Finland’s government is set to roll out an experiment in universal basic income, a policy under which all citizens receive an unconditional standardized amount of money each month. Through 2017, a random group of Finnish citizens will receive a monthly check equivalent to $600 USD.
I don’t necessarily think UBI is a bad policy idea, but I believe this experiment is not representative of what UBI should be.
Why is this experiment such a big deal? The modern idea of a UBI has been around since the ’60s when five pilot programs were tested in the United States. Since then, there have been a handful of studies across the globe, but none were rigorously tested, large enough or comprehensive enough to be taken too seriously. But Finland’s experiment could be, and that’s a big deal.
The Finnish government will randomly select 2,000 to 3,000 individuals ages 25-58 to receive the monthly income, which will have no means test and will be untaxed. These individuals will be selected from Finland’s unemployed population. The money will replace the unemployment benefits they receive, and they will continue to receive the UBI once they find a job. An additional 2,000 or so unemployed individuals will be monitored as a control group.
I realize we’re not in a perfect world where we can throw unlimited money into experiments, but 2,000 subjects is a painfully low number. With a population of more than 5.5 million, this experiment samples 0.04 percent of Finland’s citizens, hardly enough to draw substantial conclusions.
The people tested will all be unemployed, which is not a good measure of the effects of a UBI. This study is specifically intended to analyze the results of a UBI on unemployment rate, but because this study will be seen as “the UBI study” and will be cited in most UBI arguments in the future, we have to be aware of its limited scope.
For a more comprehensive study, we need to include students and the employed as well.
The money provided to the subjects is not a substantial amount. OK, I realize that as a student, saying $600 a month isn’t substantial is sacrilege. But let’s put that into context. The average monthly cost of living in the United States for a married couple with one child is around $4,600. The average monthly cost for a single person is roughly half that amount.
If I told you I’d give you $600 a month, is that enough to influence your decisions about what job to hold — or if you’ll even hold a job? When I’m not even covering half the living expenses for a single person, my guess is no, it won’t change your employment plans. I believe we won’t see people change their employment habits until we pay half of their living costs at minimum, which this study won’t reach for most people.
On top of that, the benefits in this experiment only last two years. Think for a moment about what you would do if I gave you $7,200 a year for the next two years. How would your plans change? You might quit that part-time job to focus on school, or you might just blow all the money. I’d wager none of you would drop out of college and give up pursuing a degree.
That’s why we also need to include students and the employed in a UBI study. Changing what you plan to study in school, leaving a job and choosing what job to accept while unemployed are all completely different. In fact, seeing how students and the employed change habits would be a more telling study. UBI-influenced unemployment changes cannot be determined by only studying the unemployed.
Psychologically, people don’t treat a windfall of cash the same as a prolonged guaranteed benefit. This experiment’s two-year span is nowhere near long enough to accurately gauge how a UBI changes people’s actions. While some people could delay their employment searches to pursue other ventures, the majority of people won’t change their plans, knowing the money won’t be around in two years.
I don’t think Finland’s experiment will be a total waste. We could still see some interesting data come out of it.
But it won’t make government or wealth distribution more efficient or let us see an accurate depiction of unemployment shifts. The small sample size and atrociously short time span make this hardly a reliable scientific study.
So in the future, be wary of anyone who cites this study as a reason for or against a UBI.
Jay Cranford is a 22-year-old finance senior from St. Simons Island, Georgia.