Ilkka Kaukoranta. Picture: SAK
Ilkka Kaukoranta. Picture: SAK

Helsinki — Finland’s basic income experiment is unworkable, uneconomical and ultimately useless. Plus, it will only encourage some people to work less.

That is not the view of a hard-core Thatcherite, but of the country’s biggest trade union.

The labour group says the results of the two-year pilot program will fail to sway its opposition to a welfare-policy idea that’s gaining traction among those looking for an alternative in the post-industrial age.

"We think it takes social policy in the wrong direction," said Ilkka Kaukoranta, chief economist of the Central Organization of Finnish Trade Unions (SAK), which has nearly 1-million members.

Since January, a group of unemployed Finns aged between 25 and 58 have been receiving a stipend of €560 a month. The amount is not means-tested and is paid regardless of whether the recipient finds a job, starts a business or returns to school.

Diverse support

Popular in the 1960s, the idea of a guaranteed minimum income for everyone is gaining more proponents again amid resurgent populism. French Socialist candidate Benoit Hamon has made it a policy platform in his presidential campaign.

A universal — or unconditional — basic income (UBI), which would replace means-tested welfare payments, has its share of supporters on both the left and the right of the political spectrum. Advocates say it eliminates poverty traps and redistributes income while empowering the individual and reducing paperwork.

In Finland, which like other Nordic nations is seen as a trend setter when it comes to the welfare state, the idea is being explored by a centre-right government headed by a former businessman and self-made millionaire.

While limited in scope (it is conditional on the beneficiary having received some form of unemployment support in November 2016) and size (it is based on a randomly selected sample of 2,000 jobless people), the Finnish trial may help answer questions like: "Does it work"? "Is it worth it"? And the most fundamental of all: "Does it incite laboriousness or laziness?"

Dysfunctional welfare

Guy Standing, a University of London professor and co-founder of the Basic Income Earth Network, calls Europe’s social-protection system "dysfunctional" and a "disincentive" to work.

In a country like Finland, people who opt for a low wage job while on benefits may end up with a marginal income tax rate of "over 90%", he said in a telephone interview.

"It is very much the belief of us who favour a basic income that 99% of people want to improve their lives" by earning more, Standing said.

Besides, a basic income has potential psychological and social benefits as well. "If you do not have basic security you cannot be rational," he said.

The union begs to differ. Not only does SAK say that the system may reduce the labour force — for instance, by tempting mothers of small children or those close to retirement to take more time off — but the union also suggests that making it easier to refuse unpleasant jobs may create inflationary bottlenecks.

In any case, the model being tested in Finland is "impossibly expensive, since it would increase the government deficit by about 5%" of gross domestic product, said Kaukoranta.

Fix it, rather than ditch it

The traditional paladin of workers’ rights would rather tweak the existing system. It has the backing of the country’s biggest opposition party, the Social Democrats, whose Kalevi Sorsa foundation concluded in a 2012 paper that UBI may simply be a means of scrapping minimum wage requirements.

SAK rejects Standing’s accusations that the union’s real motive for opposing UBI is fear of a drop in membership or a collapse of its insurance funds.

A 2014 report by the German Institute for Economic Research suggested trade union hostility "may be a result of the threat of losing bargaining power".

Kela, the social-security institution tasked with conducting the experiment, says it will not release any results until after its completion in two years.

Mira Jaskari, a 34-year-old who was picked for the pilot programme, says receiving a basic income may make it easier for her to accept part-time job offers that would otherwise not have been worth her while. Before being unemployed, she used to work in catering and as an office assistant.

Whether she will indeed do so, and whether her response will be representative of the sample, will not be known until after December 2018.

Bloomberg

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