What Finland wants to learn from its universal basic income experiment

'It is a symbol that we believe in even poor people’s capacity and we think that they are able to do things which are beneficial to them and their community,' according to two Finnish experts

Ben Chapman
Tuesday 01 August 2017 16:21
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What is Finland's universal basic income scheme?

An experiment with a form of universal basic income (UBI) in Finland has gained a huge amount of attention and sparked a new round of debate about the hotly debated topic.

In a recent article, two Finnish experts, Olli Kangas and Heikki Hiilamo, explained why the trial is being carried out and what they aim to learn from it.

Mr Kangas is director of government and community relations for Kela, the Social Insurance Institution of Finland and is one of the study’s designers, while Mr Hiilamo is a professor of social policy at the University of Helsinki and Kjell Nordstokke Professor at the VID Specialised University in Oslo.

According to the pair, the experiment is intended to demonstrate how to reform the Finnish social security system to “better correspond to changes in modern working life”.

The central question is to test whether the carrot works better than the stick in encouraging the unemployed to accept new jobs offers and to seek income from entrepreneurial activities, the two men say.

The Finnish scheme is the first of its kind in Europe. Participants receive €560 (£473) every month for two years from January 2017 and do not have to demonstrate that they are seeking employment.

They are not required to regularly report to authorities to prove they still need the payment - as is the case with standard unemployment benefits - and they can spend the money however they like.

Kangas and Hiilamo suggest that UBI has the potential to make social security “more participatory” and reduce disincentives to find work inherent in current welfare systems.

Many supporters of a basic income say that current benefits systems encourage people not to take on work unless it is well-paid, because they will lose their benefits.

Kangas and Hiilamo also say it will reduce bureaucracy and simplify the “overly complex benefit system”.

“The question of how to find meaningful employment for those in the margins of labour market has urgent relevance throughout the Western world," the men say.

Globalisation and technology are eliminating jobs and making work less secure, meaning an increasing number of people will be unable to make ends meet with earnings from employment, Kangas and Hiilamo argue.

They add: “Simultaneously, digitalisation creates new job opportunities without the protection of traditional employment contracts.

“In contrast to workfare policies, where claimants may face sanctions terminating all benefits, basic income is based on a positive view of individuals.

“It is a symbol that we believe in even poor people’s capacity and we think that they are able to do things which are beneficial to them and their community.

They conclude that the current experiment should be succeeded by further trials because more information is needed about basic income as well as the current benefits system.

“While the jury is out in Finland, authorities in France, Italy, Switzerland, Scotland, and the Netherlands have all recently announced an interest in running basic income pilots in the coming years,” they say.

Not everyone is impressed by the pilot scheme, however. In February, Finland’s biggest union said the experiment was unaffordable and would encourage some people to work less while driving up wages in undesirable professions.

“We think it takes social policy in the wrong direction,” Ilkka Kaukoranta, chief economist of the Central Organisation of Finnish Trade Unions (SAK), told Bloomberg.

The union, which represents almost 1 million members, or a fifth of the Finnish population, said the model being tested is, “impossibly expensive, since it would increase the government deficit by about 5 per cent” of gross domestic product.

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