Finland: End of the Basic Income Project in 2019
By Georgi Ninov - Research Analyst
The Finnish government has decided to close its universal basic income (UBI) trial program which was put in place for a two year period in January 2017. The Finnish social security agency (Kela) introduced the initiative which paid a sample of 2000 randomly chosen unemployed citizens a monthly sum of 560 EUR – tax free and without any conditions attached. The participants also continued to receive the payments even after finding a job. Since the government rejected the request of Kela for further funding of the project, it will effectively end in January 2019. In fact, last December the Finnish Parliament passed a law that would require people receiving benefits to be actively seeking jobs and report their efforts to the authorities every three months – a system which is directly at odds with the UBI idea. This is also an indication that the country is more likely to pursue a universal credit system rather than a basic income one.
Originally, the concept of UBI in Finland was conceived in 2015, when the unemployment rate in the country reached 9.5% - considerably higher than fellow Scandinavian economies Sweden, Denmark or Norway and social measures were sought to turn around the trend. As of March 2018 the unemployment rate is still above the EU average (7.1%) and around the Eurozone average (8.5% as of February). The average monthly earnings in Finland amounted to 3400 EUR – around 6 times higher than the sum received by the basic income participants.
The initiative is considered pioneering since Finland became the first European country to introduce UBI, even if it was on a trial basis. Proponents of the system believe that it could help battle poverty and reduce inequality due to the fact that it would provide security to the citizens in times of economic turbulence and increase the bargaining power of the unemployed against employers offering minimum wages. In theory, it should also encourage entrepreneurship and even enable parents to spend more time with their children. Indeed, UBI has been also considered in countries such as Scotland, the Netherlands, Kenya and the US states Alaska and California. On the other hand, critics point out that basic income might discourage unemployed from seeking jobs. The costs of such programs are also an issue, since they would require an increase in taxes. In 2016, Swiss citizens voted decisively against UBI in a public referendum.