Lessons for Romania? Finland’s free money experiment failed as it did not spur unemployed people to work despite making them happier

Sorin Melenciuc 08/02/2019 | 15:12

Finland’s free basic income experiment failed as did not spur its unemployed recipients to work more to supplement their income as hoped, according to the government. However, the experiment did help people to feel happier, Finnish researchers said on Friday.

Rich countries generally can afford to pay high social benefits, and the system of social welfare is expanding rather than declining.

Finland has made one step further and experimented a new concept: paying an unconditional income to all citizens, whether or not they’re in work.

The Finnish government selected 2,000 unemployed people who received a guaranteed sum, or ‘basic income’, of EUR 560 a month for two years.

But the results were disappointing. Finland’s minister of health and social affairs Pirkko Mattila said the impact on employment of the monthly pay cheque of EUR 560 “seems to have been minor on the grounds of the first trial year,” according to Reuters.

However, those in the trial reported they were happier and healthier than the control group.

“The basic income recipients of the test group reported better wellbeing in every way in comparison with the comparison group,” chief researcher Olli Kangas said.

Finland’s experiment is a variation on the idea of a universal basic income, which owes its roots to Thomas Paine, who in 1797 proposed paying all 21-year-olds a grant funded through a tax on landowners.

Some economists even propose now to expand worldwide the universal basic income.

‘We propose a minimum income for everyone as a fixed proportion of gross national income – Universal Basic Share (UBS). The scheme can thereby be introduced in all countries, poor as well as wealthy. It would function in India equally well as in Norway,’ says Kalle Moene, director of the Centre for the Study of Equality, Social Organization and Performance at the University of Oslo (ESOP), and his Indian-American colleague, Debraj Ray, who is affiliated to the Centre, quoted by Phys.org.

But this social welfare system never gained much political traction in Romania, where social benefits’ receivers are considered by many to be lazy, unwilling to work and a burden for the tax payers.

The number of Romanians receiving guaranteed minimum income (GMI) dropped by 14.4 percent between December 2017 and December 2018, to 188,438, as rapid economic growth creates jobs and reduces unemployment.

But low social benefits could be the main reason for the limited number of people applying for state social welfare in Romania.

The amounts paid to Romanian GMI receivers are very low even by local standards. The average sum paid in December to GMI receivers was RON 269 (EUR 58), representing a small fraction of the average monthly income of the Romanian employees – RON 2,792 (EUR 600) in November 2018, according to official data.

Tthe failure of the Finnish experiment could comfort those who think that giving free money to the poor is not a good option – and Romania has still many poor people.

BR Magazine | Latest Issue

Download PDF: Business Review Magazine June 2024 Issue

The June 2024 issue of Business Review Magazine is now available in digital format, featuring the main cover story titled “VTEX secures landmark partnership with major German retailer”. To
Sorin Melenciuc | 06/06/2024 | 16:28
Advertisement Advertisement
Close ×

We use cookies for keeping our website reliable and secure, personalising content and ads, providing social media features and to analyse how our website is used.

Accept & continue