Episode 796: The Basic Income Experiment

Sep 22, 2017

The basic income is a hot topic of social policy. It's a steady payout to citizens. Liberals argue it provides support to struggling citizens with dignity and freedom. Libertarians like that it can be dispensed without an expensive, and controlling, bureaucracy. The rest argue that it's a giveaway that will inspire laziness.

In Finland, unemployment is 8.8 percent, and most of the time, citizens can't collect unemployment if they're making additional money, discouraging recipients from finding jobs. So the Finnish government has set up something unusual: a live experiment. A test to help settle the debate, or figure if it's even worth having. A test group of 2,000 unemployed Finns receive 560 euros each month from the government. No strings attached. For unemployed researcher Sanna Leskinen, that meant being able to apply for part time jobs and plan for the future. Avery Trufelman went to Finland to see how the experiment was working.

This week on the show: how does the basic income work in practice? And could it work in the U.S.?

Today's show is adapted from 99% Invisible, a podcast about the forces of design and architecture that shape our world.

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Copyright 2017 NPR. To see more, visit http://www.npr.org/.

ALEX GOLDMARK, HOST:

Hello, and welcome to PLANET MONEY. I'm Alex Goldmark. I'm the supervising producer here. And for as long as I have worked at PLANET MONEY, we've been getting one request pretty much more than all the others. In your emails and your tweets and your Facebook messages, which I really do read, there are these two words that keep coming up, that people really want us to talk about - basic income.

The idea of basic income is that the government should give citizens a check every month just for existing. The government gives the citizens this money - not enough to make everyone rich but enough so that they don't starve. It's an idea that, depending on who you talk to, can stop poverty, make the world more fair. But it could also make government smaller and more efficient and let citizens have more freedom and dignity because, the theory goes, a basic income could replace welfare and food stamps or any number of other social programs.

This is the kind of economic idea that is drumming up so much excitement and all of those emails because it has something for almost everyone. There are supporters on the left and on the right. And they all want to see this tried. But it's also one of those ideas that is just so radical that it seems like it can never really happen. So when our friends at the show 99% Invisible told us they were going to visit a country that is testing out basic income right now and that they had this great story about what it takes to get basic income to catch on, we said, yeah. We want to hear that story.

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GOLDMARK: If you don't know 99% Invisible, they are this great podcast about design. And in this episode, they bring us the clever design logic that is behind the most exciting basic-income experiment in the world right now. Host Roman Mars and reporter Avery Trufelman pick it up after this.

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ROMAN MARS: This is 99 percent invisible. I'm Roman Mars.

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MARS: People all over the world are flirting with an idea called basic income.

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UNIDENTIFIED MAN #1: Basic income.

UNIDENTIFIED MAN #2: Basic income.

UNIDENTIFIED WOMAN: Basic income for all...

UNIDENTIFIED MAN #3: The idea behind the basic income is that...

UNIDENTIFIED MAN #4: ...Each citizen receives a payment every month...

UNIDENTIFIED MAN #5: ...As a right without conditions and paid individually.

AVERY TRUFELMAN: Basic income, also known as universal basic income or unconditional basic income, or UBI.

MARS: That's producer Avery Trufelman.

MARS: Very, very roughly defined, universal basic income is this idea that a government would pay all their citizens. And everyone would get a flat sum of money every month to cover their basic needs, whether or not they have a job. And this money would be no strings attached, with no conditions. And this would hopefully remove any stigma from receiving it. It's free money. Basically, it's free money.

MARS: The logic behind it is this, a lot of jobs don't pay enough money for people to even make rent or buy groceries. You can work full time and still be below the poverty line. So it's easy to understand why people on the left would advocate for a guaranteed income.

TRUFELMAN: But also a version of this concept is popular in libertarian circles. They see basic income as a way to shrink the welfare state. For example, you could take away food stamps, Medicare and housing subsidies and replace all of it with one flat sum.

MARS: People in tech are also interested in the concept of basic income, and they feel a certain urgency about it. Robots are coming for our jobs, they say, and basic income is the best way for humans to maintain a decent lifestyle when our labor is increasingly obsolete.

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MARK ZUCKERBERG: Our generation is going to have to deal with tens of millions of jobs replaced by automation like self-driving cars and trucks. But we have the potential to do so much more than that.

TRUFELMAN: That's Mark Zuckerberg giving a commencement speech at Harvard. And what he's getting at is, in a world where jobs are scarce, everyone will need a financial cushion. And then, by his logic, if people don't have to worry about food and shelter, maybe they'd feel freer to innovate. Maybe they'd start a new company or go back to school.

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ZUCKERBERG: We should explore ideas like universal basic income to make sure that everyone has a cushion to try new ideas.

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MARS: Listen to that Harvard crowd. It is eating it up. Elon Musk has also advocated for UBI. And the startup incubator Y Combinator will soon begin its own pilot experiment right here in Oakland to study what happens when they give a group of people a basic income.

TRUFELMAN: It's actually an idea that's been around for a long time, and there are many different variations on it. But recently, there have been a number of experiments with forms of basic income happening around the world. A nonprofit is running an experiment with UBI in Kenya. And Ontario, Canada, just launched a test in three different cities. But this recent excitement about basic income experimentation is largely focused on Finland.

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UNIDENTIFIED REPORTER #1: Finland will be the first country in the world to pilot a basic income.

UNIDENTIFIED REPORTER #2: Finland's experiment with universal basic income.

UNIDENTIFIED REPORTER #3: Is it a great idea, or was it just Finnish financial folly?

MARS: In the beginning of 2017, the Finnish government began an experiment with a basic income.

TRUFELMAN: And this news about the Finland experiment was really exciting. Maybe we will learn what people will do if they can make money without work. Will they just hang out at home? Will society grind to a halt? How will people find meaning in their lives, and how will they evaluate success?

ROOPE MOKKA: And that's, of course, the big question. It's kind of the acid test of basic income that - will receiving basic income make people more or less active, whatever the activity is, whether it's just walking around or whether it's taking care of your neighborhood's kids or applying for work.

TRUFELMAN: This is Roope Mokka.

MOKKA: Founder of Demos Helsinki - were are a Helsinki-based think tank.

TRUFELMAN: And here's what I learned talking to Roope and other people in Finland about this experiment with basic income.

MOKKA: The talk about basic income, in Finland, started before the understanding of what the outcomes of automation would be for the employment market.

TRUFELMAN: The Finland experiment is not about robots, and it's not to see if people will stop working when they get free money. The experiment is to find out if giving people basic income will actually help them start working.

MARS: And this whole experiment is especially interesting to us here at 99PI, not just for what Finland is testing but how they are testing it. Finland is trying out a unique design-oriented way of thinking about government. Rather than just rolling out laws on a massive scale, they are trying to craft legislation in stages with user feedback, like a piece of design.

TRUFELMAN: Because every good design is made to fill a need or solve a problem. And this is the problem.

SANNA LESKINEN: I hate it, to be unemployed.

TRUFELMAN: Right now, in 2017, the unemployment rate in Finland is at 8.8 percent. And that's about double the U.S. unemployment rate. And that rate is worse in smaller Finnish cities like Joensuu.

LESKINEN: Joensuu is in eastern Finland. Eastern Finland has always been poorest parts of the country.

TRUFELMAN: This is Sanna Leskinen, resident of Joensuu, which is about an hour's drive away from the Russian border. She's 39, and she's been unemployed for a little over two years.

LESKINEN: Unemployment has been, here, bigger than, say, in the southern or western Finland because we are far from bigger cities where are more - much, much, much more job opportunities.

TRUFELMAN: Sanna has a master's in history, and she worked as a researcher until her project ran out of funding. In the U.S., depending on the state, you can generally collect unemployment for about half a year after losing a job. In Finland, you can collect unemployment for about two years. And then, there are different kinds of social assistances and allowances you can apply for if you still don't have a job.

MARS: But here's the catch - if you're collecting unemployment assistance in Finland, you generally cannot earn additional income or you risk losing those benefits. And then you'd have to reapply, which is a massive drag.

LESKINEN: It's really a really difficult situation.

TRUFELMAN: This actually happened with the person we hired to record Sanna. We asked what his rate was, and he said he couldn't charge us because he is also unemployed and would lose part of his allowance if he took on money from freelance work. So he did it for free. Thanks, Jaana (ph).

MARS: Basically, the government of Finland realized that something had to be done about this system - that they were accidentally disincentivizing citizens from getting small jobs or maybe even starting businesses of their own. And these are citizens who want to work, like Sanna.

LESKINEN: Being unemployed makes me feel, anyway, sort of - I don't know - unimportant. I mean, doing a job would make you feel like you're doing something for, you know, a purpose. It's something. But being unemployed, you're just hanging around and just not being very important to anything or anybody.

TRUFELMAN: So this welfare system clearly needs to be changed. And this could be done in a few different ways, like with an earned income tax credit. But first they wanted to try out something simpler and go from there.

MARS: And this is where we get to design. They wanted to design and test policy in a process very similar to the way designers come up with new products.

MOKKA: You would design policies that - you would think about policies as kind of design objects or design services. And that means that you could do iteration and tests.

TRUFELMAN: That's Roope Mokka again, founder of the think tank Demos Helsinki. And the prime minister's office turned to them.

MOKKA: So the prime minister's office approached us and asked that - how can we employ design thinking on a national level? You know, how can we do, like, governmental-level design thinking?

MARS: Design thinking - it goes like this. First, there is a challenge or a problem that must be solved.

TRUFELMAN: Then, designers express, test and cycle.

MARS: Express.

TRUFELMAN: That means designers come up with a few ideas and prototypes.

MARS: Test.

TRUFELMAN: They try those ideas out, maybe with a model or a sample.

MOKKA: Get feedback and understand what actually happens - what are the outcomes?

TRUFELMAN: And cycle.

MARS: Incorporate that feedback to make changes and revise the design. Then the process begins again and again and again. A couple years ago, this is how the Finnish prime minister decided he wanted to design legislation. So Demos helped establish an experimentation unit, which is an actual office of the Finnish prime minister.

MOKKA: The prime minister's office's experimentation unit is the first unit that was, like, designs - policies in the kind of design thinking, meaning of the word.

TRUFELMAN: There are other governments that are interested in experimentation. But here's what makes Finland different. They want to create prototypes of laws and then change and scale and update them dynamically as the results of their experiments show what's effective and what's not.

MARS: And in order to run these experiments Finland actually had to pass a law to ensure that they were not in violation of their constitution.

MOKKA: Because all the constitutions of democratic countries in the world - they say that you have to treat people equally.

MARS: And by definition, if you're running experiments, you're not treating people equally.

MOKKA: Because they - the people who are part of the experiments - are not being treated equally. So there needed to be a special law that outlined, OK, how do the experiments fit in the constitution that says that people need to be treated equally?

TRUFELMAN: And one of the first experiments the Finnish government decided to do was with basic income because the welfare office is extensive and complicated. And rather than rejiggering one part of it and changing a bunch of stuff around and reworking their normal operations, the basic income experiment just kind of chugs along on its own. The program is currently overseen by Marjukka Turunen, who works for a government institution called KELA.

MARJUKKA TURUNEN: KELA - so that's a social insurance institution here in Finland. So I was in charge of implementing this basic income experiment - or head of it - project leader.

TRUFELMAN: There's not a lot of stigma about welfare in Finland. Everyone goes to this office every now and then in life because there are 40 different kinds of benefits that Finns can receive, including student support, paternal care, maternal care, pension subsidies and, of course, unemployment.

MARS: So in January of 2017, KELA picked 2,000 unemployed Finns at random from all over the country.

TURUNEN: In this experiment, we have 2,000 people who are getting these basic income, 560 euros per month. And so they have to be between 25 to 58. So they are not students or young people. And they are not those kind of people who will fill out their pension age during this experiment. So this is kind of like the profile of these people.

MARS: Participants didn't volunteer for the experiment. KELA just told them that they would now be receiving 560 euros a month. The news came in a letter.

LESKINEN: I got a fat, fat mail. And this said that, OK, you have been chosen to be one in this basic income experiment. And I was like, oh, what's that?

TRUFELMAN: Sanna, the unemployed researcher in Joensuu, hadn't really thought about basic income until she read that big, fat packet that came in the mail which outlined the experiment for her. Five hundred sixty euros a month would be a little less than Sanna would get on unemployment. But she'd also be able to work and not worry about losing it.

LESKINEN: So I was happy about it because two years that experiment lasts. It's going to be that money every month. And I don't have to stress that much because I am a big stressor person. I stress a lot. And finding a job was very important to me. So now I'm able to, if I find a job - like, a part-time job - I could take it and not lose the support money that usually would if I wasn't part of this basic income experiment.

TRUFELMAN: Some of the participants have been talking about their basic income with the press. But Sanna has kept it a secret.

LESKINEN: I feel embarrassed about it because it feels like I have this advantage. So I haven't been very excited about spreading that information. And now as I'm participating in this, your podcast, it's like, OK. Not many people in Finland are probably hearing about this. So I can be open about it. I'm sorry to put it this way.

MARS: I'll have you know we are huge in Finland, Sanna.

TRUFELMAN: Sanna doesn't know anyone else involved in the study. And most people in Finland don't. Her friends get kind of starstruck when she tells them her secret.

LESKINEN: I get people I know, you know, off guard with that. So, oh, you're part of that. You're the first one I've ever met. So it's like - (laughter) it's kind of funny, really.

MARS: When you collect unemployment in Finland, you have to go to these job training meetings and check-ins every couple of months. But these 2,000 participants scattered around the country don't have to do anything at all to get this 560 euros every month. Even though they're part of this experiment, they also don't have to report how they spent it.

TRUFELMAN: And at the end of the experiment, KELA will look and see if this group of unemployed people who got basic income took on work and compare it with their control group, which is the rest of the unemployed people of Finland.

TURUNEN: One hundred and seventy-five thousand people who are in the same profile that these 2,000 people are - but they are not getting this basic income. So we are comparing these two groups of people in this two-year period and see what is happening to these - how are these people behaving when they get this basic income? And how are these people behaving not getting the basic income?

MARS: And then when they compare the results, basic income might - just might - get one step closer to becoming a reality.

TURUNEN: Well, if you play with the idea that this basic income would actually come a universal basic income here in Finland, which is kind of like the idea that - I don't actually believe that is going to happen.

TRUFELMAN: You don't think that'll happen.

TURUNEN: Well, I think that there are lots of people who are not thinking this is a good idea.

TRUFELMAN: Yes, the person currently overseeing the experiment for basic income believes it won't work.

TURUNEN: I think that it would be too dramatic. So we would wipe out all of these social security systems that we have been building up for decades and then just replace it with one benefit.

TRUFELMAN: Turunen imagines that not everyone would prefer a flat income rate. Some people do need more than one base sum. Like, what if you have children or parents with special needs who you have to take care of all day? In that case, you don't have the capacity to start picking up gig work. The basic income wouldn't be enough for you.

TURUNEN: And, of course, who would pay for it? So who would finance it?

TRUFELMAN: It's really hard to say how much basic income would actually cost the average taxpayer were it to be instituted. And we don't quite know how it would affect the economy or inflation rates. It's all dependent on a number of factors, and there's no exact math on this.

MOKKA: If someone truly claims that they know how much more expensive basic income would be, I think they're lying. It's such a systemic shift that if we decide to start paying everyone a lump sum of money, it will change the economy in such a way that the whole system changes. It's, like, once again, something we have to experiment.

TRUFELMAN: Roope says that, yes, basic income would save money by cutting back on bureaucracy. But it would probably still be expensive to fund.

MOKKA: But that's almost technical. If - you know, if you need money, you raise money. It's, like, what politicians do. They change the way budgets are arranged.

TRUFELMAN: If basic income makes citizens become more active and engaged, Roope has faith that governments will find a way to pay for it because an excited and activated population is generally good for the economy. He says that's why they have to test before anything else if basic income would really increase productivity and improve general well-being. At this point, they're testing to see if it'd be worth more investigation.

LESKINEN: I really, really, really hope that this will continue to spread out - that more people are involved.

MARS: This experiment has invigorated Sanna. Even though she gets slightly less money than she would on unemployment, she is free to do whatever she wants.

LESKINEN: I am trying to find a job. I am sending applications - and take, possibly, a part-time job.

TRUFELMAN: She feels like she's about to start a new chapter. And she's ready for what's next.

LESKINEN: A tranquility of mind - it brought that to me. And it sounds funny because the amount of money is not that big. But give people hope. Give people a chance to take a moment away from that stress and that panic of, do we survive?

TRUFELMAN: It's really important to keep in mind that Sanna is just one participant in a very small study. And basic income may have helped her search for part-time work. But when I spoke with her, she had yet to actually find employment.

MARS: And, also, you probably noted that this form of basic income is not universal basic income. If it were universal, it would be money for every citizen, employed or not. In this particular experiment, the basic income is only for unemployed people.

MOKKA: Yeah. I think what we're experimenting now would be called partial, basically, in (??). This is a limited experiment. I don't know how relevant it is because a lot of groups are missing.

TRUFELMAN: If we want to see what people do when they don't have to work anymore, Roope says they should next see what happens if basic income is given to people who are already employed - to see if they then quit their jobs?

MARS: Critics of the experiment also argue that 2,000 people is too small a sample size. Two Finnish economists published an op-ed in The New York Times called "Why Finland's Basic Income Experiment Isn't Working" and said it had the potential to incentivize people to accept low-paying and low-productivity jobs.

TRUFELMAN: It's an experiment that's far from perfect but it's not supposed to be a be all, end all. Ideally, it's a first draft.

MOKKA: We cannot just consider that, you know, let's give this amount to some thousands of people. And then we'll know for sure. It's going to be other experiments before we can find out how to how to renew social security.

TRUFELMAN: Basically, if this experiment is at all successful, or even if it's not, it should lead to another experiment and then another and then another.

MARS: And Finland isn't just designing experiments with basic income. There will be experiments for what languages to teach in schools, how to change child care - everything. According to their website, the experimentation office is working on 26 key projects nationally.

TRUFELMAN: And slowly, hopefully, Finland will use the design process to figure out if it's possible or worthwhile to try radically new ideas.

MARS: Express, test and cycle.

Will we ever get a basic income experiment right here in the U.S.? It turns out we already had one decades ago. Avery explains after the break.

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MARS: So a lot of people here in the United States are talking about universal basic income. And to me, it just seems like it's just not on the table at all. I just feel like there's something about the U.S. that makes it so it would never happen here - that basic income is basically something that could only be tested in Nordic welfare states.

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TRUFELMAN: The crazy thing about basic income is it's actually this very American idea. And it was first proposed - or at least kind of first mentioned by American Founding Father Thomas Paine. We've actually been down this road before as a nation here in the United States. We did some studies with basic income back in the '70s.

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RICHARD NIXON: I shall ask to change the framework of government itself.

MARS: That's Richard Nixon.

TRUFELMAN: Richard Nixon wanted to see if he could guarantee a family of four $1,600 a year which is equivalent to, like, $10,000 today.

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NIXON: Let us place a floor under the income of every family with children in America. Let us provide the means by which more can help themselves.

MARS: Wow (laughter).

TRUFELMAN: And so yeah. And then he decided to really try and do it. Tens of millions of dollars were budgeted so that more than 8,500 Americans could be involved in experiments all around the country. And there were a bunch of different ones. And they tested, like, different variations of basic income and different ideas around it.

MARS: And so why haven't I heard of these at all?

TRUFELMAN: Well, people started analyzing the results before all the data was in. And so there were, like, these rumors swirling around that people were dropping out of the workforce and just, like, enjoying this basic income. And it wasn't actually a statistically significant trend. It was just kind of a rumor...

MARS: Right.

TRUFELMAN: ...Which can sometimes be more powerful than a fact. And there were also all these reports of increased separation and divorce rates. And that was considered really scandalous and set off a lot of opposition. But then when the data was actually analyzed, it wasn't as large as it seemed. There weren't that many more divorces. There were a few. But this wasn't necessarily a bad thing.

MARS: Totally. Yeah.

TRUFELMAN: Yeah.

MARS: It just stopped the economic slavery of women in marriage.

TRUFELMAN: Exactly. Exactly.

MARS: That's not so bad (laughter).

TRUFELMAN: Yeah. But the American public didn't have the patience for nuance. And they were like, this will be the end of the family unit. So we can't tolerate it. And it's all just because, like, they started chatting about it before they had the numbers.

ELIZABETH RHODES: You know, it was kind of disregarded before we really had a chance to fully analyze the data.

TRUFELMAN: This is Elizabeth Rhodes. And she is the research director of a basic income study that is happening at Y Combinator research. And she is helping to launch a basic income experiment here in Oakland.

RHODES: We're doing a sort of a pre-pilot, a small group to sort of test some of the logistics, and preparing for a larger, randomized, controlled trial that we hope to launch next year.

TRUFELMAN: After that local test, they want to really expand it.

RHODES: We're actually looking to do two U.S. states and broader regions within two states.

TRUFELMAN: They have definitely learned from these early experiments to start small, expand slowly and to not promise too much because, you know, they want to wait for this experiment to fully play out.

RHODES: The study is going to run, you know, for several years. And so I don't expect to see, you know, changes overnight in any way. And so I think we really need to give it time.

TRUFELMAN: So in doing this research about basic income, I've come across a thousand polarizing think pieces that are either like, UBI is a great idea, and we should do this right now or like, this is a terrible idea, and we need to stop it. But, realistically, it's going to be years before we know what we can learn from this privatized American experiment or from the Finnish experiment, for that matter. No one has solid answers yet about what basic income would mean for the national tax code or inflation or unemployment rates or the economy or the robots or our happiness and well-being. And right now all we know is that different experimenters all around the world are trying to figure out some answers. But we just don't know them yet.

MARS: So this is going to end like all radio stories end, which is, time will tell.

TRUFELMAN: (Laughter).

MARS: Only time will tell.

TRUFELMAN: But for now, time will tell.

MARS: (Laughter) Well, thanks, Avery.

TRUFELMAN: Thanks, Roman.

GOLDMARK: Big thanks to Avery Trufelman and Roman Mars and Sharif Youssef and the whole crew at 99% Invisible. If you are not subscribed, take out your app and do it right now. They have beautiful stories, well-told about all kinds of design issues, origin stories of the world around you every week. You can send us an email with story ideas and suggestions. I do read them. Planetmoney@npr.org. We are on Facebook and Twitter. I'm Alex Goldmark. Thanks for listening. Transcript provided by NPR, Copyright NPR.