Finland begins universal basic income experiment

4 Jan 17

Finland has begun delivering unconditional payments to unemployed citizens to test whether providing a universal basic income can help boost employment.

 

For the next two years, Finland’s social security agency Kela will deliver monthly payments of €560 ($584) to 2,000 randomly selected unemployed residents between the ages of 25 and 58.

The pilot will serve as the latest experiment in universal basic income (UBI) – an idea that is increasingly gaining traction as automation and technology threaten to displace much of the workforce into the future.

However, amid growing support UBI also faces much criticism, with many arguing it would be unfeasibly expensive and fail to achieve the expected benefits.

Marjukka Turunen, head of Kela’s legal affairs unit, said the scheme will cut red tape, encourage residents to seek employment and remove their disincentives to work.

Unlike other similar schemes, Kela’s will continue payments even if the beneficiary finds work: “There are no repercussions if they work a few days or a couple of weeks,” she said. “Incidental earnings do not reduce the basic income, so working and self-employment are worthwhile no matter what.”

The payments will replace the beneficiaries’ current benefits, which can often be reduced so significantly when a person starts working that they do not gain any additional earnings from getting a job.

Turunen added that the system will also reduce bureaucracy for recipients, who are not required to report the hours worked or to “fill in various forms”, and help them plan their finances and provide security in increasingly uncertain and unpredictable world of work.

Kela’s research team has recommended expanding the programme, which the department dubbed the “first step to modernising the social security system”, in 2018 to include people with low incomes and perhaps people under 25.

The current scheme, which will see the Finnish government pay out €26.9m ($28.1m) over the next two years, enjoys wide support in Finland. A 2015 survey carried out by Kela found that 70% of respondents were “favourably disposed” to the idea of UBI, and believe it should be set at around €1,000 ($1,043) per month. Average monthly earnings in Finland are over €3,000 ($3,130).

UBI is championed by many worldwide too, with pilot schemes currently in preparation or underway in the Netherlands, Italy and Canada. Two Scottish councils, Fife and Glasgow, are also considering launching the first UBI trials in the UK, and the concept has already been trailed on a smaller scale in Namibia and India.

The idea’s proponents argue that UBI could reinvent social security systems that are often lambasted for their complexity, waste and punitive nature. They believe it would provide much-needed security, freedom and choice and prepare the world for a technological revolution likely to change many jobs, and the nature of work, for good.

A recent UK study by economists Howard Reed and Stewart Lansley for think-tank Compass tested the feasibility of UBI for the country’s poorest.

One of its models – a partial UBI scheme that maintains the existing means-tested benefits system combined with an unconditional income element – would cost around £8.2bn ($10.1bn) per year and achieve substantial reductions in, for example, child poverty (by 45%).

The study argued this is relatively easy to achieve fiscally. A more generous scheme, to the tune of £15-20bn ($18-25bn) per year, could even be found through tax increases or a targeted UBI social wealth fund.

In America, however, Robert Greenstein, founder and president of think-tank the Centre on Budget and Policy Priorities, disagrees that a true UBI scheme, for all Americans, could be funded “mainly or entirely from new taxes”.

In a post on the CBPP’s website last year, he argued the long-term costs would equal tens of trillions, when the country is already short on the revenues needed for existing social security, infrastructure, education, childcare and more.

Others believe the system would fall short of expectations, and instead could discourage working and even increase inequality by failing to take into account the varying needs of different groups.

Last year, Swiss voters were shown to be unconvinced. A proposal to introduce UBI in the country was overwhelmingly put down, with 78% of voters rejecting the idea in a referendum

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