Why Alaska’s Experience Shows Promise for Universal Basic Income
An approach to Income Inequality
Trials are underway within the U.S. and elsewhere to understand the effects of cash transfer programs like universal basic income to provide people with basic sustenance — where the government sends out a regular stipend to everyone regardless of income or employment status. Interest is rising following concerns that technological innovations would lead to massive unemployment as more work is automated.
Since 2017, Finland has been experimenting with a partial basic income program, a variant of universal basic income, given only to the unemployed. Alaska has had a royalty payment program since 1982 in which every resident, including children, gets $1,000 to $2,000 a year. (The U.S. state does not call it a universal basic income but it’s a similar cash transfer program.)
Finland’s basic income trial will end next year and for now the government has no plans to expand it pending results from the study. However, many in Finland reportedly did not like the idea of cash handouts without requiring work and some worried that young people would just stay home and play computer games.
“The main idea … was to see if people who are unemployed, if they would be able to keep their unemployment compensation, would they be more keen to look for work?” says Heikki Hiilamo, professor of social policy at the University of Helsinki in Finland.
But while Finland seems to have hit a roadblock, a study of Alaska’s oil royalty program shows a very different picture. “One of the concerns is … if you give people money for nothing, why should they work?” says Ioana Marinescu, a professor at the Penn School of Social Policy & Practice. “What we found was astonishing — which is that on average Alaskans work at the same rate as comparable states” such as Utah and Wyoming.
That’s because when people get extra cash, they tend to spend it, Marinescu said. Surrounding businesses, such as the neighborhood café or boutique, see increased sales as a result and then hire more employees to handle the boom. “The two put together end up seeing no effect on employment,” she said. “That’s very interesting to us to see that when this is applied on a big scale, … if a whole state would implement this, this can have interesting and important effects on the economy.”
