Monday, August 29, 2016

Finland's Upcoming Basic Income Experiment Is Moving Forward - Here's What You Need To Know

Via Business Insider:

A basic income experiment is part of the government programme promised by Prime Minister Juha Sipilä. A two-week consultancy period on the proposed experiment has been announced and is currently underway before the government will submit a proposal for legislation to parliament.

The consultation period, stretching from August 25 to Spetember 9, is a chance for experts to voice their opinions on the setup of the experiment.

Here are the main points:

- Basic income will replace corresponding social benefits for a test group of 2.000 randomly selected individuals.

- Participation in the test is mandatory, and those who partake will receive EUR 560 per month. The figure has been selected to ensure that participants will not receive less money under the experiment, although that does not mean it is neccessarily the level Finland would chose for if basic income became a reality. For comparison, Switzerland's recent proposal for a basic income was at a level of EUR 2.300 per month.

- The experiment is set to take place sometime during 2017-2018, and will be covered by EUR 20 million set aside in the budget.

- The experiment will not be an example of universal basic income since only people who are currently receiving unemployment-related benefits are eligible for inclusion.

- Students ae not eligible for participation in the experiment.

Why basic income?

Finland has a fairly high unemployment rate compared to its Nordic neighbors - towards double that of Denmark and Norway. In economic theories of unemployemt the incentives for finding work is central to the time it takes to find a job, which in turn is crucial for how many people are unemployed at any single moment.

Unconditional basic income is controversial because it is generally thought to reduce incentives to find work relative to unemployment allowances.

Additionally, a universal basic income scheme, theoretically has no effect on wage gaps - those who already have higher wages will have theirs adjusted upwards proportionally to reflect marginal productivity.

But none of this has been tested, and Finland's experiment, being the first of its kind, would at least fill the purpose of exploring whether there is a difference in effectiveness in motivating people to find work between the different systems.

The Social Insurance Institution of Finland (Kela), which will be responsible for administering the experiment, actually expect basic income to increase incentives to find work.

In response to an inquiry by the Basic Income Earth Network, as to the aim and purpose of the experiment, Kela wrote:

"The experiment is one of the activities aiming to reform social security so that it better encourages participation and employment".

and

"The objective of the legislative proposal is to carry out a basic income experiment in order to assess whether basic income can be used to reform social security, specifically to reduce incentive traps relating to working".

Regardless of the results, another motivation for basic income schemes is that reduced government administration related to unemployment could offset the costs of a system featuring basic incomes. That is also something that needs to be tested.

Finally, the champions of basic income see it as a means of liberating people and allowing them the freedom to be productive on their own premises. It is argued that without the pressure to conform to the job market to sustain oneself, many individuals will be able to apply themselves to less obviously productive labor - such as the creative industries. If artificial intelligence can replace every aspect of human labor exect creativity, that may by a prudent direction to steer the economy.

In any case, basic income is an interesting idea sweeping the world, because it finds supporters from the whole political spectrum, though for very different reasons. Finland's experiment will be an important precendent for political debates concerning basic income all over the world.

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