In the welfare office at City Hall in Utrecht, The Netherlands, Geoff and his partner, Talita, are getting ready to enroll in the city’s welfare program. (Both of them declined to give their last names.) Until recently, they ran a Thai restaurant in Utrecht. “These last four weeks have been the hardest of my life,” says Geoff. “[We have] no money. We just lost our business, and all our friends are gone.”
The welfare benefit in Utrecht provides a monthly payment of 900 euros (about $1,000) for an individual or 1,600 euros (about $1,800) for a family. What if the city offered that benefit without attaching any strings to it? To Geoff, it’s an intriguing idea. “How do I apply?”
At the start of 2016, Utrecht will begin a two-year experiment in turning welfare logic on its head. (As of the fall of 2015, the experiment was awaiting approval by the Dutch national government.) Today the provision of welfare in The Netherlands, as in most countries, is highly conditional: Claimants must prove that they’re looking for work. They must accept work when it’s offered to them. They can’t work and still claim a benefit. They must do “volunteer” work. And so on. In Utrecht, officials want to find out what would happen if they simply gave benefits-eligible people money—without conditions.
One term for that approach is “universal basic income,” or UBI. The idea of UBI originated on the political left, but it has also won support from conservatives such as the late Milton Friedman, a Nobel-winning economist. The theory behind UBI is that giving people a set minimum income will free them from “wage slavery” and enable them to go to school, care for a loved one—or give up their day jobs to pursue their dream jobs.
Although the Utrecht experiment will affect only people who already receive income from the state in the form of welfare payments, it may shed light on the potential virtues of the UBI model. “We know that the current system doesn’t really work,” says Nienke Horst, project manager for the experiment. “Maybe there’s a more positive way.”
The experiment, devised by scholars at Utrecht University, will divide 300 people who are currently on welfare into several groups. First there will be a control group that is subject to existing eligibility rules. Members of a second group will have no obligation to look for work, but any outside income that they earn will count against their benefit payment. Members of another group will get extra income for doing volunteer work. Members of yet another group will lose money if they don’t perform volunteer work. And those in one group—the UBI group—will have complete freedom to do whatever they want: Even if they get a job on their first day of receiving benefits, they can just pocket the extra income.
Paul de Beer, an economist at Amsterdam University, says that the UBI-inspired option offers a few big advantages—and not only for people on welfare. “The cost of administering and monitoring the social security system would be reduced drastically,” he says. “And it might contribute to a better-functioning labor market.” In particular, de Beer suggests, it might be possible to jettison minimum wage laws and other forms of labor market regulation. “Workers are still well protected because they can always fall back on their basic income,” he says.
Other Dutch cities are exploring UBI-based approaches to welfare policy. Officials in Tilburg says that their city will follow Utrecht’s lead, and similar projects are under consideration in Enschede, Groningen, Gouda, Maastricht, Nijmegen, and Wageningen.
In Germany, meanwhile, an experiment is under way that comes closer to the original UBI concept. It’s a private effort, and it’s not limited to people on welfare. In 2014, 19,000 UBI advocates created a pool of money via crowdfunding and then used a lottery to award 11 participants no-strings-attached monthly stipends of 1,000 euros (about $1,100). One recipient gave up his job in a call center so that he could study to become a teacher. Another used his newly won freedom to write a doctoral dissertation.
Back in Utrecht, Geoff and Talita mull over a question about what they would do if they received a UBI-style benefit. Would they slump onto the sofa and reach for their remote control? “I’d keep looking for work anyway, because 900 euros is not enough,” says Geoff. “And even if it was 1,000 euros more, I would still look for work, because [on welfare] you have nothing to do. I’ve been at home a month now. It’s disgusting!”
Read more stories by John Laurenson.