Finland launches Europe’s first basic income experiment

Finland has launched a basic income experiment – the first in Europe. From 1 January, a random sample of Finland’s unemployed will receive a monthly basic income of €560 (£477) for 2 years, even if they do paid work during that time.

The purpose of the experiment is to see if a basic income can help to boost employment.

market in HelsinkiThe experiment may extend in 2018 to include groups on small incomes, such as freelancers, small-scale entrepreneurs, and part-time workers. Image: Market in Helsinki – pixabay 814718

It is the first of a series of experiments where Finland will be testing various basic income solutions, says the Social Insurance Institution of Finland (Kela), the government agency in charge of settling benefits under Finland’s social security programs.

Streamline social security system

The Finnish government are seeking ways to reshape the social security system in response to the changing labour market.

Patterns of work and employment are changing. More and more people are working part-time, are on temporary contracts, or working for themselves.

The government want a system that encourages people to find work and removes disincentives to work. They also want to reduce bureaucracy and streamline Finland’s complicated benefits system.

At present, as in many countries, unemployed people in Finland in receipt of state benefits see no change in income if they find work. Their benefits reduce in line with their earnings.

Managing such a system is challenging and costly – especially with non-standard work patterns.

Recipients have to fill in forms and report any hours they work – and their benefits reduce accordingly.

Basic income will stay constant – even if recipients work

In the basic income experiment, participants will receive €560 per month, which will be deducted from any benefits they already receive.

This compares to Finland’s average net disposable income per head of about €2,250 per month.

However, the amount of basic income they receive will not change – even if they work a few days or a couple of weeks.

Under a basic income system there would be less paperwork and no need to report number of hours worked.

Marjukka Turunen, head of Kela’s Legal Affairs Unit, suggests recipients of the basic income will also be able to plan their finances and feel more secure.

The basic income will be paid monthly in advance, so recipients can count on having at least that amount of money. Currently, they have to claim labour market subsidies in arrears.

Will it make people bold or lazy?

Professor Olli Kangas, who heads the research department at Kela, says in an article from the Associated Press that it will be interesting to see how the basic income experiment affects people’s behaviour. He comments:

“Will this lead them to boldly experiment with different kinds of jobs? Or, as some critics claim, make them lazier with the knowledge of getting a basic income without doing anything?”

Kela is recommending the recipient sample be increased in 2018 to include other groups on small incomes, such as freelancers, small-scale entrepreneurs, and part-time workers.

There have also been suggestions that all young people under the age of 25 should be included.

Finland has a population of 5.4 million and a long-term unemployment rate of 2.3 percent. This compares with 4.0 percent overall in the European Union and 1.2 percent in the United States.