Business Essentials for Professionals

Finland’s Universal Basic Income Test Fails; Not An Alternative For Job Displacement?


Finland’s Universal Basic Income Test Fails; Not An Alternative For Job Displacement?
There are many who believe that advances in information technologies would result in shift in employment even though they also agree it is critical in achieving greater efficiency in various aspects of business and commerce. They argue that there would be loss of jobs and suppression of wages. And in line with those critics, a study by Oxford University and the Oxford Martin school estimates that there can be automation in at least 47% of the jobs in the US in the next 20 years.
Then there are some who also believe that the solution to this is the concept of Universal Basic Income (UBI) – a system where a basic wage is paid irrespective of whether one is employed or not. UBI is viewed to be the only alternative to the anticipated problem of wide spread unemployment because of developments in IT by entrepreneurs such as Elon Musk, Mark Zuckerberg, and even Richard Branson of the Virgin conglomerate.
The basic concept that drives UBI is somewhat similar to the premise that runs social programs like universal healthcare and other universal coverage systems.
Such ideas have dominated the welfare minded countries in Scandia for many years now. While they impose very high rates of taxes, they also have a system that allows them plough back the revenues generated from taxes to their citizens through social welfare projects.
In January of 2017, Finland, welfare state, was the first country that began working with the idea of UBI. Under a pilot scheme, about 2,000 Finns who were unemployed started receiving a UBI payment irrespective of whether they were in casual employment and odd jobs. The attitude and outcome of the dole on the sample of 2000 was compared with outcome of a control group comprising of 137,000 employed citizens of the country.
“Incidental earnings do not reduce the basic income, so working and … self-employment are worthwhile no matter what,” said a spokesperson for Kela, the Finnish governmental agency responsible for welfare programmes, at the time:
There were some however who identified at least two faults with the system. the first was an increase in taxes because every citizen had to contribute to the UBI amount and the second is that many believed that it would act as an incentive of not working.
The program was ultimately planned to include all adult Fins if the pilot project went through successfully, the Finnish government had said. The assumption of the government was that the country would be able to save on money in the long run because it this concept was less costly compared to keeping up with the present social welfare services that are prevalent for the unemployed there.
But the funding of the basic income would mean an increase in income tax of almost 30% according to the Organisation for Economic Cooperation and Development (OECD), the most well-known think tank of Europe. Additionally, the poverty rate of the country would increase from 11% to 14.1% as there would be greater income inequality because of the basic income scheme.
And the closure of the pilot project by the Finnish government following such analysis, other schemes are being tested out to reform the Finnish social security system.
But even though such an effort has failed, many still tout such efforts and alternatives to the shift in job patterns because of advancement of IT to boost people’s income.
Despite the critics claiming that UBI has failed in Finland, it can be said that Finland has failed UBI. Critics argue that the pilot programme was limited in the number of people included in it was too low to produce meaningful results and it needed to include a much larger population. That meant that much more needs to be spent in such social projects to allow for them to be actually tested on a large population.
But that money could be used for re-skilling of the displaced employees so that they are able to take up other types of employment. And this has been the trend of mankind ever since the development of the wheel and with the overall inventions and development of technologies.
(Adapted from