Thursday, December 17, 2015

Finland is considering giving every citizen a basic income

The Finnish government is getting serious about the idea of a national basic income. It has commissioned KELA, the national social insurance provider, to study the concept, calculate the costs, and run an experiment in 2017 to judge the feasibility of rolling it out across the country. If, eventually, the government were to approve of such a plan, Finland could scrap all existing benefits and instead hand out a monthly stipend to everyone. According to some reports, the monthly payment could be €800 ($870).

Whereas several Dutch cities will introduce basic income next year and Switzerland is holding a referendum on the subject, there is strongest political and public support for the idea in Finland.

A poll commissioned by KELA showed that 69% support (link in Finnish) a basic income plan. Prime minister Juha Sipilä is in favor of the idea and he’s backed by most of the major political parties. “For me, a basic income means simplifying the social security system,” he says.

But for those outside Finland, the plan raises two obvious questions: Why is this a good idea, and how will it work?

It may sound counterintuitive, but the proposal is meant to tackle unemployment. Finland’s unemployment rate is at a 15-year high and a basic income would allow people to take on low-paying jobs without personal cost. At the moment, a temporary job results in lower welfare benefits, which can lead to an overall drop in income.

Previous experiments have shown that universal basic income can have a positive effect. Everyone in the Canadian town of Dauphin was given a stipend from 1974 to 1979, and though there was a drop in working hours, this was mainly because men spent more time in school and women took longer maternity leaves. Meanwhile, when thousands of unemployed people in Uganda were given unsupervised grants of twice their monthly income, working hours increased by 17% and earnings increased by 38%.

One of the major downsides, of course, is the cost of handing out money to so many people. Liisa Hyssälä, director general of KELA, has said that the plan will save the government millions. But, as Bloomberg calculated, giving €800 of basic income to the population of 5.4 million every month would cost €52.2 billion a year. Finland only plans to give the basic income to adults, not every citizen, but with around 4.9 million adults in Finland, this would still cost €46.7 billion per year. The government expects to have €49.1 billion in revenue in 2016.

Another serious consideration is that some people may be worse off under the plan. As a proposal hasn’t been published yet, it’s not yet known exactly who might lose out. But those who currently receive housing support or disability benefits could conceivably end up with less under national basic income, since the plan calls for scrapping existing benefits. And as national basic income would only give a monthly allowance to adults, a single mother of three could struggle to support herself compared to, for example, a neighbor with the same government support but no children and a part-time job.

Finally, this raises the question of whether it’s really fair to give a relatively better off individual the same amount of welfare as someone who’s truly struggling. Finland’s constitution insists that all citizens must be equal, though, of course, equality can be interpreted in many different ways. So far, there’s no definitive answer as to whether national basic income will create a more or less equal society.

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