Finlandia Morningfuture
Guiding The Case 19 September Sep 2018 0830 19 September 2018

Basic income – an experiment in Finland

In 2017, Finland began a two-year pilot project in which 2,000 unemployed people received 560 euros a month, without any obligations. The experiment is due to finish in December 2018, when the government will decide whether to stop the project or roll it out to the rest of the country.

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As the Italian government makes plans to introduce “basic income”, another European country is already experimenting with this form of welfare. That country is Finland and, in 2017, it began a two-year pilot project. After reports in the media of a desire to put an end to the scheme, the government in Helsinki confirmed it wanted to proceed with the project until December 2018, as planned.A decision will then be made over what steps to take next.

The basic income pilot project in Finland involves 2,000 unemployed citizens. Instead of receiving unemployment benefits, Kela - the Social Insurance Institution of Finland - is giving them an obligation-free monthly sum of 560 euros. The participants are between 25 and 58 years of age and are not required to fulfil specific requirements in exchange for the benefit: they do not need to be looking for work nor are they obliged to accept jobs the employment agency offers them.

Finnish supporters of universal basic income believe the measure could help unemployed people find temporary jobs by guaranteeing them a minimum income to live on and, as such, encouraging them to find a stable job instead of living on benefits and the state’s support. Another argument in favour of the scheme is that the minimum monthly allowance could help those facing employment hardship address any uncertainty around the present and their future. It also increases mobility of labour, by guaranteeing a minimum income in the time between leaving one job and starting another.

In a country that already has a very strong welfare culture (unemployment benefits, housing benefits, child benefits and so on), this new framework is not so much intended to fight poverty as it is aimed at reducing bureaucracy and limiting disincentives for the unemployed to find work. The logic is that, under the current subsidies, there is little to encourage the unemployed to find work as they would lose their subsidies, which, on average, are around half of an annual salary. They are even less likely to start their own business. The new basic income would still be granted once the subject found a new job or created their own, thus creating a less distorted system.

The programme began in January 2017 and, to date, has cost around 20 million euros. The end of December will see the end of the two-year experiment, at which point the centre-right government, run by Juha Sipila (head of the Centre Party of Finland), will decide whether to end the scheme or roll it out across the country. In any case, the first official results of the experiment will not come in until 2019. Kela, which supported the government in its decision-making process, has come up with various different versions of the system: a universal basic income for all adult citizens (excluding pensioners); a partial basic income for jobseekers between 25 and 63 years of age; negative income tax; forms of social dividend (with very tight controls) and universal credit. A basic income of 560 euros limited to the unemployed between 25 and 63 years of age is the one that would best balance the books.

In the latest general survey on universal basic income in Finland, carried out in the Autumn, 51% of those interviewed said that providing a basic partial income of 560 euros a month was a “good idea”, while only 21% believed it was not.

The government in Helsinki, however, has also begun a process to reform unemployment benefits, introducing what it calls the “activation model” in early 2018. The new model suspends unemployment benefits for those not demonstrating that they are making a reasonably active effort to seek work. And several have already wound up losing this benefit. This in a country that receives global recognition for its welfare system and has some of the lowest poverty and income inequality rates in the world.

Income redistribution measures are indeed a notable feature in this Scandinavian welfare state and they receive a great deal of public support there. In fact, around 75% of the population wants the state to further reduce income inequality. And, in the latest general survey on universal basic income in Finland, carried out in the Autumn, 51% of those interviewed said that providing a basic partial income of 560 euros a month was a “good idea”, while only 21% believed it was not. On the other hand, the government’s so-called “activation model” has been extremely unpopular with the Finns and not only with those who have had their benefits taken away. In a survey carried out by the national broadcaster, Yle, 56% of those asked opposed the measure, while just 36% supported it.

Of course, there is the issue of affordability. If basic income were rolled out across the country, it would naturally pose financing issues in the long term. Its critics are concerned that universal basic income would place further strain on citizens and companies that already face high tax bills. In any case, in 2019 the results will come in and the extent to which the system has worked and the impact it has had on the state coffers will become clearer. And there are, perhaps, lessons from which Italy can learn. Although, as Kela has already observed, no model can simply be transplanted from one country to another.

Across the world, there are few examples to match the Finnish experiment (except some tests carried out in the Netherlands and in Canada). It seems it may be a while yet before a verdict is reached.

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