who find jobs.

Also, the administrative overhead won't really go down for the study because the study itself is added administrative overhead. But that's really an aside; it would still enable measurement of how much a real UBI would save in admin overhead.

If the goal of the study (I'd really like to see the actual proposal...) is just to see if more unemployed find jobs under the UBI than with normal unemployment admin requirements, I guess that's a useful thing to know, but it is a very limited part of what a UBI is about. In particular, as far as I know, no one has ever tested the UBI by forcing a group of people to pay extra taxes and then monitoring how that affects them.

 

[russ_watters]

Also, the administrative overhead won't really go down for the study because the study itself is added administrative overhead. But that's really an aside; it would still enable calculation of how much a real UBI would save in admin overhead.

Erp, actually, I'm not sure if that is really true or not either! Since presumably the people are still receiving part of their normal unemployment benefits, at least part of the administrative overhead would still be needed.

 

[OmCheeto]

...
Does NO ONE read what I post?

REALLY?

NO ONE?

Well, not until you yell at me...
But I was interested in the economic impact, just in case your assertion that this experiment has no added costs was not true.
First off, I must say I don't fully understand the Finnish government structure. And this may be true of others as I've seen government budget numbers from between 11.5 and 54 billion euro.
Anyways, I added up what this experiment will cost: €13.44 million/year [maths: 2000 people * €560/(month*peeps) * 12 months/yr]
I compared this to the upper govt. figure: €54 billion/year
And what came up was a tiny little PERCENTAGE: 0.025% of budget
It's also apparently half of what the President of the Republic spends: €34 million/year [ref]

Conclusion: Presidents are expensive.