Finland begins basic income trial

Finland has become the first country in Europe to pay its unemployed citizens an unconditional monthly sum.

Under the two-year scheme, which began on January 1, 2,000 Finns aged 25-54 will receive a guaranteed sum of €560 each month. The income will replace their existing social benefits and they will continue to receive it even if they find work.

Kela, Finland’s social security body, said the trial aims to cut red tape, poverty and unemployment which is currently at 8.1%. Finland’s current system can discourage jobless people from working as even low earnings can trigger a big cut in benefits.
The trial will be attractive to those on the left with its promise to reduce poverty, as well as those on the right who see it as a route towards a less bureaucratic welfare system.

A survey conducted by Dalia Research last year found that two thirds of citizens across all 28 EU states support some form of basic universal income. Swiss voters rejected a basic income scheme in a referendum last year as it would have meant increasing welfare spending from 19.4% to around a third of the country’s GDP.

Ugo Colombino has written for IZA World of Labor about unconditional basic income and whether it is a viable alternative to other social welfare measures. He writes that: “While an unconditional basic income policy is simple and transparent, with low administration costs, financing it might require higher taxes. Although the evidence on implied efficiency losses is mixed, carefully designed taxes can avoid the risk of canceling the potential benefits of unconditional basic income through efficiency losses.”

Related article:
Is unconditional basic income a viable alternative to other social welfare measures? by Ugo Colombino