Switzerland has turned its back on a basic income scheme, in which the federal government would have given every resident a monthly payment – expected to be around 2500 Swiss Francs ($2,500) – "regardless of their income and assets".
Although voters rejected the move in a referendum at the weekend, Switzerland isn't the only country weighing up a basic-income experiment. Around 10,000 people in Finland could soon be paid €550 each month if the government goes ahead with a universal basic income pilot project.
A working group has advised the government to trial the tax-free wage, roughly equal to unemployment and welfare benefits that cover food, personal hygiene and clothing and other daily expenses, in 2017 for two years. A poll showed that the proposal has overwhelming support, with 69% of Finns agreeing with the plan.
The Netherlands and France are considering similar moves. A basic income experiment is due to start in the Dutch city of Utrecht in 2017. While some have criticized the plan, saying it will simply discourage the unemployed from looking for work, Nienke Horst, a project manager for the Utrecht city government, told Quartz that “we think that more people will be a little bit happier and find a job anyway”.
Why introduce a basic income?
Social benefit systems are complex and more often than not bureaucratic. Basic income proposals seek to simplify those expenses by doing away with complex benefit systems.
Finland, for example, has an incentive to consider the alternative. The country has an unemployment rate of roughly 9.5%. In 2014, the OECD Social Expenditure Database showed that Finland had the second highest public social expenditure as a percent of GDP after France.
Would it work?
The major criticism of a basic wage is its enormous cost. As Bloomberg pointed out, giving every Finn a basic monthly income would cost the government 52.2 billion euros a year, while the government’s projected revenue for 2016 is 49.1 billion euros. That number, however, can be misleading. Not every Finn is an adult of working age, and the rich, while entitled to the stipend, would still be subject to their regular taxation rates. The main incentive for a basic wage remains that a large portion of the cost would be offset by ending other costly social programmes.
History is also undecided
Historical evidence suggests that the scheme could be beneficial, or not.
The Canadian town of Dauphin experimented with a stipend programme from 1974 to 1979. It is true that a drop in working hours occurred, but there was also an increase in the time men spent in education and the amount of maternity leave women took.
A Ugandan scheme for the unemployed also resulted in an increase of workng hours by 17% while earnings increased by 38%.
In the United States, however, the 1968 negative tax experiment came to a different conclusion. A negative income tax could not provide an income benefit comparable to welfare and create incentive for work “as long as the median income remains within striking distance of the poverty line”. It should be noted that the American plan was different from Finland’s proposal in that it was only intended for the poor.
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