What Scotland can learn from Finland’s experiment in universal basic income

In a daily coronavirus pandemic briefing on Tuesday, Scotland’s First Minister said the “time has come” to seriously consider universal basic income for Scots. 

Much more on this from stewartb:

Progressive countries experiment to progress – Finland and Universal Basic Income

One area of public policy innovation attracting renewed interest during the Covid-19 pandemic is universal basic income (UBI). It is now being pursued in Spain. It received a further expression of interest from our FM at a recent Covid-19 briefing: there has already been preliminary work to design UBI pilots in Fife, Edinburgh, Glasgow and North Ayrshire.

This post is prompted by the publication of the final evaluation report on the ‘Finnish Basic Income Experiment’.

Background – the politics of UBI

Of course there are also UBI sceptics, detractors and firm opponents across the political spectrum. This published in 2018 by the London School of Economics summarises the ‘politics’ of UBI:

“Universal Basic Income (UBI) has a long history. The idea to provide all citizens with an unconditional and regular income cash benefit without means-test or requirement has been discussed as far back as the 18th century. Thinkers on the right are attracted to its simplicity, which contrasts with the current complex welfare state arrangements in most advanced economies, its minimalism and its low adverse effects on work incentives, since it is paid irrespective of labour market participation. On the left, people emphasise its universalism and unconditionality which would reduce the gaps in coverage of current benefits and ensure labour is decommodified, thereby increasing the power of workers to bargain for better working conditions and wages.

Its detractors are similarly located across the ideological spectrum. Many liberal economists see UBI as prohibitively expensive and inefficient insofar as it directs resources to those who may not need them. Others on the left see UBI as a dangerous legitimisation of capitalism and an implicit acceptance that not everyone will be provided a job. They also emphasise UBI’s limited ability to address all the social risks that individuals face in a market economy. Finally, some trade unions, particularly in Bismarckian welfare regimes, oppose what they see as releasing employers of their social responsibility. Trade unions also voice concerns that this will reduce their institutional power which lies in their key role in managing the administration of social insurance benefits.”

Source: https://blogs.lse.ac.uk/netuf/2018/03/07/the-politics-of-universal-basic-income-ubi/

International interest in UBI

There have been many pilots internationally, of different scale and ambition, in recent decades. They have been conducted typically to test an alternative way to develop current social security or to examine if a basic income is a solution to extreme poverty.  However the difficulty of mounting a realistic, a ‘true’ test of UBI in parallel with the operation of a country’s existing fiscal and social security ‘system’ – which may itself experience policy changes and changes in economic/market conditions during the period of any pilot – is acknowledged. 

Since 1982, the state of Alaska has operated a scheme that has some characteristics of UBI in that its citizens receive a payment from the state that is universally and unconditionally granted. Every man, woman and child is given an annual payment taken from Alaska’s c.$66 billion ‘Permanent Fund’. This Fund has been built up by the state government depositing at least 25% of mineral royalties – revenue the state generates from its mines, oil, and gas reserves — into the fund annually. The money is in turn invested by the Alaska Permanent Fund Corporation in domestic and global stock, bonds, private equity etc. and interest earnings are then distributed to Alaska residents every September.

It is in this general context that the bold UBI experiment undertaken in Finland attracted international interest. The Finnish Basic Income Experiment claimed to be the ‘world’s first statutory, nationwide and randomized basic income experiment’. It sought to determine: (i) how the experiment affected participants’ employment; (ii) the effects on health, livelihoods and experiences of government bureaucracy; and more generally (iii) how the participants perceived the significance of the experiment in their lives.

The final report, in Finnish but with an abstract and ‘Overview’ in English, can be found here:

Source: http://julkaisut.valtioneuvosto.fi/bitstream/handle/10024/162219/STM_2020_15_rap.pdf?sequence=1&isAllowed=y

Design of Finland’s experiment

On 1 January 2017, 2,000 long-term unemployed Finns, aged between 25 and 58 and who were at the time recipients of the ‘standard’ means-tested, minimum-income benefit of €560 a month were randomly selected (the ‘treatment’ group). For two years, they were given that same amount unconditionally – irrespective of with whom they were living, how much they were earning and whether they were actively looking for a job. Also it was a benefit which did not have to be claimed. The experiment ended in December 2018 followed by an extensive evaluation of outcomes and impacts. The evaluation compared and contrasted the ‘treatment’ group with a ‘control’ group of 173,000 individuals who were receiving unemployment benefits at the time but were not selected to receive the basic income in the experiment.

Findings of the experiment

Based on the accessible abstract and overview only, these are the main findings:

  • Review of other UBI experiments: show consistently that basic income does not substantially affect labour supply but increases well-being.
  • Days in employment: during the observation period from November 2017 to October 2018, days in employment increased, on average, about six days more in the group that received basic in-come than in the control group.

However, no significant employment effect was observed during the first year of the experiment. The modest positive employment effect in the second year of the experiment is regarded as a joint effect of the basic income experiment itself but also of amendments newly introduced to Finland’s national unemployment benefit legislation which increases conditionality.

  • Wellbeing: subjective well-being was studied with a survey that included questions about social and financial well-being, subjective health, job-search activity and employment, as well as about attitudes towards basic income. The survey was targeted at the 2,000 recipients of a basic income and at a sample of 5,000 persons in the control group.

The survey results showed significant differences between the groups. In general, basic income recipients assessed their well-being more positively. The recipients experienced less stress and symptoms of depression and better cognitive functioning than the control group. In addition, the financial well-being of basic income recipients was better: they reported to be more often able to pay their bills on time. The treatment group also reported that they trusted other people and social institutions more than did the control group; they had higher confidence in their future possibilities; and also experienced less bureaucracy.

  • Life on basic income:  based on interviews with a sub-sample of basic income recipients, the results are too lengthy and involved to report comprehensively here.  Highlights include:
  • some recipients felt that the experiment had provided them with a larger variety of legitimate modes of participation outside of paid labour, such as giving informal care
    • accounts of strengthened autonomy through an enhanced possibility of long-term financial planning; lessened stress related to bureaucracy and related demands; and improved possibilities of doing ‘meaningful things’ were common regardless of any changes in employment.
  • Media coverage: the experiment generated a great deal of interest around the world. The  evaluation examined how international media framed the issue, and which frame has been the most prominent and why. Five different frames were identified: the economic, the future, the conflict, the human interest and the political. The most prominent frame in the media data is the economic frame. However, the report’s authors note that: “Personal stories were a new and remarkable feature in the media coverage”.
  • Finnish public opinion: attitudes towards basic income were measured in a population survey. In this, 46% of the respondents agreed or somewhat agreed with the statement that a basic income should be introduced as a permanent part of the Finnish social security system. Difficulties in making ends meet and insecurity in the labour market were related to stronger support of basic income. Moreover, supporters of political parties that promote basic income seem to report higher levels of financial difficulties and insecurity in the labour market compared to the supporters of other parties.

Final thoughts

Whether or not the results of Finland’s national experiment lead directly to the implementation of UBI in that country or influence its adoption elsewhere any time soon, there is a strong sense that many more policy influencers/makers are giving greater attention to the potential of UBI to solve evident societal challenges.

In a recent article in Social Europe magazine on the outcome of the Finnish experiment, the author Philippe van Parijs states:

“Making access to the formal labour market easier for the excluded is an important purpose of a basic-income reform. But it is by no means the only one. Its far broader aim is to make our economy more resilient and our society more just, by increasing the economic security and freedom of choice of those with least of those.”

And he adds: “Whatever its limitations, this experiment provides food for thought and action to all those who believe basic income is the way to go. And with the pandemic shattering the economic security of many around the world, there are more of them than ever before. Thank you, Finland!”

Source: https://www.socialeurope.eu/basic-income-positive-results-from-finland

One thought on “What Scotland can learn from Finland’s experiment in universal basic income”

  1. I think the powers needed to introduce UBI in Scotland may be refused. It is what the SG does next that is of interest to me.

    Here are links to two talks. One is by Kim Noble on the effect of income on brain development in children. The other by Sir Harry Burns on what helps to develop “wellness”.

    Like

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