Money for Nothing? The unconditional basic income

Next spring will see the start of an interesting experiment that could potentially fundamentally change Germany’s social system. For three years, 120 people will receive an unconditional basic income of 1,200 euros per month. Regardless of whether they are in need or not.

With this long-term study, the German Institute for Economic Research, the association Mein Grundeinkommen and scientists from the Max Planck Institute for Research on Collective Goods and the University of Cologne want to investigate how this income affects people’s everyday lives. Among other things, hair samples will also be used to examine the stress levels of the test subjects.

Similar experiments have already taken place in Finland and the Canadian province of Ontario in recent years. However, in Finland it was only the unemployed who received money and in Canada the experiment was ended after the majorities in the regional parliament shifted. The Conservatives, who are now in power, stopped the project for cost reasons. In fact, the financing of an unconditional basic income is one of the biggest obstacles to its introduction. Moreover, does it make sense to simply give people money without asking for anything in return? Isn’t money for nothing a motivation killer that reduces motivation? A few things make me doubt this thesis.

So let’s go back to Canada. There was a similar experiment in Manitoba around forty years ago. This was also ended after a change of government. However, the findings to date are remarkable: This is because the basic income reduced healthcare costs, while mental and physical well-being were significantly improved. In view of the out-of-control costs of our healthcare system, this seems to me to be an interesting approach.

Incidentally, countries with a broad-based social system, basic security and a well-developed healthcare system have coped better with the pandemic in many areas than others.

A third reason why we should think about new social security models is the fundamental change in our working world. Automation and digitalization will cost many jobs in the coming years. The knowledge of this is already causing existential fears for many people – corona has only accelerated this development and brought it into the media spotlight. An unconditional basic income could at least partially alleviate such fears and make people more open to the new industrial world. Because new jobs will certainly be created. Overall, the world of work will become more dynamic.

The big question mark, however, is and remains the affordability. If you extrapolate the 1,200 euros in question, this means a total annual burden of around 1.2 trillion euros for the state. In other words, around 30 percent of total economic output. This would save the costs of current benefits such as unemployment benefit, Hartz IV, child benefit, parental benefit, social assistance, asylum seeker benefits, day care, student loans and so on, as well as the associated bureaucracy. Depending on which approach is chosen here, the idea may or may not be self-sustaining.

As there are no examples of such a model to date, many financial factors are still unknown. Perhaps there are as yet unknown side effects that help to reduce costs. It is also possible that the pendulum will swing in the other direction because more people will lie down in this social hammock, resulting in lower productivity and less revenue for the state.

The long-term study makes sense if only to obtain more valid data. The results of the study may also lead to options that make our social systems sustainable and crisis-proof even without such radical restructuring.