Abu Dhabi, UAEThursday 21 November 2019

Finland's free cash fails to get people into new jobs

Universal basic income recipients did not find as many jobs as desired, but were rewarded by a boost in happiness

Finland has a culture of high taxation – the average personal rate is 50 per cent – and popular support for wealth redistribution EPA
Finland has a culture of high taxation – the average personal rate is 50 per cent – and popular support for wealth redistribution EPA

A two-year trial by Finland’s government, in which 2,000 jobless people aged 25 to 28 were given a monthly payment of €560 (Dh2,331), failed to create more employment.

A report on the Nordic country’s Basic Income Experiment, published on Friday, revealed that the handouts – which came without conditions – did not lead to more people taking up work.

However, the health and well-being of recipients fared better compared to those who did not receive the allowance.

“Those with basic income had less stress and concentration and health problems than in the control group. They also relied more strongly on their future and their social potential,” said Minna Ylikanno, senior researcher at the government’s social security agency, Kela.

Researchers denied that the findings – which covered only the first year of the trial – were not contradictory, as increased well-being could have positive long-term effects but little impact on employment prospects in the short term.

Results for the second year of the scheme are due in 2020.

Finland’s personal income tax rates averaged 51.6 per cent last year, contributing to a culture of wealth redistribution that enjoys strong popular support.

Backing for the scheme swept the globe, with supporters suggesting universal basic income could be a bulwark against redundancies forced by the rise of artificial intelligence.

Y Combinator, a tech company in Silicon Valley, has plans for a $60 million (Dh220.35m) project to provide basic income for 3,000 Americans. Advocates of the plan in Britain believe poverty could be eradicated if the scheme were to be introduced there.

British researchers think giving £12,000 (Dh57,000) on top of the salary of a minimum-wage worker (about £14,000), could lift them from the bottom 10 per cent of earners to average incomes.

“Higher incomes are associated with better physical and mental health outcomes, a lower likelihood of committing a crime and lastly better outcomes for children at school,” British think tank, the Centre for Social Justice, said.

Facebook founder Mark Zuckerberg, inventor of the internet Tim Berners-Lee and Tesla’s Elon Musk also support the universal income idea.

Support for the payments has grown in the US. Almost half of Americans approve of the idea of introducing basic income. Eleven years ago, barely a tenth of Americans supported it.

Guy Standing, co-founder of the Basic Income Earth Network, rejected claims it would make people lazy.

“It’s an insult to the human condition,” Mr Standing told the World Economic Forum in Davos, Switzerland last year.

“Basic incomes tend to increase people’s work rather than reduce it.”

Pushing through political support in the US could be difficult.

“Anything that sounds like welfare gets a much more negative reaction from Republicans,” said Frank Newport, editor-in-chief of pollsters Gallup.

A major reason behind Republican opposition could be the taxation needed to fund such payments or equivalent state welfare.

Updated: February 9, 2019 07:53 PM