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Finlands Universal Basic Income Trial

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What We Can Learn From Finlands Basic Income Experiment

By Tim Ward
Futurism
July 26, 2017

Finland’s Failed Experiment?

Universal basic income (UBI) is a hot topic in the world today. So far, however, very few experiments have been conducted to ascertain precisely how best to implement such a system. For that reason, a small-scale UBI experiment in Finland has drawn much attention as one of the few real-world examples we have of how UBI could work.

The trial BEGAN earlier this year and is being managed by Kela, the national social-insurance institute. Kela selected 2,000 Finns between the ages of 25 and 58, each of whom was receiving some form of unemployment benefits, to receive 560 (about $645) per month.

In theory, this project would give the world new insights into the logistics and consequences of introducing a UBI system. However, the trial has been riddled with issues and mistakes from the start due to improper planning and a troubled political environment, and now, it is little more than a lesson of how not to run a UBI experiment.

Among the most serious errors was a slashing of the sample size to just one-fifth the number suggested in the original proposition. This extremely small dataset is not enough to be scientifically viable.

Additionally, the trial kicked off during a period of economic turmoil in Finland. The country’s economy had suffered three recessions since 2008, and this state-sponsored UBI project was launched in a time of economic austerity.

Although the results of the project, which will be announced in 2019, may give us some insights into the viability of future UBI programs, even those who designed the Finnish experiment are skeptical of its validity. Olli Kangas, Kelas coordinator for the program, TOLD THE ECONOMIST that it was currently in a state of neglect, comparing politicians’ actions to “small boys with toy cars who become bored and move on.”

A Worldwide Question

Universal basic income has been proposed as a solution to two issues that are currently shaking society: poverty and the integration of artificial intelligence (AI) into the jobs sector. In an INTERVIEW WITH THE GUARDIAN, Stephen Hawking warned that the latter will cause “job destruction deep into the middle classes,” and ELON MUSK HAS ASSERTED that there will be fewer and fewer jobs that “a robot cannot do better” as the technology develops.

The idea of a UBI system is to automatically award every citizen with a state-sponsored wage, which could then be augmented by further work. This would provide those displaced by robotic systems with a way to support themselves on the most basic level.

Although Finland’s lackluster experiment remains the largest state-sponsored experiment to date, various governments are considering conducting their own UBI trials.

India, the world’s largest democratic country, has endorsed the system claiming in a report that it is “basically the way forward” - and is now considering the best way to introduce it to its populous. The state of Hawaii, which also recently accepted the terms of the Paris Agreement despite Donald Trump’s federal withdrawal, has also announced on Reddit that they will “begin evaluating universal basic income.”

The system is not without its skeptics, however. Experts question who would provide the money to fund such projects, asserting that a universal basic income of $10,000 a year per person could add approximately $3 trillion to national spending in the U.S.

Individuals such as Mark Cuban and Robert Gordon, an economist at Northwestern University, have suggested that we should optimize existing benefits systems. Gordon told the MIT Technology Review that his idea is to make ԓbenefits more generous to reach a reasonable minimum, expand the Earned Income Tax Credit, and greatly expand preschool care for children who grow up in poverty.

We won’t know for sure how effective a UBI could be until someone actually implements an experiment large enough to provide meaningful data, and right now, Finland doesnt appear to be that entity.

SOURCE

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Money for nothing: is Finland’s universal basic income trial too good to be true?

Europe’s first national experiment in giving citizens free cash has attracted huge media attention. But one year in, what does this project really hope to prove?

By Jon Henley in Helsinki
January 12, 2018

One year on from its launch, the world remains fascinated by Finland’s groundbreaking universal basic income trial: Europe’s first national, government-backed experiment in giving citizens free cash.

In January 2017, the Nordic nation began paying a random but mandatory sample of 2,000 unemployed people aged 25 to 58 a monthly L560 (475). There is no obligation either to seek or accept employment during the two years the trial lasts, and any who do take a job will continue to receive the same amount.

With the likes of Mark Zuckerberg, Stephen Hawking, Elon Musk and Bernie Sanders all proponents of a universal basic income (UBI) model, Finnish officials and participants have been inundated with media requests from around the globe. One participant who hoped to start his own business with the help of the unconditional monthly payment complained that, after speaking to 140 TV crews and reporters from as far afield as Japan and Korea, he has simply not been able to find the time.

But amid this unprecedented media attention, the experts who devised the scheme are concerned it is being misrepresented. “It’s not really what people are portraying it as,” said Markus Kanerva, an applied social and behavioural sciences specialist working in the prime ministers office in Helsinki.

“A full-scale universal income trial would need to study different target groups, not just the unemployed. It would have to test different basic income levels, look at local factors. This is really about seeing how a basic unconditional income affects the employment of unemployed people.”

While UBI tends often to be associated with progressive politics, Finland’s trial was launched - at a cost of around 20m ($17.7m) - by a centre-right, austerity-focused government interested primarily in spending less on social security and bringing down Finland’s stubborn 8%-plus unemployment rate. It has a very clear purpose: to see whether an unconditional income might incentivise people to take up paid work.

Authorities believe it will shed light on whether unemployed Finns, as experts believe, are put off taking up a job by the fear that a higher marginal tax rate may leave them worse off. Many are also deterred by having to reapply for benefits after every casual or short-term contract.

“It’s partly about removing disincentives,” explained Marjukka Turunen, who heads the legal unit at Finland’s social security agency, Kela, which is running the experiment. Kanerva describes the trial as an experiment in “smoothing out the system.”

To maintain privacy and avoid bias, Kela is not contacting any of the 2,000 participants for the duration of the two-year trial. A handful have given interviews to journalists (several have said they feel less stressed thanks to the scheme), but no official conclusions are yet being drawn from these anecdotal experiences.

According to Kanerva, however, the core data the government is seeking on whether, and how, the job take-up of the 2,000 unemployed people in the trial differs from a 175,000-strong control group - will be robust, and usable in future economic modelling when it is published in 2019.

Unintended benefits

The idea of UBI had been circulating in left-of-centre political circles in Finland since the 1980s, mainly as a way to combat the economic and social consequences of falling industrial employment by freeing all from students to the elderly; stay-at-home parents to the unemployed - to make meaningful contributions to society by, for example, volunteering.

Appealing both to the left (who believe it can cut poverty and inequality) and, more recently, to the right (as a possible way to a leaner, less bureaucratic welfare system), UBI looks all the more attractive amid warnings that automation could threaten up to a third of current jobs in the west within 20 years. Other basic income schemes are now being tested from Ontario to rural Kenya, and Glasgow to Barcelona.

But there is little consensus so far on what UBI should look like in practice, or even on the questions that need to be answered first: which model to adopt, what level of payment, how to combine UBI fairly with other social security benefits, and how the tax and pension system should treat it.

For UBI purists, the fact that the monthly Finnish payment roughly equivalent to basic unemployment benefit - is going to a strictly limited group, and is not enough to live on, disqualifies the Finnish scheme. But while it may not reveal as much as a broader trial would have, the schemes designers are confident it will shed new light on several key social policy issues.

For example, Kela hopes additional data that is being collected as part of the trial from healthcare records will provide useful information on whether the security of a guaranteed unconditional income, paid in advance so beneficiaries can budget for it, might have a positive impact on anxiety, prescription drug consumption or doctor’s visits.

One participant has said she is less anxious because she no longer has to worry over calls from the job centre offering a job she can’t accept because she is caring for her elderly parents, Turunen said. “We may be able to see from the trial data whether it has had unintended benefits - such as reduced medical costs.”

The trial data may also allow the government to spend less on bureaucracy by simplifying Finland’s complex social security system - currently, it offers more than 40 different means-tested benefits - which is struggling to cope with a 21st-century labour market of part timers, short-term contracts and start-ups.

The benefit system is simply “not suited to modern working patterns,” Turunen said. “We have too many benefits. People don’t understand what they’re entitled to or how they can get it. Even experts don’t understand. For example, it’s very hard to be in the benefit system in Finland if you are self-employed - you have to prove your income time and time and time again.”

Perhaps most significantly, “the trial marks a real breakthrough for field experiments,” according to Kanerva. Rolled out in record time and after a brief, one-line pledge in the governments platform, it had to function alongside all existing social security laws and clear numerous legal obstacles - including Finland’s constitution, which requires all citizens to be treated equally.

“It was a huge effort to get it over the line,” Turunen said. “The government was determined it must be based on specific legislation - most experiments are not and that it had to launch in January last year ... It was quite a task.”

The Finnish experiment’s design and objectives mean it should perhaps not really be seen as a full-blown UBI trial at all, cautioned Kanerva: People think we’re launching universal basic income. Were not. W’֒re just trialling one kind of model, with one income level and one target group.

But as experts around the world increasingly debate how a bold but ill-defined concept might actually work in practice, the Finnish experiment will at least “produce meaningful results - albeit in a limited field,” according to Kanerva. In an area where convictions are often more abundant than facts, It has forced people to talk specifics.

SOURCE

Posted by Elvis on 01/15/18 •
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