Five new facts about Finland’s experiment of the universal basic income

Basic incomeWe have already described the Finnish experiment in another article (click here to access it) , but there were a lot of questions left. We have been able to know more about a number of questions which were not clear.

The calendar for the pilot phase

A draft report is going to be given to the government on the 13th of March, and then the government is going to comment on it, as the draft report will propose a number of possibilities and scenarios, and there would be a need for the political level to clarify their will. Then, some months later, the final report with clear proposals and scenarios will be delivered. There will be then a debate and additional modifications, so that it is expected that the final scheme for the pilot phase will be decided (voted?) in the middle of November. It should then be implemented on the 1st of Januar 2017y, but from our point of view it is absolutely not realistic, even if KELA, the Finnish Social Security, who would be  managing the basic income would be very efficient.

The people who will be involved in the pilot phase

Here is the most difficult problem today. Ideally, the researchers, in order to be sure that the experiment is going to be statistically a good test for a general deployment, would need to build statistically randomly defined samples of citizens, representative of the population. The problem here is that it is difficult to tell people: you have been randomly chosen for the test, and whether you like it or not, you experiment the basic income. In addition, the Finnish Constitution is guaranteeing that citizens should be treated in the same way in all Finland. But it you take only volunteers, there is a good chance to have some kind of bias, because the volunteers would probably those more in favor of the reform. So the working group has these days some meetings with lawyers to fin a solution which should be legal and statistically valid.

The scheme considered before the lawyers step in would involve a national sample (around 2000 persons), a regional sample and a local sample in some municipalities. It could be something around Tampere, but the region concerned is not yet really defined.I suppose that politicians will have a lot to say about it also

What will be the level of the basic income, and the  scope of the reform

The working group is likely to propose to the government different scenarios, with different levels of basic income, possibly from 400 euros to 800 euros. It has to be understood that it should be financially neutral, which means that the cost of the basic income has to be covered by the savings made by eliminating a number of allowances and subsidies (mainly payed today by KELA, such as for example basic unemployment allowances, parental allowances, and by the municipalities, such as for example social allowances for people without resources), and by a modulation of the taxation of other income.

This last point is important. If somebody earns today 2000 euros as a salary from the employer, he or she will get the basic income, whatever its level, but will pay higher taxes on his or her salary.For example, with a tax-free basic income of 700 euros, it would be necessary to pay to the state in average 40 % on the additional income to be able to have a system which is neutral financially. The questions for the working group and the government are now: should this be a flat rate tax or a progressive tax? is 40 % acceptable or dissuasive for those who want to work?

Another question is on the table: pensioners should be excluded from the system, as the pension system managed by the social partners and the government is quite fragile and this would oblige to introduce too much changes in a system which is functioning quite well and is accepted by all partners. But there are still some points in discussion: it would be interesting to replace also the student allowances with this system, but it would have an additional  cost, even if it would simplify a lot the bureaucracy.

From the financial point of view, the group has not yet taken into account the global impact on the Finnish growth, which may be quite positive, and affect positively Finnish public finances. However, it would compensate the fact that a number of people who could now benefit from social allowances (estimated to 25 % to 40 % of the possible beneficiaries) are not asking for them, possibly because it is too bureaucratic, when the (simpler) new system could push them to ask for the basic income. This could impact public expenditures by 200 million euros.

Is the basic income going to be given with a condition of activity?

There is an ongoing debate about the fact that it would be more acceptable if the basic income would be given with some condition of activity. The main problem is to define what “activity” means and who is going to check. Working is clearly an activity, performing some tasks for a municipality of NGOs also. Going into rehabilitation or reeducation to physically or mentally recover or improve is also an activity. But what about helping an old father or mother at home? Doing sports to stay in condition and combat obesity? And is KELA going to recruit new people to check if people are active?

All this is quite difficult, and the political level will probably have to decide on it, as it is not an easy choice, between protestant morals and efficiency. The Dutch ongoing experiments (click here to read about them) do not include an obligation to be active. it is in particular motivated by the fact that a recent study conducted in 18 European countries concluded that generous welfare benefits make people likely to want to work more, not less. As stated by Ralf Embrechts, director of the Social Development Association of Tilburg, Netherlands, and one of the promoters of the program, “We want to discover, if you trust people and give them a basic income without any rules or obligations—so, unconditionally—that they will do the right thing”. Finland could take the same approach, and correct it after the pilot phase if necessary.

Who should be included?

It looks like the system could cover everybody in Finland from 18 to pension age. However, there are discussion about the need to add a condition of prior residence in Finland (for example 2 or 3 years or 5 years). In the present political climate, it is quite difficult not to consider  it, and anyway an universal implementation in Finland would make the country very attractive for certain groups of non-EU citizens, and this needs to be addressed.

*

The next step of the project will be the draft report in March 2016, and the political reactions. But it could be said that the members of the group have already discovered that the basic income is going to have a positive impact on the reduction of inequalities and the diminution of poverty in Finland.

 

 



Categories: Government, Social

Tags: , , , , ,

1 reply

Trackbacks

  1. Basic income: how Finland plans to implement the first nation-wide project in the EU – Finland Politics

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: