As with the U.S. and other countries, Finland is experiencing a type of class warfare. Their economy isn’t doing well. Their unemployment rate is about 10 percent and taxpayers are screaming about social safety nets. So, the government decided to end them and replace them with a flat monthly payoff, for every man, woman and child, of 550 euros a month ($876).
The concept, called basic income, has been a popular source of debate among academics and economists for decades, though Finland would be the first nation in the European Union — and the first major nation anywhere — to actually implement the idea on a universal basis. The basic income was popularized by the economist Milton Friedman in the 1960s as a ‘negative income tax.’
The plan is risky. Finland’s economy is much worse than the U.S.’s and conservative politicians are calling for austerity instead of spending money they feel the country doesn’t have. In fact, the program would entail spending almost every dime the country has.
However, it would put money back into the economy, possibly giving it a much-needed boost both to businesses and the tax base.
Of course, you know how a plan like that would be received in the United States. Conservatives would argue that the measly paycheck would disincentivize people from working. Reality is something else. Social safety nets save lives and help the economy:
The War on Poverty succeeded in reducing the poverty rate by one-third, from 26 percent in 1967 to 16 percent in 2012
Far from serving a static underclass of the perpetually poor, safety net programs benefit the majority of Americans—70 percent—at some point in their lives
Safety net programs boost economic mobility, making poor children more likely to graduate from high school, attend college, and enter the middle class
Poverty costs the U.S. economy more than $500 billion every year, the result of low productivity, poor health, and high levels of crime and incarceration
There is also little evidence that the safety net reduces labor participation by much, if at all. Some policies—such as the Earned Income Tax Credit, or EITC—have been shown to increase work among recipients—as Rep. Ryan acknowledges. Where policies do negatively affect labor participation, the result is small and has a very limited impact on poverty levels. A comprehensive review of the literature reveals that the safety net supports social mobility and strengthens our economy.
Source: American Progress
If history is any indicator, and it usually is, Finland’s unconventional anti-poverty plan will help the economy, not hurt it, but it will be fun to watch conservatives squirm.
Featured image via FreeStockPhotos.