America’s energized progressives have been scrambling lately to explain, among many other things, that the neo-socialist “Green New Deal” agenda many of them are embracing (or at least saying nice things about) doesn’t really propose to guarantee an income to those “unwilling to work.”
That impolitic language, like other extravagances that provoked discomfort among mainstream liberals and delight among conservative critics, was, it seems, merely an imprecision in a hastily assembled fact sheet on the hastily spreading GND movement spearheaded by New York’s rock star radical congresswoman, Alexandria Ocasio-Cortez — or something like that.
But while extravagance, going big, intellectually and fiscally, seems to be the very essence of the Green New Deal, a “universal basic income,” with no work requirement attached, is not itself an especially new or exotic idea. It has recently been tested, in Finland, and it’s worth noting that it has produced recently detailed “disappointing results.”
What’s a little odd at first glance is the nature of the disappointment involved. It seems Finnish policymakers had primarily hoped to prove that giving the unemployed money without asking a single thing of them in return would, well, cause more of the idle to get jobs. Didn’t turn out that way.
That Scandinavian designs in social and economic policy are complex and interesting is the theme of a piece elsewhere on this page today. Economist Tim Taylor shows that the vaunted “democratic socialism” model in Sweden, Norway, Denmark and Finland has in reality evolved into a system that is more capitalistic, friendlier to corporations and the affluent, and involves more nuanced trade-offs than its swelling throng of thinly informed American admirers sometimes imagine.
It’s true, though, that Nordic governments boldly intervene in their economies and societies, tweaking programs and policies in hopes of fine-tuning economic incentives and outcomes.
Earlier this month, Heikki Hiilamo, professor of social policy at the University of Helsinki, noted that “the basic income experiment in Finland has gained unprecedented attention around the world” as the first rigorous test of a concept that actually emerged in America and Canada “in the 1970s.”
The idea of governments providing everyone with a minimum income has deep historical roots and was championed half a century ago by leading conservative economic thinkers such as Milton Friedman and Frederich Hayek. They liked the simplicity of helping the poor through a direct, universal payment, the lack of administrative bureaucracy needed, and the absence of labor market distortions like those produced by minimum wages and other interventions.
But Hiilamo notes that in practice, “social policies on both sides of the Atlantic have been dominated by ‘workfare,’ where payment of benefits is made conditional … ” Typically, unemployment insurance provides temporary help so long as a person is out of work and looking for a job, while other assistance and subsidy and tax-credit programs require a recipient to seek training or accept even unpaid or low-wage work — and benefits generally phase out as earned income increases.
It’s long been understood that all such conditional and means-tested programs have disincentive problems. The very things that might help lift participants out of poverty in the long run — getting a job, or working more — can cost them benefits in the short run, at best reducing the immediate payoff for exertion.
But no-strings-attached “free money” programs threaten to be unaffordable, and they rub many taxpayers the wrong way.
Hiilamo explains that in Finland it was a “center-right bourgeois government” (not the “Left Alliance” or the “Greens”) that two years ago launched an experiment “to test if the carrot works better than the stick in encouraging the unemployed to accept new job offers and to seek income from entrepreneurial activities.”
A randomly selected group of 2,000 young and long-term unemployed Finns were chosen to receive 560 euros (roughly $700) per month, no questions asked — which would continue no matter how much their other income might increase. A demographically similar control group continued to face work/training mandates and benefit phase-outs as income rose.
The result, Hiilamo reports, is that “despite the fact that basic income recipients had clearly better incentives to work … [they] did not have more workdays or higher incomes than those in the control group . … There were no statistically significant differences between the groups. … The results show that among the young and the long-term unemployed other obstacles for work, such as outdated skills and health issues, are more important than financial incentives.”
Hiilamo even suggests the experiment’s one positive finding — that basic income recipients at least became more contented — may be unreliable.
A more hard-nosed American response to all this might marvel that free money did not reduce cheerful freeloaders’ willingness to work. But the carrot’s failure to outperform the stick is something of an unpleasant surprise for the Scandinavians. As Taylor details, these countries have had considerable success overall overcoming the disincentive effects of their lofty tax rates by spending generously on in-kind subsidy programs (child and elder care, etc.), which improve the financial rewards for work and entrepreneurship.
But apparently, even in small, homogenous nations with world-class levels of community spirit, the inability (or unwillingness) of some individuals to achieve self-reliance is daunting.
D.J. Tice is at Doug.Tice@startribune.com.