Finland assessing basic income scheme’s impact

Government is paying 2,000 unemployed people €560 each a month under a two-year experiment

Finland is busy tracking data of 2,000 unemployed people who are paid €560 each a month under a two-year universal basic income experiment started by the Nordic nation in January. Finland, which has a welfare system that is often cited as the most generous offered by a nation, embarked on the project after a two-year study as globalisation and the changing work environment are posing new challenges.

“Lots of jobs will disappear; new kind of jobs will emerge. There will be more self-employed people and freelancers,” says Olli Kangas, Director of Governmental Relations, Kela, the social insurance institution that administers welfare benefits in the country.

Finland cuts an average 25% of wages as taxes, and the deductions finance the welfare benefits, including pensions and free medical treatment. But when employment contracts become short term and people get more into self-employment, administering the system will be difficult, Professor Kangas says.

In India, while the Economic Survey of 2016-17 recommended universal basic income, Finance Minister Arun Jaitley recently said the proposal was not politically feasible.

In Finland, Kela maintains a register of every permanent resident of the country. All the data collected, even disease and drug consumption details, of the 2,000 people randomly selected for the experiment will be studied. The interim results will not be revealed so as not to skew the results of the study. The 1.7 lakh other unemployed in the Kela registers form the control group.

One aspect that will be eagerly looked into is labour behaviour — meaning if anyone is taking up employment. Universal basic income is meant to be paid to all people in a country without conditions, whether rich or poor or employed or unemployed. If many people in the sample under study take up jobs, one assumption will be that the handout is not a disincentive to employment. Finland pays unemployment benefit of €560 for any number of years till the age of 63, when pension payment begins. Hence, people do not take up jobs that pays less than that sum.

Political parties in Finland, even partners of the ruling coalition, are divided over universal income. The Green party backs it as most of its supporters are in flexible job contracts and hence require something to fall back on when out of work. The Social Democrats oppose it, saying it will distance the people from the State. The Left supports the idea.

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Printable version | Feb 18, 2020 9:29:44 AM |

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