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Universal Basic Income: A Finnish Social and Employment Experiment

In 2017, the Finnish Ministry of Social Affairs and Health is to mandate a pilot project aiming to assess the usefulness of universal basic income (UBI) as a means of radically overhauling the social security system all the while promoting employment and cutting government expenditures (http://stm.fi/artikkeli/-/asset_publisher/sosiaali-ja-terveysministerio-pyytaa-lausuntoja-osittaisen-perustulokokeilun-toteuttamisesta?_101_INSTANCE_yr7QpNmlJmSj_languageId=en_US). But how could an unconditional, tax-free, and non-means-tested grant of €560.-/month to every citizen possibly be financed; let alone be profitable for a country?

It can so in an astoundingly easy fashion, say Swiss Institut Zukunft [Future Institute] researchers, Müller; Renninger; and Straub (http://zukunft.ch/potentialanalyse-grundeinkommen.pdf). Through the contentment and motivation drawn out of the financial treat the authors expect the workforce to reach higher levels of labour productivity, leading to increased economic output and; ultimately; higher government tax income. This effect is amplified by the demand-side effect of increased consumer spending. The authors farther believe the diminishment of financial insecurity to lower the public cost of stress-related psychic and physical ailments whilst, simultaneously, incentivising entrepreneurship; the latter of which is theorised to grow stronger over time. Furthermore, when compared to conventional social benefits, UBI is less prone to benefit fraud, thus circumventing the misallocation of state funds (https://www.thersa.org/discover/publications-and-articles/reports/basic-income).

More tautologically than vindicatorily, various sources (www.economist.com/news/leaders/21699907-proponents-basic-income-underestimate-how-disruptive-it-would-be-basically-flawed, https://www.theguardian.com/world/2016/jun/02/state-handouts-for-all-europe-set-to-pilot-universal-basic-incomes, and many else) stress that UBI is in itself an indispensable concept in light of the speeding automation of work and the underemployment rooting therein.It is widely believed that humans will not be able to make a living from their jobs in conceivable future. The financial safety net spun by UBI, however, would enable them to temporarily leave the workforce to undergo (re-) trainings and qualify themselves for intellectual work that cannot be done by machines, thus forestalling the incomparably higher social expenses of mass underemployment.

So far resembling a utopian vision come true, UBI still has its downsides when it comes to being implemented in policy. One – seemingly simple! – barrier to be broken down in establishing UBI is the design of specific modalities for disbursement. Is UBI to be paid out using existing income tax mechanisms? But if so, what about non-income-tax payers, or those citizens not formally taking part in the economy? In what rota will disbursements be made, and how can sufficient liquidity be ensured at these times? There is also some difficulty in creating and maintaining an encompassing cadaster of recipients and monitoring whether disbursements are actually received by all those entitled. Ultimately, UBI is suspected to miss out on so-called psychological and behavioural feasibility: in societies that value work as a basis of legitimacy of wealth it will be hard to justify UBI to the broad public, and pressure will weigh on those leaving the workforce for living off the others’ pockets (psychological feasibility); and the policy runs the risk of undermining itself through driving people out of the workforce, thus drying up the source of funds used to finance UBI (behavioural feasibility).

Amongst the Finnish, the expectation prevails that UBI will heave up employment by incentivising current recipients of social benefits to take on part-time jobs without having to fear the loss of financial support (http://www.forbes.com/forbes/welcome/?/sites/francescoppola/2016/08/27/&toURL=http://www.forbes.com/sites/francescoppola/2016/08/27/&refURL=&referrer=). In the light of recent research, whatsoever, the pilot is more of a surprise package with manifold possible outcomes.

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Author: studentnovasbe

Master student in Nova Sbe

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