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WHY THIS MATTERS IN BRIEF
As automation threatens to make tens, if not hundreds, of millions of people redundant, governments are trialling new welfare schemes to support them, one of which is UBI.
The rise of the robots, whether it’s hardware robots that are taking over more manufacturing jobs, warehouse jobs or farming jobs, and much more besides, or software robots, in the form of new Artificial Intelligence (AI) agents, avatars and bots, has led numerous governments, including Europe and the US, universities and think tanks to announce an approaching “Jobs-apocalypse,” and as the clock ticks down to the day when, allegedly, half of us could be out of work, governments have scrambled to try to find a solution to make sure that people who find themselves in the dole queue are looked after financially. And despite much focus, and much gnashing of teeth and burning the midnight oil to find solutions, only one seems to be forthcoming – Universal Basic Income, or UBI for short.
In the past couple of years we’ve seen a number of UBI trials proposed, for example in Canada, California, Finland, Hawaii, Scotland and the US, and, in some cases, such as Finland, rolled out and trialled, and now, in Finland’s case, as their trial approaches the finish line, it looks like we finally have some data to help us at least partially answer the million dollar question “What happens when you give people free money?”
Before receiving free money from Finland’s government, Sini Marttinen had to take great care to plot how much she could work without losing her unemployment benefits. The 35 year old consultant could make about €300 per month before she was taxed 50 cents in every euro above that.
“You would spend a lot of time on the best strategy to get the most money,” she says, but at the start of last year Marttinen “won the lottery”, in her own words. The Helsinki resident was one of 2,000 unemployed people picked at random from across the country to take part in the world’s most prominent trial of UBI.
Instead of receiving her unemployment benefits, which amounted to about €500 after taxes, she now receives €560 in monthly basic income. This money is unconditional – she keeps it no matter how much work she finds.
“It’s absolutely perfect. Because I got basic income, I could start my own business,” she says. The two year Finnish trial is at its halfway stage and there is already anecdotal evidence that basic income has helped reduce stress among participants by easing the requirements of benefits bureaucracy. But there are also increasing doubts about the trial itself and whether it offers a viable example of how basic income could work.
“We are not really testing a specific model that could be introduced in Finland. We are a very long way away [from that] but we have come one step nearer,” says Markus Kanerva, a senior specialist at the prime minister’s office who has been heavily involved in the trial.
The idea of giving citizens money for nothing has a long heritage with supporters including Martin Luther King and Milton Friedman, and more recently the idea has been touted by the new titans of the technology industry such as Facebook’s Mark Zuckerberg and Tesla’s Elon Musk who keeps telling everyone that he believes it’s inevitable we will have to “adopt some form of Universal Basic Income.”
Finland’s centre-right government started the trial under a new framework that allows it to try various social policies through randomised tests. Kanerva says the goal is to make Finland “the most innovative and experiment friendly country by 2020” but the UBI experiment was hurriedly set up, in part so it shows results before parliamentary elections due in 2019.
Ilkka Kaukoranta, chief economist of the SAK Trade Union Confederation is sceptical of the trial. Unions believe that taking away the conditionality of benefits, the requirement that their recipient has to look for work, will undermine the welfare system, leading to eventual cuts.
“A conditional safety net is the only way to combine a high level of benefits with a high level of employment,” he says, before adding that “implementing the basic income model being tested would increase the budget deficit by 5 percentage points.”
That is because the trial includes no changes in taxation, participants keep the €560 no matter how much they earn through work. An example is Mika Ruusunen, a 47 year old former baker from Tampere. He had been unemployed for more than a year while retraining in IT. A few days before being told he would be part of the trial he was offered a job, which he still has 13 months later.
“It’s just extra money on top of what I earn,” he says.
He thinks basic income would work best for people who have an idea for a new business, rather than the broader mass of unemployed and Juha Jarvinen shows why this could be true. The 39 year old father of six in rural western Finland had wanted to start a business but felt inhibited by rules limiting supplementary earnings. Basic income allowed him to take the risk of starting a video business.
“The biggest change is with my mind. It finally meant that what I can do only depends on me. Before, with benefits, it was too much controlled by the employment office. They are saying you must do this and this and this,” he says.
Basic income has given him back control of his life, he adds.
“For six years, I was breaking down all the time. Now I have the freedom – I don’t need to feel stressed,” he says. A common refrain from trialists is that bureaucracy often put them off finding work.
“The big impact has been psychologically, not the money. The trial doesn’t really change things money wise, but it does change the bureaucracy and make taking work easier,” says Marttinen.
Finnish authorities could extend the trial to different groups such as low income employed, self employed, stay at home mothers and students, says Kanerva, and other experiments could take place, such as cutting or increasing childcare incentives for certain families. Many inside and outside the trial believe in any case that the government’s enthusiasm for UBI has cooled, and there are grumblings about everything from the type of unemployed people picked to the amount of money they are getting. Those on the trial concede it has imperfections that mean it cannot be implemented as tested, but Ruusunen says that the mere fact of holding the trial has been beneficial.
“The best thing about the experiment is that people are thinking about the idea, and considering what is fair and necessary, and seeing that the welfare system is too bureaucratic.”
So, while Finland’s trial continues, it looks like UBI is, at the very least, a very interesting social experiment and that it helps improve people’s mental well-being while also encouraging and helping them explore new opportunities, but that said it also looks like its implementation, if that is it’s ever implemented anywhere, could be much more complex than may people think.