World First Look

Finland experiments with $600 a month stipend for jobless

A two-year trial will offer 2,000 unemployed citizens $600 a month to be spent as they see fit.

A crowd in Helsinki celebrates the centenary year of Finnish independence, which kicked off on New Year's Eve, Dec. 31, 2016.
Jussi Nukari/Lehtikuva via Reuters | Caption

Some 2,000 unemployed Finnish citizens will begin to receive a monthly stipend that is not tied to their employment status, marking one of the world’s first forays into universal basic income, which could have groundbreaking implications for how nations combat income inequality.

The randomly selected Finns will receive €560, or around $587, each month for the next two years – even if they find regular, steady jobs or rake in extra cash by participating in the gig economy. If the program proves successful, Finland may expand it to include all adults, believing the shift could mean long-term savings for the nation's welfare system, which remains complicated and expensive.

Several nations around the word have floated the idea of a universal basic income, but the waters remain mostly untested, making the investment seem shaky at best to many. But after decades of persistent issues with welfare around the world, including an inequality trap created by systems that discontinue benefits for those who take low-wage jobs, subsequently hampering incentives to work, many are starting to wonder if solutions lie in more radical attempts.

"Incidental earnings do not reduce the basic income, so working and ... self-employment are worthwhile no matter what," Marjukka Turunen, the head of the legal unit at KELA, the agency that controls Finland's social benefits system, told CNN Money.

Officials hope that such a system will tackle a troubling disincentive problem: when low-income citizens crave stability, they may be less likely to pursue work, knowing that higher paychecks that don’t actually lift them and their families out of poverty could lead to the cancellation of income subsidies and welfare benefits.

Finland isn’t the first country to consider basic income guarantees. Canada, Iceland, Uganda, and Brazil are all discussing pilot programs, while the city of Livorno in Italy rolled out a guaranteed program to its 100 poorest citizens last June. Switzerland also considered a blanket universal income for all citizens, but voters overwhelmingly denounced the more radical program with a referendum vote last year.

Still, the idea has become appealing even in economies that lean away from socialism, including in the United States. Y Combinator, a Silicon Valley accelerator program for startups, announced last May that it planned to unveil a pilot program in Oakland, Calif., which would include fewer than 100 people for a period between six months and a year, hoping to better understand what effects such systems could have on the economy.

"We hope basic income promotes freedom, and we want to see how people experience that freedom," the company announced in a blog post.

The idea may seem odd coming from a Silicon Valley company, rather than a government entity, but more tech companies and executives are starting to envision a future in which technology replaces low-wage jobs, but also allows the cost of living to drop.

Much remains to be seen about Finland’s pilot program, but success could lead officials to an expansion of benefits across the country.

"It's highly interesting to see how it makes people behave," Olli Kangas, from KELA, told the Associated Press. "Will this lead them to boldly experiment with different kinds of jobs? Or, as some critics claim, make them lazier with the knowledge of getting a basic income without doing anything?"