April 2, 2016


A Basic Income Is Smarter Than a Minimum Wage (Leonid Bershidsky, 4/01/16, Bloomberg View)

 It's dawning on politicians in some countries that tying basic subsistence to work through the minimum wage is not the most logical way to achieve social justice.

These countries are experimenting with a universal basic income that will be paid to all, whether they work or not. A Finnish government working group tasked with trying out the scheme proposed parameters for a pilot project on Wednesday: Up to 10,000 people are to start receiving 550 euros ($627) per month next year. Finland's economy is struggling -- it's still smaller than it was in 2008 -- but the government calculates it can provide a basic, secure income to its entire population by cutting up the current benefit system.

Other countries looking at the scheme include Canada, where the province of Ontario is starting a pilot project this year, New Zealand, where the second biggest party in parliament is interested in adopting the idea as part of its platform, and the Netherlands, where four cities are piloting basic income programs. In June, Switzerland will hold a referendum on universal basic income, but the chances of success there are rather slim.

The idea is radical and it sounds like money for nothing to many people, but it has more of a libertarian flavor than a Communist one. By guaranteeing basic survival, a government provides a service as necessary as, say, policing the streets or fighting off foreign enemies. At the same time, once this service is provided, the government can get out of trying to regulate the labor market: Its goal of keeping people fed and clothed is already achieved.  The Finnish government believes the basic income scheme will encourage the currently unemployed to take part-time jobs, which they avoided for fear of losing their benefits.

Many people may agree to work for less than the current minimum wage, and on more flexible terms, if they're supplementing a guaranteed income, not scrambling to avoid having to beg for food. There should be little incentive not to work at all: The amount proposed in Finland hardly provides a comfortable existence. And  Finland's ability to earmark the money from existing programs shows many critics' fears that universal basic income may require impossibly high taxes may be misplaced. 

Posted by at April 2, 2016 7:51 AM