Unconditional Basic Income

Unconditional Basic Income – Finland tests a new form of welfare

Unconditional Basic Income

 

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Unconditional Basic Income

JUHA JARVINEN, an unemployed young father in a village near Jurva, in western Finland, brims with ideas for earning a living. He has just agreed to paint the roofs of two neighbours’ houses. His old business, making decorative window frames, went bust a few years ago. Having paid off debts, he recently registered another, to produce videos for clients.

Mr Jarvinen says that for six years he hoped to start a new business but it was impossible. The family got by on his wife’s wages as a nurse, plus unemployment and child benefits. He had a few job offers from local businesses, which are mainly in forestry, furniture and metalwork. But anything less than a permanent, well-paid post made no sense, since it would jeopardise his welfare payments. To re-enroll for benefits later would be painfully slow.

Mr Jarvinen’s luck turned in January, when he was picked at random from Finland’s unemployed (10% of the workforce) to take part in a two-year pilot study to see how getting a basic income, rather than jobless benefits, might affect incentives in the labour market. He gets €560 ($624) a month unconditionally, so he can add to his earnings without losing any of it.

If Mr Jarvinen is making progress, it is too soon to draw overall conclusions. Kela, Finland’s national welfare body, which runs the pilot, will not contact participants directly before 2019, lest that influences outcomes. Instead it monitors remotely, using national registers of family incomes, taxes paid and more. (Anonymised data will be made available to researchers.)

Some lessons are emerging. Olli Kangas, who helped to design the study and now runs it for Kela, says the process is far harder to implement than expected: “a nightmare”. He decries politicians who blow hot and cold, yet insist the study must be wrapped up before an election in 2019. He calls them “small boys with toy cars, who become bored and move on”. Finnish politics is intricate: the Centre party, Greens and a far-left party back the study. So does a libertarian wing of the conservatives, hoping to pare the welfare state. Sceptics include traditional conservatives, many Social Democrats and big unions.

Such unions, with (mostly male) members in permanent jobs in heavy industry, manage unemployment funds and do not want to lose control, so they dislike the idea of a basic income, says Mr Kangas. In contrast the idea appeals to those who represent part-time service staff, such as (mostly female) cleaners or retail workers. He says surveys show the wider public wavering: 70% like the idea of the grant in theory, but that drops to 35% when respondents are told that income taxes—already high—would have to rise to pay for it.

The study’s design faced constraints. The constitution ordains equality for all, so getting permission to afford some welfare recipients special treatment was difficult. That limitation, and a budget of only €20m (plus diverted welfare funds that would have otherwise gone to the recipients), restricted the sample size to just 2,000 people. Mr Kangas frets that might prove too small to be statistically robust. And it limits the questions the study can investigate.

He would like to try similar grants on those with low-income jobs, to see if such recipients choose to work less, for example. It would also have been instructive—if expensive and politically difficult—to give grants to residents of entire towns to see how local economies are affected. The timescale is another limitation. Kate McFarland, of the Basic Income Earth Network, which has promoted the idea of basic incomes since the 1980s, says a two-year study is too short to learn how the psychology of beneficiaries changes.

Whatever its flaws, the pilot is a good example of the Finnish penchant for social experiments. Participants will be followed for ten years to identify long-term effects. International interest in the pilot programme has been intense. This month television crews from South Korea and Sweden have been queuing up to see Mr Kangas; he regularly lectures abroad and advises others on similar studies. Just getting started counts as a success, he says. “This is trial and error, and the door is now open for better experiments.”

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This article appeared in the Finance and economics section of the print edition under the headline “Northern pilot”
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Unconditional Basic Income

Unconditional Basic Income

RV-Vijay

Author: RV-Vijay