Basic income trial: creates happiness, but not jobs

Finland is half-way through a two-year basic income trial. Photo / 123RF

A nationwide experiment with basic income in Finland has not increased employment among those participating in the two-year trial, but their general well-being seems to have increased, a report said Friday.

The Social Insurance Institution of Finland, or Kela, said "it was not yet possible to draw any firm conclusions" from the first half of the experiment, where about 2,000 randomly selected, unemployed people aged 25-58 got tax-free income of €560 ($939.72) a month with no questions asked.

Finland is looking into ways to reshape its social security system and became in January 2017 the first European country to launch the trial, which will end in 2020.

Critics say universal basic income reduces incentives for people to look for work.

Proponents say it can empower people to start new businesses, knowing that they would continue to receive monthly income no matter how well their new venture does. It can also encourage people to try a new job without the fear of losing their unemployment checks or having to go through the paperwork of reapplying for benefits.

"Earlier, I didn't accept all small jobs out of fear of losing my benefits and having to reapply for them," said writer Tuomas Muraja as he was on his way to a sauna before heading out for an evening at the opera.

"I feel much more secure now that short-term jobs no longer reduce my benefits or delay their payment."

In the Finnish experiment, the basic income is below what unemployment benefits pay, which is €32.40 euros, or almost €1,000 a month — subject to income tax of about 30 per cent. The basic income is tax free, but barely enough to live on for someone paying rent, so it keeps pressure on the recipients to join the work force.

Minna Ylikanno, a researcher with Kela, said the basic income recipients appeared less stressed, healthier and more confident in the future than a 5,000-member control group of unemployment benefits recipients.

The report found that those on basic income and the unemployed people in the control group ended up working roughly the same number of days.

"The basic income may have a positive effect on the wellbeing of the recipient even though it does not in the short term improve the person's employment prospects," Ylikanno added.

The participants in both the trial and the control group were selected randomly among those who received unemployment benefits from Kela in November 2016 , Ylikanno told The Associated Press.

The Nordic country's official unemployment rate was 5.4 per cent in 2018.

- AP