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Finland trials basic income for unemployed Finland trials basic income for unemployed
(about 17 hours later)
Finland has become the first country in Europe to pay its unemployed citizens a basic monthly income, amounting to €560 (£477/US$587), in a unique social experiment that is hoped to cut government red tape, reduce poverty and boost employment. Finland has become the first country in Europe to pay its unemployed citizens an unconditional monthly sum, in a social experiment that will be watched around the world amid gathering interest in the idea of a universal basic income.
Olli Kangas from the Finnish government agency KELA, which is responsible for the country’s social benefits, said on Monday that the two-year trial with 2,000 randomly picked citizens receiving unemployment benefits began on 1 January. Under the two-year, nationwide pilot scheme, which began on 1 January, 2,000 unemployed Finns aged 25 to 58 will receive a guaranteed sum of €560 (£475). The income will replace their existing social benefits and will be paid even if they find work.
Those chosen will receive €560 every month, with no reporting requirements on how they spend it. The amount will be deducted from any benefits they already receive. Kela, Finland’s social security body, said the trial aimed to cut red tape, poverty and above all unemployment, which stands in the Nordic country at 8.1%. The present system can discourage jobless people from working since even low earnings trigger a big cut in benefits.
The average private sector income in Finland is €3,500 per month, according to official data. “For someone receiving a basic income, there are no repercussions if they work a few days or a couple of weeks,” said Marjukka Turunen, of Kela’s legal affairs unit. “Working and self-employment are worthwhile no matter what.”
Kangas said the scheme’s idea was to abolish the “disincentive problem” among the unemployed. The government-backed scheme, which Kela hopes to expand in 2018, is the first national trial of an idea that has been circulating among economists and politicians ever since Thomas Paine proposed a basic capital grant for individuals in 1797.
The trial aimed to discouraged people’s fears “of losing out something”, he said, adding that the selected persons would continue to receive the €560 even after receiving a job. Attractive to the left because of its promise to lower poverty and to the right – including, in Finland, the populist Finns party, part of the ruling centre-right coalition – as a route to a leaner, less bureaucratic welfare system, the concept is steadily gaining traction as automation threatens jobs.
A jobless person may currently refuse a low-income or short-term job in the fear of having his financial benefits reduced drastically under Finland’s generous and complex social security system. A survey last year by Dalia Research found that 68% of people across all 28 EU member states would “definitely or probably” vote in favour of some form of universal basic income, also known as a citizens’ wage, granted to everyone with no means test or requirement to work.
“It’s highly interesting to see how it makes people behave,” Kangas said. “Will this lead them to boldly experiment with different kinds of jobs? Or, as some critics claim, make them lazier with the knowledge of getting a basic income without doing anything?” In a referendum last year 75% of Swiss voters rejected a basic income scheme, but that proposal – to give every adult an unconditional minimum monthly income of SFr2,500 (£1,980) – would have meant increasing welfare spending from 19.4% to around a third of the country’s GDP, and did not have government backing.
The unemployment rate of Finland, a nation of 5.5 million, stood at 8.1% in November with some 213,000 people without a job — unchanged from the previous year. Basic income experiments are also due to take place this year in several cities in the Netherlands, including Utrecht, Tilburg, Nijmegen, Wageningen and Groningen. In Utrecht’s version, called Know What Works, several test groups will get a basic monthly income of €970 under slightly different conditions.
The scheme is part of the measures by the centre-right government of Finland’s prime minister, Juha Sipila, to tackle unemployment. One will get the sum as unemployment benefit, with an obligation to seek work – and sanctions – attached. Another will get it unconditionally, whether or not they seek work. A third will get an extra €125 if they volunteer for community service. Another will get the extra €125 but will have to give it back if they do volunteer.
Kangas said the basic income experiment may be expanded later to other low-income groups such as freelancers, small-scale entrepreneurs and part-time workers. The Italian city of Livorno began giving a guaranteed basic income of just over €500 a month to the city’s 100 poorest families last June, and expanded the scheme to take in a further 100 families on 1 January. Ragusa and Naples are considering similar trials.
In Canada, Ontario is set to launch a C$25m (£15m) basic income pilot project this spring. In Scotland, local councils in Fife and Glasgow are looking into trial schemes that could launch in 2017, which would make them the first parts of the UK to experiment with universal basic income.
The Green party in the UK has supported the idea of a citizen’s wage, partly owing to rapidly increasing job insecurity and the rise of the gig economy, and partly owing to the massive costs associated with administering increasingly complex and unwieldy welfare systems.
Proponents of universal basic income argue that it can be more efficient and more equitable than traditional welfare systems, and will also protect people better as economies change through automation.
“Credible estimates suggest it will be technically possible to automate between a quarter and a third of all current jobs in the western world within 20 years,” Robert Skidelsky, professor of political economy at the University of Warwick, said in a paper last year.
He said a universal basic income that grew in line with productivity “would ensure the benefits of automation were shared by the many, not just the few.”
Economists Howard Reed and Stewart Lansley saw further benefits in a report for Compass last year. As well as a solid income base in an age of increasing economic and social insecurity, a universal basic income would offer “financial independence and freedom of choice for individuals between work and leisure, education and caring, while recognising the huge value of unpaid work,” they said.
Opponents, including the Conservative government which rejected a call from the Scottish National party last year for a basic income scheme, see it as unaffordable and unlikely to incentivise people to find work.