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Finland’s basic income trial falls flat

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The Finnish government has decided not to expand a limited trial in paying people a basic income, which has drawn much international interest.

Currently 2,000 unemployed Finns are receiving a flat monthly payment of €560 (£490; $685) as basic income.

“The eagerness of the government is evaporating. They rejected extra funding [for it],” said Olli Kangas, one of the experiment’s designers.

Some see basic income as a way to get unemployed people into temporary jobs.

The argument is that, if paid universally, basic income would provide a guaranteed safety net. That would help to address insecurities associated with the “gig” economy, where workers do not have staff contracts.

Supporters say basic income would boost mobility in the labour market as people would still have an income between jobs.

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.

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Another Kela researcher, Miska Simanainen, said “reforming the social security system is on the political agenda, but the politicians are also discussing many other models of social security, rather than just basic income”.

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Olli Kangas wanted the two-year trial to be expanded to people in work

When Finland launched the experiment its unemployment rate was 9.2% – higher than among its Nordic neighbours.

That, and the complexity of the Finnish social benefits system, fuelled the calls for ambitious social security reforms, including the basic income pilot.

The pilot’s full results will not be released until late 2019.

OECD finds drawbacks

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.

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

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.

What do others say about basic income?

Some powerful billionaire entrepreneurs are keen on the idea of universal basic income, recognising that job insecurity is inescapable in an age of increasing automation.

Among them are Tesla and Space X CEO Elon Musk, Facebook’s Mark Zuckerberg and Virgin Group boss Richard Branson.

US venture capitalist Sam Altman, who runs start-up funder Y Combinator, is organising a basic income experiment.

Y Combinator will select 3,000 individuals in two US states and randomly assign 1,000 of them to receive $1,000 per month for three to five years. Their use of the unconditional payments will be closely monitored, and their spending compared with those who do not get the basic income.

In 2016, Swiss voters overwhelmingly rejected a proposal to introduce a guaranteed basic income for all.

Supporters of the proposal had suggested a monthly income of 2,500 Swiss francs (£1,834; $2,558) for adults and also 625 Swiss francs for each child.

News credit : Bbc