Finland Will Give Some Unemployed Citizens a Basic Income (theoutline.com)

Next month, the Finnish government is going to try something completely different to help its unemployed citizens: give them free money. From a report on The Outline: On Jan. 9, 2017, a randomly selected group of 2,000 unemployed citizens in Finland will receive a check for 560 euros (about $585) with no strings attached. They'll continue to receive that check every month for two years straight, even if they find a job or continue to remain unemployed. This is part of an experiment to see what happens to people's participation in the labor market after they've been guaranteed a certain amount of money.

Comments

I predict a lot of misunderstandings about BI

[serviscope_minor]

I suspect this thread like the last will have a lot of misunderstandings about BI.

The biggest misunderstanding for the general principle is that you take the existing system as-is and simply give everyone 10k per year or something. The numbers are clearly absurd so that causes people to dismiss it.

That's not how it works.

Basically what you do is modify (increase) the tax so in most cases, people get net more or less what they do now. That way the numbers come out more or less the same as they are now but in practice on the low end people do get extra money. Most people won't see much of a change.

Re:I predict a lot of misunderstandings about BI

[bluefoxlucid]

I encourage you to take a look at the spreadsheet labeled "WageTax", and the one labeled "EmploymentCost".

Single individual making $150,000 takes home $3,932 more per year; employer cost is roughly $9,300/year cheaper (assuming a low 18%-of-salary cost of employment, although it's usually 25%-40%). Buying power difference is estimated here as a 9% increase, although that's again a conservative estimate.

Single individual making $60,000 (about median) takes home $6,289 more per year; employer pays roughly $3,720 less. Buying power difference is about a 19% increase.

For married households, it's bigger, although the costs to the employer don't change (they drop by the same amount).

Taxes don't need to be raised on the highest income earners; they can be lowered on businesses, notably on payroll (tax taken based on how much wages you pay).

Re:I predict a lot of misunderstandings about BI

[Tx]

Considerable irony here, seeing as you're guilty of misunderstanding BI yourself. There are many different BI schemes proposed, of which what you describe is just one, so saying "that's not how it works" is clearly not very meaningful. The most practical BI schemes are the ones that are fiscally neutral, whereby existing welfare schemes are scrapped, and the budget used to fund a basic income instead. The Finland scheme is of that sort. It's not about modifying or increasing taxes to pay for it; the big change is the scrapping of the existing complex, bureaucratic, and expensive welfare systems in favour of a basic income payment. Tax is supposed to remain pretty much unchanged.

Re:I predict a lot of misunderstandings about BI

[Anonymous Coward]

I just want it. Stop dangling the carrot. Its a no brainer, give me $1000 a month or what it ever is, you can be almost certain that $1000 will flow directly back into the economy one way or another. The middle/working class its not like the 1%ers - we're not going to sit on all this money and remove it from the economy.

Re:I predict a lot of misunderstandings about BI

[MightyMartian]

A singular advantage in a BI scheme is that it can shrink down a government's welfare fraud investigation system, as many of the forms of fraud seen in most unemployment/welfare benefits systems all but disappear. Depending on how BI is implemented, there might still be some gaming of the system for child and/or marital benefits, but this is more an argument for a flat BI system. But, as you say, there are multiple BI schemes out there, and each one has to be analyzed to determine overall costs both in the form of expenditures and in governance costs.

Re:I predict a lot of misunderstandings about BI

[MightyMartian]

Rome used to give bread to the mob, because when they didn't, food riots would break out and then you'd see some real violence.

As it is, automation is going to mean a lot of jobs, even low skilled service jobs will disappear over the next half century. So you can buy into your Libertarian-fueled dystopia all you want, but back in the real world, where governments have to deal with real problems, UBI is going to happen, and you can't take your whole "the violence inherent in the system" crap and annoy your relatives with it.

Re: I predict a lot of misunderstandings about BI

[serviscope_minor]

Administration costs that wouldn't exist if you weren't doing it in the first place.

The existing system already has administrative costs. In fact one of the supposed benefits of BI is you vastly shrink the admin since you don't to deal with vetting and enforcement of myriad different schemes.

Not to mention the opportunity costs incurred by the people who provided the money

I really don't understand how you're failing to get the point. Those people are ALREADY providing the money. It's not like you don't currently pay taxes (unless you're the president elect). The point is the total tax income doesn't change. You just distribute it differently.

Re: I predict a lot of misunderstandings about BI

[king neckbeard]

Think of it as immunization against hoarding instincts by the mega-rich. They are acting irrationally, hiding so much money that their great-grandchildren probably couldn't even sanely spend it all, in tax havens and such. That hoarding behavior destroys the velocity of money, which stifles the economy as well as causing poverty and crime. Also, as stated by others, UBI is actually really simple in administration.

Re:I predict a lot of misunderstandings about BI

[T.E.D.]

Rome used to give bread to the mob, because when they didn't, food riots would break out and then you'd see some real violence.

That's largely true. However, the riots were more of any annoyance than anything.

The real driving force in Imperial Rome was the armies. Whenever an Emperor died (or an existing one sucked), generally the armies between themselves (often times by fighting each other) picked who would be the new Emperor. That effectively meant the army had to be kept happy at all costs, which in practice meant they kept getting raises, regardless of the rest of the Empire's ability to pay them. Eventually they had to start looting their own temples to pay the Armys' wages.

Incomplete economic experiment

[bluefoxlucid]

I've generally talked about a Universal Social Security (a type of UBI) in its potential to create broad market effects. That's not possible in these small experiments, so you get incomplete information.

Imagine being a landlord. If an average of 10% of your theoretical rent revenue is lost to evictions and empty units, what happens? You have 10 units that must rent for $250/month to make your profit margin, yet you face a risk of $25/month per unit. Well, to retain the same profit margin, you have to charge $275/month--and what if your tenants can only afford $260/month? You can't rent these units. Mind, your tenants will more likely only be able to stably afford $260/month, meaning they have $275/month but have a good chance of sometimes having only $260, and so that $25/month needs to be higher to cover that risk, and now you've got to charge them $285/month, and it's even worse now.

You can't profit in that market.

Now imagine we change things around. Instead of your tenants being underemployed, part-time workers who can lose hours, jobs, or welfare (unemployment insurance) with the season or just bad luck, they have a guaranteed income. Your tenants will have enough money for food, clothing, personal care, utilities, and a steady $260/month. You have 10 units with a base rent of $250/month to hit your viable profit margin, and now they're only facing a 4% risk. You can charge your tenants $260/month to cover this, and they're stable at that rent: you'll lose money to evictions and empty units at an amortized cost of $10/month, on average, thus still hitting your profit margin.

Do you think landlords will gradually test the waters, then start building out rental properties and attracting low-income tenants, when that stable income is going away in 2 years, or 5 years, or 10 years? It's going to take a while to get ROI.

Financial stabilization brings economic stabilization. When people can't go below a livable income, ever, for any reason, then the supply of a basic service can't be interrupted by a sudden collapse of the demand market. That's central for a market-driven welfare system like any form of basic income.

Re: Incomplete economic experiment

[ranton]

As soon as you give people more money, the upper classes will obtain it eventually.

Yes they will, right after the poor have been fed, housed, and given a reasonably comfortable life with that money. Sounds like this kind of wealth redistribution is a win win the way you describe it.

Re:Incomplete economic experiment

[Kiuas]

BI by any other definition is blatant inflation!

No, no it isn't. The whole point of BI is to simplify the already existing models of social security. The people in this experiment are currently on unemployment benefit which this will replace. The whole point about BI as others have pointed out is that it's created essentially as a negative income-tax bracket. That is, not everyone across the board will get X amount of euros more (which would be what you describe: a blatant increase in inflation and nothing more). The BI will be taxed away from people making above a a certain amount, thus making it a modified version of the already existing benefits we have here.

Have a look at this chart, it's one of the proposed models for basic income by the Finnish Green Party. Now, I might not entirely agree with the numbers therein but this gives you an idea of how these systems are imagined. The leftmost column is the basic income, same for all income groups. The column after that is income from work, and the column after that is taxes paid for on the income for work (41 % for those making less than 4200, and 49 % for those making above it). The column after that is net income after taxes, and the column after that is total income (net income + basic income), the rightmost column is the effective tax-rate. Now you can see that for the two lowest classes, even though the nominal taxrate is high (41) the effective tax-rate is indeed negative due to the basic income, and only 4 % on those who make 1500.

This model (and most UBI models floated around here) would actually lower taxes on middle and low income earners. The cost to moving to a model like this from the current system would actually be relatively small, as we already have a both heavily progressive taxation system as well as a wide-variety of different types of social benefits that this would replace,

The whole problem with the old-fashioned social-security systems currently in use here (in Finland) and elsewhere is that the amount of terms and conditions involved with them create a trap: people cannot for example accept part-time or gig jobs as that basically stops the for receiving the unemployment benefits for awhile and they have to re-apply for it, effectively meaning that taking say a 3-4 days job offer will often lose you more money when you factor in the loss of the unemployment benefit for a fixed amount after that.

This makes no sense, as it's trapping unemployed people into a situation where they're afraid to take part-time jobs because they cannot for certain know they'll be able to survive the interrim period between the part time job ending, and the umemployment benefit starting to run again.

This is one of the scenarios in which BI is meant to help and is actually what this experiment is meant to test: what they're looking at is whether or not allowing people the same amount of income as they're currently getting in the form of the current unemployment benefit but guaranteeing that they will not lose it if they take a part-time job offer, whether or not this increases the people's willingness to take up short/part-time contracts, knowing that their income will be secured and will not be disrupted by this.

Since the amount in this experiment is no different from the existing unemployment benefits, it cannot be argued that this will drive inflation up, as we've had hundreds of thousands of people receiving the exact same amount of money in the form of unemployment benefits for years, and that has not driven up inflation.

With automation taking more and more jobs systems like UBI are a necessity for the future: if we want to keep the economies running, if we want to maintain a consumer-base of people who have money to spend on goods and services in a future in which their labor will be either of very little or no value (because they've been made obsolete by machines), we must provi

Re:Finland

[MightyMartian]

UBI is not about replacing work, it's about a universal backstop so that if you cannot find work, or sufficient work for the basic necessities, you will be assured enough to pay for the roof, heat and food. Presumably, in a UBI world, high income earners would essentially give all the UBI back in the form of taxes.

Sooner or later UBI will have to happen. Automation is going to remake the working world as profoundly as the Industrial Revolution did.

Re:Finland

[__aaclcg7560]

Presumably, in a UBI world, high income earners would essentially give all the UBI back in the form of taxes.

George W. signed a $3,000 tax credit for adults to learn new job skills into law after 9/11. I used that tax credit to go back to school to learn computer programming and switched from video game testing to IT. Today I pay more in taxes than I did 15 years ago.

Re:Finland

[MightyMartian]

Taxation is the only way any civilization can function. Taxation has been a feature of civilization since the beginning of civilization. Some of the earliest examples of proto-writing were basically ledgers used by early civilizations to track taxes.

Get over it. You live in the society, you get to pay a share for that society's function. Your liberty stems from the right to elect representatives to the legislative assemblies that enact taxation legislation. Your liberty does not extend to you not having a moral and lawful duty to pay taxes. Fuck off with your sociopathic selfish "I'm being robbed" crap.