'''finlands basic income experiment'''
THERE must be a catch, right? A system in which every citizen of a country receives a guaranteed basic wage in order to meet their living costs. There is no income testing, no lengthy application process, needless bureaucracy is slashed, and you can earn as much — or as little — as you like on top of this, without adjustments or penalties. It sounds like utopia. This idea of a “universal basic income” isn’t new — having been floated by various economists and politicians across the world for decades. But as of next year, Finland are biting the bullet and will become the first country to trial such a scheme.
A number of Finns — in the ballpark of 10,000 — will be given a set living wage of around €550 ($AU850) a month for two years, in an attempt to balance the shortcomings of the country’s current welfare system. If the trial is successful, it could be implemented across the country. The Finnish Government has reserved €20 million (AUS$31m) for the experiment, as well as funds from existing social transfer benefits. A survey held last September by the Finnish Social Insurance Institution (Kela) suggests they have the public on their side, with 69 per cent supporting the idea of a universal basic income. Finland’s finance minister, Alexander Stubb, has expressed his support for the basic income pilot. Picture: Henrik Kettunen/Bloomberg Finland’s finance minister, Alexander Stubb, has expressed his support for the basic income pilot. Picture: Henrik Kettunen/BloombergSource:Supplied Olli Kangas, Research Director at Kela, is designing and running the experiment. He explains that the idea itself came from the country’s new Government, in place since last May. “Through this experiment, the Government wants to explore how to diminish, and possibly abolish, the work disincentives and income traps which it thinks weakens the present social transfer system in Finland,” Kangas explains.
The country’s current social security system features a number of income-tested benefits such as housing allowance, labour market subsidy, and social assistance, which are all paid and weighed separately. This throws up a number of serious roadblocks when it comes to transitioning to work. “The joint effect of these layered benefits is that if a person who is receiving these benefits finds a job, his or her effective marginal tax rate becomes very high — 80 to 100 per cent — and consequently, work does not necessarily pay,” Kangas notes.
“The Government also refers to ‘bureaucratic traps’: situations where the claimants lose their benefits for certain periods of time, or have too-long waiting periods when shifting between employment and social security which makes the claimants hesitant to accept short-term job offers.” Kangas cites further difficulties in combining social benefits and short-term employment, pointing out that recent changes in the labour market: zero hour contracts, new forms of self-employment, and what he refers to as “precarious work”, were all reasons for the Government’s initiative. As with any economic overhaul, there are detractors.
“The most violent opposition comes from the export-oriented, male-dominated trade unions and the Social democratic party”, Kangas explains, “as well as representatives of the Finnish Employer Federation — big industry.” Despite these objections, the trial is going ahead — and many governments around the world will be watching with keen interest; Kangas points out that in the Netherlands they are currently planning similar local experiments. Although he devised and will oversee the trial, Kangas himself is neutral in regards to the politics behind such a move. “I do not have any agenda either for or against basic income,” he explains. Like any social scientist, he will be studying the data set before taking a side. “After the experiment, I hopefully can answer the question: either it is a good idea or it is a bad idea.” It is certainly an interesting idea. If the experiment is successful and spreads further afield, it may just kickstart a social revolution.