Lessons from Finland on Universal Basic Income

Piles of money. Photo credit: czbalazs - http://www.sxc.hu/photo/1236662Aditya Chakrabortty, a Guardian Columnist, recently travelled to Finland to interview a man who’s been part of a Universal Basic Income trial. The scheme gives 2,000 randomly chosen people, who were already receiving unemployment benefits, £493 a month unconditionally. The scheme will finish properly at the end of 2018 and no official results will be published until then, but there is anecdotal evidence from a number of interviews conducted with people chosen to take part.

One such person is Juha Jarvinen. When asked by Chakrabortty what difference the trial money had made to his life, he showed the journalist his workshop, full of film-making equipment; plans for an artist’s version of Airbnb; and a room where he makes drums that sell for hundreds of euros, while also supporting six children.

This anecdotal evidence suggests that many unemployed people would work harder with unconditional benefits, no longer having to jump through bureaucratic hoops.

It’s not even as though it’s a massive sum. It’s less than a fifth of the average private-sector income in Finland, which, if copied here in the UK, would be a third of the level under which we deem people to be living in poverty. Hence it is not the level of funding that is really liberating, but the freedom from the vast amount of hoops that people previously had to jump through to get a similar amount of money.

One issue with the Finnish study is the lack of giving UBI to people who are already working, potentially missing effects that the policy has on employed people. However, we have another proxy for this, being the trials of Basic Income in Manitoba, Canada. Analysis of the data collected during these trials suggested that only new mothers and those who had dropped out of school recently reduced their work hours due to receiving UBI, to spend more time with their baby and to restart education respectively, which I am sure you will all agree is a productive use of their time.

The UK currently treats claimants exceptionally badly, deeming people who are dying fit to work and removing their benefits, all for ideological and little financial gain. As liberals and individualists, we must put our faith in the people themselves to do what is best for them with UBI money, whether this is to start a new business, go back to school or save for an emergency. We must support a universal basic income.

* Oliver Craven is a party member in Lincoln, Sleaford and North Hykeham Liberal Democrats.

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14 Comments

  • Max Wilkinson 2nd Nov '17 - 3:53pm

    In what way is the Finnish experiment a trial of UBI? It’s not universal.

  • Laurence Cox 2nd Nov '17 - 4:10pm

    @Max Wilkinson

    It is a trial of a specific feature of UBI, its non-withdrawability. See the description of it here:

    http://basicincome.org/news/2017/10/overview-of-current-basic-income-related-experiments-october-2017/

    The assumption is that a conventional benefits system discourages work-seeking because:
    1) Withdrawal of benefits as income increases creates a high marginal tax rate. In the UK, even for Universal Credit it is about 70% and for the existing benefits system it can go over 90%. No one who is not on benefits pays such high marginal tax rates;
    2) The delays in benefit payment cause problems for anyone taking up short-term work.

    At the end of the trial they will be able to compare the trial group with the control group (those unemployed who stayed on the existing benefits system) to see if it reduced unemployment in the trial group.

  • Katharine Pindar 2nd Nov '17 - 5:36pm

    It’a good to hear about trials of UBI, but your conclusion does not follow, Oliver. You would expect that suddenly being given an unconditional sum of money might stir people to do things they had always wanted to do and be creative. It can’t be assumed from such trials that a permanent handout would have the same effect. As Liberal Democrats, I think our first concern is to insist that the benefits system must work more compassionately and effectively. However, I have begun to like the idea of giving everyone a handout at some time in their lives, whether for a change of track or to give a few months of freedom from the everyday grind, to be spent exactly as they like.

  • Red Liberal 2nd Nov '17 - 8:45pm

    UBI would be ideal for people on ESA (or who fail the rigged ‘medicals’ for ESA) who have fluctuating health conditions and can find themselves unable to work for unpredictable periods of time.

  • Lorenzo Cherin 3rd Nov '17 - 2:24am

    Oliver ,I think shows here, that as he is someone very involved in , and on the board of, Liberal Reform,advocating this, it is nonsense saying our party is so divided .

    And similarly here is an example to refute the naysayers insisting his group are in any way shape or form, neo liberal rightwingers. They are within the mainstream of social liberal thought, just with a respect and feeling for the classical liberal origins.

    I have no problem with basic or universal income . But what Oliver and some need to do , is convince that we are able to limit this to all who have permanent residence of at least five years in this country , or it is a magnet for literally unsustainable migration ,or might lead to skewed immigration policies, that other governments would implement to the detriment of those who need to be here for family reasons.If day one everyone would get it then the tendency to reinforce the spousal income insistence, would be there, the worst policy of the coalition , which should be abolished.

    We could bring this in at the same time as demonstrating a balanced attitude to immigration, adding public service budget increases, funding starvation being rectified properly, and responsible taxes on big corporations deciding to offshore. We need to get back to responsible economics all round. This might help to make people more enterprising not less, if backed up with a more imaginative approach to business and the role of government.

    In my view we need to examine this even more than a land value tax.Or let the latter pay for the former not replace existing taxes.That would be radical, and make LVT seem more worth doing.

    I would suggest there is much common ground on these things.It means basic or universal income changes lives for the better, empowers individuals rather than bureaucrats.

    Oliver and company, do not forget that those who advocate it must push for big changes in the public sector, Labour ,who flirt with it,do not seem to realise that much of the job centre plus staff would be laid off,if it is implemented, most would not be needed, only specialist and real advisers, who want to further enable people to advance. That is not what they do now ! The service is authoritarian and illogical, people often not skilled, or who have awful attitudes ,hectoring many who are decent people in difficult circumstances.

  • Peter Martin 3rd Nov '17 - 8:29am

    @ Laurence Cox,

    We all agree that we don’t want anyone to be left behind in poverty in our society. That can happen for a variety of reasons: Unemployment, temporary sickness, permanent disability etc.

    But is a UBI the best way to tackle this kind of problem? Why should anything be “Universal”? Why pay out money to everyone regardless of need?

    If anyone loses their job then it is reasonable that they should be supported for a period of time while they find another one. That’s why we all pay our taxes and particularly our National Insurance contributions. But after a certain period, say 3-6 months or whatever, then the situation needs to be re-assessed.

    UBI is a blunt instrument. It would be far better to just guarantee anyone who needed money some paid work, of a type they were capable of doing, for the public purpose, at a guaranteed minimum and living wage. There’s plenty that needs doing in our schools and hospitals. Every council would have a list of jobs that they’d like to see done. We could include retraining as a kind of paid work too.

    This isn’t pie-in-the-sky stuff. Its all been done before very successfully in the USA. Prior to WW2 “Almost every community in the United States had a new park, bridge or school constructed by the WPA”

    https://en.wikipedia.org/wiki/Works_Progress_Administration

  • Red Liberal 3rd Nov '17 - 10:16am

    @Peter Martin the issue I have with that plan is that it sounds rather like state conscription (or workfare) – obviously programmes like that would be helpful to some, but if they were compulsory, that would be rather authoritarian. One of the benefits of UBI is that it would give people the freedom to be self employed or discover and fulfill their own work potential and ambitions.

  • Peter Martin 3rd Nov '17 - 10:51am

    @Red Liberal,

    I agree that the devil could likely be in the detail for any such scheme, but I’d be at pains to differentiate it from workfare. The scheme would entirely be optional and I’d give it a try initially in areas of high unemployment. If the State was prepared to pay, say, £10 ph this would effective set a minimum wage in terms of pay and conditions.

    Even when the economy is in poor shape and unemployment is high most people are either in reasonable jobs, or at least in jobs they don’t mind doing too much. We all have “Monday morning” feelings from time to time. So there’s no need to hand out benefits to those who don’t need them. In any case, all you’ll be doing is raising the amount of tax that is deducted from their pay just to be able to give them another income called UBI.

    @Oliver Craven,

    Sorry I meant to address my previous comment to you. There’s quite a lot of left opposition to the idea of a UBI. I don’t agree with everything in this article but this is an example of it.

    https://www.opendemocracy.net/neweconomics/universal-basic-income-is-a-neoliberal-plot-to-make-you-poorer/

  • Nonconformistradical 3rd Nov '17 - 11:18am

    @Peter Martin
    “But is a UBI the best way to tackle this kind of problem? Why should anything be “Universal”? Why pay out money to everyone regardless of need?”

    Possibly if the administrative costs of administering a non-universal system are very high and if money paid out to those not in need can be clawed back simply through the tax system? Yes I know – the UK tax system is anything but simple but that’s another problem which needs to be addressed.

    “It would be far better to just guarantee anyone who needed money some paid work, of a type they were capable of doing, for the public purpose, at a guaranteed minimum and living wage. There’s plenty that needs doing in our schools and hospitals. Every council would have a list of jobs that they’d like to see done. We could include retraining as a kind of paid work too.”

    I’m inclined to support a scheme along those lines – but I can imagine ‘issues’ with unions over the amount paid for such work – if it appeared to be undercutting an agreed pay structure it would be difficult.

  • Laurence Cox 3rd Nov '17 - 12:05pm

    @Peter Martin
    We are looking for evidence-based policy. That is why there are trials of UBI being carried out. Just because something was done in the USA in the 1930s under social conditions that were totally different to the UK today, does not mean it is the answer to today’s problems.

    We also need to remember that the Left can be just as conservative (with a small c) as the Right, so saying that they also oppose UBI doesn’t mean that we shouldn’t consider it. Indeed their ad hominem comments in the posting that you quote, shows that they haven’t got good arguments.

  • Peter Martin 3rd Nov '17 - 2:29pm

    @ Laurence Cox,

    You’ll probably get a lot more opposition to the idea of a UBI from Tory voters. They’ll naturally baulk at the idea of handing out “taxpayers money” to the “work-shy”. So I’d reserve your efforts of persuasion primarily for them.

    I wouldn’t quite put it in those terms, but they do have a point. I’d probably dip into Marx and say that we should ask of each “according to their ability” and give to everyone “according to their need”. Not, note, according to their “wants”.

    From a more centrist perspective Katharine puts the case against the UBI very well. We have to recognise that politics is the art of the possible. I would argue that it is quite likely we will get acceptance of the idea we can hand out “taxpayers money” to those who need work and on condition that we all get back something in return. It is much less likely we’ll get widespread acceptance of handing out money, unconditionally, to everyone, regardless of whether they need it or not.

  • @Peter Martin.
    This canard about ubi going to the better off who don’t need it needs putting to rest. Ubi paid to the wealthy would be clawed back through the higher marginal rates of income tax which would inevitably the levied in order to pay for the scheme. Ubi isn’t a tax free handout, it’s a way of redistributing income at a time when labour markets are delivering increasingly unacceptable outcomes.

  • nvelope2003 4th Nov '17 - 9:18am

    Chris Cory: If UBI is to be clawed back from those who do not need it would this not mean a 100% tax rate ?
    Labour markets are delivering unacceptable outcomes because there has been such a huge increase in supply since 1997. Over supply causes a drop in price and shortage creates a rise.

  • Peter Martin 5th Nov '17 - 3:26pm

    @Chris Cory,

    “Ubi paid to the wealthy would be clawed back through the higher marginal rates of income tax”

    So you are saying we’d just use the tax system to avoid making a Universal Basic Income genuinely Universal?

    OK but it’s quite easy to be wealthy and not pay much income tax!

    nvelope2003 makes the point that 100% tax rates would be needed. Possibly not quite that high but they’d still be very high. The wealthy are good at switching income into capital gains once tax rates do start to creep up. They’d get around them one way or another.

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