Finland Steps Back from BI

The BBC reports that Finland is abandoning its experiment with a universal basic income:

The Finnish government has decided not to expand a limited trial in paying people a basic income, which has drawn much international interest.

Currently 2,000 unemployed Finns are receiving a flat monthly payment of €560 (£490; $685) as basic income.

“The eagerness of the government is evaporating. They rejected extra funding [for it],” said Olli Kangas, one of the experiment’s designers.

Some see basic income as a way to get unemployed people into temporary jobs.

The argument is that, if paid universally, basic income would provide a guaranteed safety net. That would help to address insecurities associated with the “gig” economy, where workers do not have staff contracts.

Supporters say basic income would boost mobility in the labour market as people would still have an income between jobs.

Finland’s two-year pilot scheme started in January 2017, making it the first European country to test an unconditional basic income. The 2,000 participants – all unemployed – were chosen randomly.

But it will not be extended after this year, as the government is now examining other schemes for reforming the Finnish social security system.

The article doesn’t really explain why Finland is dissatisfied with the plan but this may have something to do with it:

In February this year the influential OECD think tank said a universal credit system, like that being introduced in the UK, would work better than a basic income in Finland. Universal credit replaces several benefit payments with a single monthly sum.

The study by the Organisation for Economic Co-operation and Development said income tax would have to increase by nearly 30% to fund a basic income. It also argued that basic income would increase income inequality and raise Finland’s poverty rate from 11.4% to 14.1%.

In U. S. parlance the OECD found that a “cut out” system would work better than an “add on” system. Finland is also considering such a system as well as a negative income tax.

The challenge is, as usual, that pesky human nature. If you provide incentives for idleness, people will be idle. Programs that were affordable for a small group become unaffordable as the original target population grows. How do you reduce poverty without creating a permanent underclass?

The best answer, also as usual, is a private sector job that pays a decent wage. Creating or maintaining the conditions for that remains elusive or unpalatable for some.