The Strategist

Finns give thumbs down to unconditional basic income

02/15/2017 - 14:41

Finland’s experiment with unconditional basic income (UBI) is going to work out, believes the country's largest trade union.

Jan Leineberg
Jan Leineberg
In January, two thousand unemployed Finns aged 25 to 58 years received benefits in the amount of $ 600 under a new social security system from Government of Finland.

"We believe that social security policy is being implemented wrongly", - said Ilkka Kaukoranta, chief economist of SAK trade union. The union is composed of million people out of 5.4 million of total population of the country.

Defenders of the system believe that the new initiative will secure all citizens and will help get rid of currently operating ineffective systems of allowances. However, SAK is protesting against the UBI system for two main reasons:

1. The system will be extremely costly, which will lead to an increase in the state budget deficit by approximately 5% of GDP.

2. The new system can deprive citizens of an incentive to find work and thus will reduce the workforce.

Supporters of the scheme do not agree with both points. Guy Standing, a chief economist and advocate of UBI, believes that the current system of social benefits in many European countries deprives people of many incentives to look for a job. Cancellation of benefits after getting low-paying jobs does not significantly increase overall income of an employee.

He also believes that UBI may be financed by sovereign wealth funds, tax increases and money coming from current Social Security programmes.

It is still whether the UBI system will work out as the experiment will be running until December 2018. Yet, more and more people are dissatisfied with the country's new approach to the social security, because they fear that they will have to pay even more for those who do not want to work.

Total cost of the experiment depends on how many of the two thousand people will find jobs.

Initial stage of the UBI scheme is funded with money that these people would have received from social services. The government will be paying out of its own pocket only when these people start to work.

Government of Prime Minister Juha Sipilä has allocated 20 million euros for this experiment, and researchers say that a large part of this amount will stay untouched until 2018 begins.

The fact that many people are totally opposed the the UBI concept is not surprising if we think back of what happened in Switzerland. In summer, the country held a referendum in which 76.9% of citizens voted against granting all inhabitants of the country with unconditional payments in the amount of € 2300.

A coordinator of Dutch experiment with UBI says that the local organizers also encountered some problems. In early 2017, authorities refused to support the initiative, warning the organizers about illegality of unconditional payments. Apart from the Netherlands and Finland, six countries are planning to hold the UBI income experiments this year, and so far, everything has been proceeding according to plan.