Finland's basic income trial falls flat
Finland's basic income trial falls flat
By Laurence Peter BBC News 23 April 2018
The Finnish government has decided not to expand a
limited trial in paying people a basic income, which has drawn much
international interest.
Currently 2,000 unemployed Finns are receiving a flat
monthly payment of €560 (£490; $685) as basic income.
"The eagerness of the government is evaporating.
They rejected extra funding [for it]," said Olli Kangas, one of the
experiment's designers.
Some see basic income as a way to get unemployed people
into temporary jobs.
The argument is that, if paid universally, basic income
would provide a guaranteed safety net. That would help to address insecurities
associated with the "gig" economy, where workers do not have staff
contracts.
Supporters say basic income would boost mobility in the
labour market as people would still have an income between jobs.
Finland's two-year pilot scheme started in January 2017,
making it the first European country to test an unconditional basic income. The
2,000 participants - all unemployed - were chosen randomly.
But it will not be extended after this year, as the
government is now examining other schemes for reforming the Finnish social
security system.
"I'm a little disappointed that the government
decided not to expand it," said Prof Kangas, a researcher at the Social
Insurance Institution (Kela), a Finnish government agency.
Speaking to the BBC from Turku, he said the government
had turned down Kela's request for €40-70m extra to fund basic income for a
group of employed Finns, instead of limiting the experiment to 2,000 unemployed
people.
Another Kela researcher, Miska Simanainen, said
"reforming the social security system is on the political agenda, but the
politicians are also discussing many other models of social security, rather
than just basic income".
Olli Kangas wanted the two-year trial to be expanded to
people in work
When Finland launched the experiment its unemployment
rate was 9.2% - higher than among its Nordic neighbours.
That, and the complexity of the Finnish social benefits
system, fuelled the calls for ambitious social security reforms, including the
basic income pilot.
The pilot's full results will not be released until late
2019.
OECD finds drawbacks
In February this year the influential OECD think tank
said a universal credit system, like that being introduced in the UK, would
work better than a basic income in Finland. Universal credit replaces several
benefit payments with a single monthly sum.
The study by the Organisation for Economic Co-operation
and Development said income tax would have to increase by nearly 30% to fund a
basic income. It also argued that basic income would increase income inequality
and raise Finland's poverty rate from 11.4% to 14.1%.
In contrast, the OECD said, universal credit would cut
the poverty rate to 9.7%, as well as reduce complexity in the benefits system.
Another reform option being considered by Finnish
politicians is a negative income tax, Prof Kangas said.
Under that scheme, people whose income fell below a
certain threshold would be exempt from income tax and would actually receive
payments from the tax office.
The challenge is to find a cost-effective system that
incentivises people to work, but that does not add to income inequality, Tuulia
Hakola-Uusitalo of the Finnish Finance Ministry told the BBC.
What do others say about basic income?
Some powerful billionaire entrepreneurs are keen on the
idea of universal basic income, recognising that job insecurity is inescapable
in an age of increasing automation.
Among them are Tesla and Space X CEO Elon Musk,
Facebook's Mark Zuckerberg and Virgin Group boss Richard Branson.
US venture capitalist Sam Altman, who runs start-up
funder Y Combinator, is organising a basic income experiment.
Y Combinator will select 3,000 individuals in two US
states and randomly assign 1,000 of them to receive $1,000 per month for three
to five years. Their use of the unconditional payments will be closely
monitored, and their spending compared with those who do not get the basic
income.
In 2016, Swiss voters overwhelmingly rejected a proposal
to introduce a guaranteed basic income for all.
Supporters of the proposal had suggested a monthly income
of 2,500 Swiss francs (£1,834; $2,558) for adults and also 625 Swiss francs for
each child.
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