Finland’s Basic Income Trial Ends — But New Ideas Emerge

I previously discussed the Finland’s basic income experiment, which was one of several being conducted across the world. After a little over a year, the Finnish trial — which involved 2,000 unemployed citizens receiving a flat monthly payment of $685 — has come to an abrupt close following the government’s lack of interest. As the BBC reported:

 

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.

It is unfortunate that a government otherwise open to bold new solutions to social problems has opted out of taking this trial to the next level.

Yet this doesn’t mean the door has closed on other economic solutions:

Another reform option being considered by Finnish politicians is a negative income tax, Prof Kangas said.

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.

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.

As long as governments and civil society groups remain open to at least trying other  ideas, I remain hopeful that humanity will be prepared for the very likely possibility of automation-induced mass joblessness and underemployment in the near future.

What are your thoughts?

 

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