Finland plans to test out basic income scheme

Ms Matila, an unemployed coder, would like to do more freelance work, but she lives in fear of derailing her unemployment benefits. The Finnish government hopes to change that thinking. It plans to select about 2,000 unemployed people and give them b
Ms Matila, an unemployed coder, would like to do more freelance work, but she lives in fear of derailing her unemployment benefits. The Finnish government hopes to change that thinking. It plans to select about 2,000 unemployed people and give them benefits automatically - minus the bureaucratic hassle and penalties for amassing extra income - and will see what happens next.PHOTO: NYTIMES

Experiment to get people to work and revive tech industry could reshape social welfare

OULU (Finland) • No one would confuse this frigid corner of northern Finland with Silicon Valley. Notched in low pine forests just 160km below the Arctic Circle, Oulu seems more likely to achieve dominance at herding reindeer than at nurturing tech start-ups.

But this city has roots as a hub for wireless communications and keen aspirations in innovation. It also has thousands of skilled engineers in need of work.

Many were laid off by Nokia, the Finnish company once synonymous with mobile telephones and more recently, at risk of fading into oblivion.

While entrepreneurs are eager to put these people to work, the rules of Finland's generous social safety net effectively discourage this. Jobless people generally cannot earn additional income while collecting unemployment benefits or they risk losing that assistance.

For laid-off workers from Nokia, simply collecting a guaranteed unemployment payment often presents a better financial proposition than taking a leap with a start-up in Finland, where a shaky technology industry is trying to find its footing again.

Now, the Finnish government is exploring how to change that calculus, initiating an experiment in a form of social welfare: universal basic income.

QUEST FOR ANSWERS

Some people think basic income will solve every problem under the sun, and some people think it's from the hand of Satan and will destroy our work ethic... I'm hoping we can create some knowledge on this issue.

MR OLLI KANGAS, who oversees research at Kela, a Finnish government agency that administers social welfare programmes.

Early next year, the government plans to randomly select roughly 2,000 unemployed people - from white-collar coders to blue-collar construction workers. It will give them benefits automatically, absent bureaucratic hassle and minus penalties for amassing extra income. The government is eager to see what happens next.

Will more people pursue jobs or start businesses? How many will stop working and squander their money on vodka? Will those liberated from the time-sucking entanglements of the unemployment system use their freedom to gain education, setting themselves up for promising new careers?

These areas of inquiry extend beyond economic policy, into the realm of human nature. The answers - to be determined over a two-year trial - could shape social welfare policy far beyond Nordic terrain.

In communities around the world, officials are exploring basic income as a way to lessen the vulnerabilities of working people exposed to the vagaries of global trade and automation.

"Some people think basic income will solve every problem under the sun, and some people think it's from the hand of Satan and will destroy our work ethic," said Mr Olli Kangas, who oversees research at Kela, a Finnish government agency that administers many social welfare programmes. "I'm hoping we can create some knowledge on this issue."

Over the past decade, Finland's economy has not grown at all. For workers, the shock has been cushioned by a comprehensive social welfare system.

In the five years after suffering a job loss, a Finnish family of four that is eligible for housing assistance receives average benefits equal to 73 per cent of previous wages, according to data from the Organisation for Economic Cooperation and Development. That is nearly triple the level in the US.

But the social safety net also appears to be impeding the reinvigoration of the economy by discouraging unemployed people from working part-time.

Ms Jaana Matila, 29, has three degrees in computing and intense aspirations to forge a career in the Oulu technology scene. She would like to do more freelance work, but is afraid of derailing her unemployment benefits. She lost her benefits for a month this year when she failed to secure a receipt for giving some swimming lessons.

"I had to ask my boyfriend: 'Can you give me some monthly money so I can buy some food?'" she said. "It's really frustrating."

NYTIMES

A version of this article appeared in the print edition of The Straits Times on December 19, 2016, with the headline 'Finland plans to test out basic income scheme'. Print Edition | Subscribe