April 23, 2019

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Finland’s Basic Income Trial Boosts Happiness, but Not Employment

Finland’s Basic Income Trial Boosts Happiness, but Not Employment
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HELSINKI, Finland — A basic income made recipients happier than they were on unemployment benefits, a two-year government experiment in Finland has found. But it did not, as proponents had hoped, make them more likely to work.

Finland — the world’s happiest country last year, according to the United Nations — is exploring alternatives to its social security model. About 2,000 Finns, chosen randomly from among the unemployed, became the first Europeans to be paid a regular monthly income by the state that was not reduced if they found work.

The government announced initial findings on Friday, a month after the trial ended.

The trial was being watched closely by other governments who see a basic income as a way of encouraging the unemployed to take up often low-paid or temporary work without fear of losing their benefits. That could help reduce dependence on the state and cut welfare costs, especially as new forms of automation eliminate some jobs.

Finland’s minister of health and social affairs, Pirkko Mattila, said the impact on employment of the monthly pay check of 560 euros ($635) “seems to have been minor on the grounds of the first trial year.”

But participants in the trial were happier and healthier than the control group.

“The basic income recipients of the test group reported better well-being in every way (than) the comparison group,” the chief researcher, Olli Kangas, said.

The chief economist for the trial, Ohto Kanniainen, said the low impact on employment was not a surprise, given that many jobless people had few skills or struggled with difficult life situations or health concerns.

“Economists have known for a long time that with unemployed people financial incentives don’t work quite the way some people would expect them to,” he added.

Sini Marttinen, 36, a former I.T. consultant, had been unemployed for nearly a year before “winning the lottery,” as she described the trial.

Her basic income gave her enough confidence to open a restaurant with two friends. “I think the effect was a lot psychological,” she said.

“You kind of got this idea you have two years, you have the security of €560 per month,” she said, adding: “It gave me the security to start my own business.”

Her income only rose by €50 a month compared with the jobless benefit she had been receiving, “but in an instant you lose the bureaucracy, the reporting,” Ms. Marttinen said.

Mira Jaskari, 36, who briefly found a job during the trial but lost it because of poor health, said losing the basic income had left her feeling more insecure about money.

The center-right government’s original plan was to expand the basic income scheme after two years as it tries to combat unemployment, which has been persistently high for years but reached a 10-year low of 6.6 percent in December.

That followed the imposition of benefits sanctions on unemployed people who refused work.

The basic income has been controversial, however, with leaders of the main Finnish political parties keen to streamline the benefits system but wary of offering “money for nothing,” especially ahead of parliamentary elections due in April.

Prime Minister Juha Sipila’s Center Party has proposed limiting the basic income to poor people, with sanctions if they reject a job offer, while the Conservative finance minister, Petteri Orpo, says he favors a scheme like Britain’s Universal Credit.

The higher taxes that the Organization for Economic Cooperation and Development says would be needed to pay for basic income schemes might also be off-putting for voters.

In a review of the Finnish scheme last year, the organization warned that implementing it nationally and cost-neutrally for the state would imply significant income redistribution, especially toward couples from single people, and increase poverty.

The researchers have acknowledged that the Finnish pilot was less than realistic because it did not include any tax clawback once participants found work and reached a certain income level.

Swiss voters rejected a similar scheme in 2016. Italy is planning to introduce a “citizens’ wage” in April in a major overhaul of the welfare state, which will offer income support to the unemployed and poor.

Trial participants were generally positive, however, with Tuomas Muraja, a 45-year-old journalist and author, saying the basic income had allowed him to concentrate on writing instead of form-filling or attending jobseekers’ courses.

He said the end of the two-year trial, during which he published two books, had made it difficult again for him to accept commissions, because he could earn only €300 a month without losing any benefits.

“If people are paid money freely that makes them creative, productive and welfare brings welfare,” Mr. Muraja told Reuters about his experience of the pilot.

“If you feel free, you feel safer and then you can do whatever you want. That is my assessment.”



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