Finland’s Startling Strategy To End Poverty: Give Away $1,200 Per Month To Each Of Its Citizens

Finland has come up with a solution to end poverty and decrease unemployment rates. The concept called “national basic income” is assigned to replace social welfare benefits packages and pay its citizens 800 euros ($1,187) each month instead.

According to the Finnish Social Insurance Institution (Kela), the proposal was made with the intention of simplifying the social security system and solving unemployment issues. Every citizen, regardless of their income and social status, will receive a uniform sum of 800 euros, tax-free, each month.

Unemployment rate in Finland reached 8.7 percent in October. At this point, taking on low-paying temporary work would not help, since there is a decrease in welfare payments. This new policy would abolish many of Finland’s social benefit packages, in which people get welfare benefits based on their incomes. With the national basic income plan, every citizen, regardless of how much they make, will receive the same amount of money from the government. However, Finland has one major problem: the country is among the European Union’s most unstable economies. The most recent economic update from the finance ministry of Finland for autumn 2015 was rather bleak: “The Finnish economy is in a serious situation. GDP growth is close to zero. Unemployment is rising and unemployment spells are becoming longer. Even once the recession is over, growth will be painfully slow.”

The economic status of Finland is also expected to get worse in the coming years as a result of demographic shifts. Surprisingly, the country’s current population is aging faster than any other European Union country. With a growing number of retirees, Finland’s workforce will decrease, resulting in a less productive nation. Moreover, fewer people in the workforce means fewer people would pay income taxes.

If the government wants to give away 800 euros a month to a population of 5.4 million Finns, the government would have to spend 52.2 billion euros a year. How will Finland pay every citizen if the Finnish government’s projected 2016 revenue is 49.1 billion euros?

Kela will run a pilot phase before the national basic income is fully implemented. Each citizen will reportedly receive 550 euros a month for the trial stage, said Kela research department manager Ollie Kangas. The national basic income proposal is expected to be presented in November, 2016.

Although the concept looks promising in theory, critics have warned that the idea would only lessen people’s motivation to work, but those in favor are hoping to see similar positive results as those countries where a basic national income has been implemented.

In the 1970s, the Canadian town of Dauphin experimented with the idea and got largely positive results.

A research conducted by Kela revealed that almost 69 percent of the population likes the idea of a national basic income. Even Finnish Prime Minister Julia Sipila has expressed support for the implementation of the proposal: “For me, a basic income means simplifying the social security system.” The Dutch city of Utrecht is also considering introducing a basic income, but unlike Finland, the government would pay for welfare recipients. More than 250 jobless residents of the city will allegedly be granted a monthly allowance. Researchers will closely monitor the effect it has on employment.

In Switzerland, the concept has been turned down by majority of the Swiss Parliament in September, fearing a monthly subsidy would only kill people’s motivation to seek employment opportunities. However, an online poll revealed 49 percent of the Swiss population would likely vote in favor of the Popular Initiative for Unconditional Basic Income. A referendum on the issue is slated for 2016.

[Images via Shutterstock]

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