Finland began a Universal Basic Income (UBI) pilot at the start of 2017. It is believed to be a huge step forward in a search for funding it in New Zealand too.
According to many supporters of UBI schemes, the introduction of a UBI can encourage labour market participation, reduce poverty and curb government expenditure by removing unnecessary red-tape and administration costs related to multiple benefit programmes.
Will people stop working?
The 41st Finance Minister Steven Joyce, naturally no fan of the idea, said that it would incentivize young people not to work or study.
Former National Finance Minister Bill English agreed – a universal basic income “would be very expensive and likely discourage work”.
The UBI concept has decades of research behind it, but just a handful of real-world trials
The largest trial of a UBI-like scheme ever took place in Canada in the 1970s. It’s known as the Manitoba Basic Annual Income Experiment, or “Mincome”.
One study looking at that experiment found that labour market participation – people working – fell by 11.3 percent. But the people who left work said they were doing things like caring for family members and investing in education.
However, Chief economist at Infometrics Stroombergen argues there won’t be any more people not working or studying than there are now.
Time for universal basic income is here – “You’ll get a few loafers, but you get that now. You have to have some faith in people – there are not going to be too many people who are happy to live on that amount of money,” he said.
The cost to implement this policy is estimated to be around $2.4 billion. Rather than cut existing programs for youth, it is proposed to fund the UBI from the National Party’s $2 billion Family Incomes Package, which focuses on helping low-income families with children and steep housing costs get ahead through four main benefits:
Nonetheless, the Finnish UBI can provide pivotal guidance to New Zealand researchers and policymakers. The trial has the potential to shed light on one of the key areas, namely, whether or not a (specific) UBI programme model (dis) incentivizes employment. Unfortunately, the first results will be not available before 2019. The transfer of findings from New Zealand to Finland will, however, warrant caution as the outcomes are likely to be affected by local culture, differences in the labour market environment, and existing public policy arrangements. More or less we can state that a Universal Basic income has arrived and the interesting part is the innovative way to cover for it, made it available in New Zealand.