Money for nothing - Finland's financial leap in the dark
PUBLISHED: 16:00 27 January 2018
Finland is trialling a revolutionary system of giving people a basic income, regardless of whether they are in work or not. WikiTRIBUNE's LYDIA MORRISH visits the country to see how the experiment is working.
Every month, 560 euros (£495) appears in Marja-Liisa Lähteinen’s bank account, courtesy of the Finnish Social Insurance Institution. Lähteinen, 32, who lives in the eastern city of Kuopio, receives the monthly deposit as one of 2,000 randomly-selected participants in a trial of Universal Basic Income (UBI) being held in the country.
She usually puts the money into savings, but has also used it to help friends out and has bought a new computer and dishwasher and even used it to take a summer holiday last year. “It’s like extra pocket money for me,” she says.
And while she was jobless when she first selected for the trial, she got a job as a lab technician just five days before receiving her first instalment last January. But the crux of the experiment is that the basic income isn’t cut back once the receiver starts earning.
By the end of 2018, Lähteinen will have received 24 instalments of 560 euros on top of her full-time income – a tidy sum of 13,440 euros. For nothing. Perhaps unsurprisingly, Lähteinen, who also runs a non-profit website for vegan products, says she feels “lucky” to be part of the test.
Universal basic income is currently having a bit of a moment. The premise is simple: scrap the existing welfare state and replace it with an unconditional cash payout for absolutely everyone, regardless of whether they’re at work or on the sofa.
The idea is gaining traction worldwide as a possible answer to inequality, changing work practices and jobs threatened by automation, with machines replacing human workers. Although the Swiss rejected such an idea in a referendum in 2016, Scotland is making moves to trial it and there is significant support elsewhere in Europe, and beyond. Enthusiasts for the idea come from across the ideological spectrum: from billionaire Elon Musk, libertarian scholar Charles Murray and the UK’s Green Party.
But despite all this modish buzz, the roots of UBI are surprisingly old: in the late 18th century, political theorist Thomas Paine pitched the idea of a ‘citizen’s dividend’ for all US citizens. It didn’t instantly catch on but as the world starts to take it seriously now, Finland has been brave enough to see if it actually works.
The Nordic country’s experiment, which is costing 20 million euros, is designed to test the basic conundrum at the heart of the issue: will basic income encourage unemployed people to find work more than current social security systems?
This is the claim of the scheme’s supporters, who say it will reduce inequality and diminish bureaucracy involved in other welfare schemes. However, detractors argue the idea is unrealistic, unaffordable and risks actually increasing poverty.
The trial, therefore, is being closely monitored around the globe. And at its half-way stage, it is fair to say that the feedback has been decidedly mixed.
The monthly sum of 560 euros is the equivalent of the minimum unemployment benefit in Finland. Participants can still receive other payments, such as housing benefit, on top of that. Among those taking part is Tuomas Maraja, a Helsinki-based journalist who also writing a book about the experiment. Like Lähteinen, he was on unemployment benefit before it began and was wary of taking on some work, in case it jeopardised those payments. “Now I’m able to take all those little gigs,” he says. “Even if [I’m paid] only 250 euros for a presentation, I can take that because I don’t have to be worried all the time.”
He prefers this system to filling in “complicated forms” and thinks basic income would help all people with irregular work, such as freelancers, artists and writers. It would, however, have to be higher than 560 euros a month – nearer to 1,000 euros, he suggests. (Finland’s average monthly wage is just over 3,300 euros).
He also believes basic income could help solve the stigma of being unemployed and says he has experienced positive psychological effects from the experiment.
In Kuopio, Lähteinen also says she feels less stressed about money, as well as more secure, financially, and can see the new system as a better fit for the more atomised world of the modern workplace. “There are a lot less jobs now [in Finland] and I don’t think everybody has to work a regular 9-5 job. There’s different types of work.”
At the core of UBI is an ambition for citizens to sustain themselves. But 560 euros is not likely to pay a Finn’s rent. Renting in Helsinki can cost between 800 euros and 2,000 euros a month and rent prices rose 2.5 percent last year.
Lähteinen, who has been living alone for more than 10 years, says her rent outside the capital used to be around 400 euros a month. “Now under 700 there’s hardly anything,” she says.
However, she thinks basic income works better than Finland’s existing social security system, which is a patchwork of around 100 different benefits, and requires those receiving payments to complete courses and take jobs they are allocated, rather than those they select.
“It’s the unemployed person who is being punished, not the system that’s not creating proper jobs,” Lähteinen says.
While she hopes basic income could mean people wouldn’t “have to submit to crappy jobs just to survive”, she doesn’t think basic income can solve Finland’s unemployment problem. “Because there aren’t enough jobs. They’re not just going to magically make them appear.”
Indeed, for all its progressive credentials (the country consistently ranks highly for education, innovation, safety, quality of environment and of life, and is recognised as a pioneer of gender equality), joblessness remains a lagging problem for Finland.
The 2008 financial crisis sent the country into one of the eurozone’s worst recessions. The government is still picking up the pieces, but the unemployment rate remains at around 7.3%. Such economic difficulties raise another problem with UBI: how could it be financed, even if the experiment goes well?
Certainly, resistance to the idea remains entrenched in the country. Matias Mäkynen, from the Social Democratic Party – one of Finland’s largest political parties, which is against basic income – says the experiment doesn’t consider the real-life situations people have.
“Basic income is more of a 1970s solution. It’s too simplified,” he says. He also criticises it for redistributing wealth “upwards” – under the scheme, payments would be made to the richest person in the land, as well as the poorest.
Other criticisms are that UBI could increase gender divides in the workplace. As Olli Karkkainen, an economic researcher at Finnish bank Nordea, claims: “Unconditional basic income could lead to mothers staying at home for longer periods of time, and that could lead to a decrease in female employment.”
Such views run directly counter to the arguments of those in favour of UBI, who say it will make mothers less wary of losing other benefits by returning to work. But the claim and counter-claim show just how important this experiment is.
No empirical data is yet available, but once it is complete, the trial should allow for more objective assessments of UBI to be made.
The fate of the project, though, rests on politics as much as it does on economics. Finland’s parliamentary elections are due in 2019, and the different parties will be campaigning on their own visions for the country’s social security system, with UBI – supported by the ruling Centre Party – just one of those visions.
When her new co-workers found out Marja-Liisa Lähteinen was taking part in the experiment, they told her she had “hit the jackpot”. Whether Finland really has found a way to create a better society, or just of singling out a fortunate 2,000 individuals, remains to be seen.
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