Basic income ‘unsustainable’ despite mental health benefits

An experiment with ‘free money’ in Finland made people happier but did not improve employment levels and would be ‘unsustainable’, a study has found. 

2,000 unemployed people were given a €560 (£490) basic income every month in a two-year trial to see whether the system would work better than traditional benefits. 

Participants in the Finnish study ‘were more satisfied with their lives and experienced less mental strain, depression, sadness and loneliness,’ researchers said.  

But the Finnish study found that the handout led to people being employed for only six more days over a one-year period. 

Finland’s prime minister Sanna Marin does not plan to introduce such an income, although her health minister said the experiment would be useful for future social security reforms. 

Advocates of a so-called universal basic income argue that it cuts bureaucracy and say that people will be more willing to take on temporary or part-time work if their benefits will not be cut as a result. 

Traditional unemployment benefits in Finland can be docked as soon as the recipient starts earning money. 

In the experiment, people were given the handout regardless of whether they were working or not, and were free to spend the money however they wished.  

Researchers said people who received the money ‘described their well-being more positively’ than those who did not. 

‘They also had a more positive perception of their cognitive abilities, i.e. memory, learning and ability to concentrate,’ researchers said.  

The guaranteed monthly payment also led to participants becoming more trusting of others and in the institutions of society. 

But Kari Hämäläinen of Finland’s VATT Institute of Economic Research said the basic income had only a ‘small’ effect on employment levels. 

The results suggest that for many people, ‘the problems related to finding employment are not related to bureaucracy or to financial incentives,’ he said. 

Creating such an income across the country would be expensive and ‘unsustainable’, he said, according to Bloomberg.   

The Helsinki government allocated €20million (£18million) to the two-year trial.  

2,000 unemployed people were given a €560 (£490) handout every month in a two-year experiment to see whether the system would work better than traditional benefits

The Paris-based Organisation for Economic Cooperation and Development (OECD) has previously claimed that a basic income programme in Finland would not be economically viable and could leave significant numbers of people worse off. 

Similar schemes have previously been trialled in Kenya, Canada, India and parts of the United States. 

In 2017, Swiss voters rejected a proposed universal basic income in a referendum after critics slammed the idea as rewarding the lazy and the feckless. 

Although the Finnish trial was the widest to be conducted in recent years in Europe, it was limited to participants who were already unemployed. 

The experiment began in 2017, but has taken on an extra significance because the coronavirus pandemic has prompted growing calls for a universal basic income. 

The global economic standstill is likely to cost tens of millions of jobs around the world as many countries suffer disastrous slumps in output. 

In addition, experts have suggested that people will be more able to follow public health advice if they have the security of a guaranteed income.       

Some countries have, in effect, introduced temporary basic incomes by sending people cheques as part of stimulus packages.  

Prior to the coronavirus crisis, Finnish trade unions called instead for employers to pay living wages that do not need to be subsidised by benefits.