Helsinki prepares to give every citizen €800 per month and shut down its welfare bureaucracy.
This makes Finland’s move toward instituting a universal basic income (UBI)—often referred to by economists as a negative income tax—all the more refreshing. The negative income tax is often associated with the free-market economist Milton Friedman, who defended it with passion and flair in the 1970s.
This year, the Finnish government hopes to begin granting every adult citizen a monthly allowance of €800 (roughly $900). Whether rich or poor, each citizen will be free to use the money as he or she sees fit. The idea is that people are responsible for their actions. If someone decides to spend their €800 on vodka, that is their decision, and has nothing to do with the government. In return for the UBI, however, the public accepts the elimination of most welfare services. Currently, the Finnish government offers a variety of income-based assistance programs for everything from housing to children’s education to property insulation. Axing these programs should free up enough public resources to finance the UBI. The bureaucracy that currently governs welfare payments will disappear. There will no longer be any need to ask for government help, nor to fill out forms or wait for the competent authorities to examine each dossier to determine eligibility.
.. Remarkably, every major Finnish political party has signed on. The Left is cheered by the socialistic idea of government-assistance-for-all. The Right looks forward to the unprecedented drop in bureaucratic control over citizens, an unheard-of extension of freedom of choice, and an unconditional restitution of part of citizens’ taxes.
.. The Finnish government is expecting the negative income tax to have a beneficial effect on employment and growth. Regardless of age, the underqualified will be more willing to accept poorly paid jobs, knowing they will continue to receive their UBI. By the same token, employers will be more willing to hire and fire, as the UBI will act as a social damper. As national wealth figures always depend on the number of citizens in the labor market, Finland is hoping for a clear growth spurt. The allowance may also limit the influx of migrants if the government decides to grant the UBI only to citizens and legal residents.