2017-06-26 07:53:23
An experiment on the effect of offering the unemployed a new form of welfare
JUHA JARVINEN, an unemployed young father in a village near Jurva, western
Finland, brims with ideas for earning a living. I m an artist and
entrepreneur. Sometimes I m too active, I don t have time to stop, he says. He
just agreed to paint the roofs of two neighbours houses. His old business,
making decorative window frames, went bust a few years ago. Having paid off
debts, he recently registered another, to produce videos for clients.
Mr Jarvinen says that for six years he had wanted to start a new business but
it had proved impossible. The family got by on his wife s wages as a nurse,
plus unemployment and child benefits. Mr Jarvinen had a few job offers in the
main local industries forestry, furniture-making and metalwork. But taking on
anything short of a permanent, well-paid post made no sense, since it would
jeopardise his (generous) welfare payments. To re-enroll for benefits later, if
needed, would be painfully slow. It is crazy, so no one will take a bit of
work.
Mr Jarvinen s luck turned in January. That is when he was picked at random from
Finland s unemployed (who total 10% of the workforce) to take part in a
two-year pilot study to see how getting a basic income, rather than jobless
benefits, might affect incentives in the labour market. He gets 560 ($624) a
month unconditionally, so he can add to his earning without losing any of it.
Not only is he active in seeking work and creating a business, he also says he
is much less stressed, relieved from the silly show of filling out monthly
forms or enduring official interviews to prove his job-seeking efforts.
If Mr Jarvinen is making progress, it is too soon to draw overall conclusions.
Kela, Finland s national welfare body and the organiser of the pilot, will not
contact participants directly before 2019, lest that influences outcomes.
Instead it monitors things remotely, using national registers of family
incomes, taxes paid, purchases at state-run pharmacies and more. These
(anonymised) data will be made available to researchers, who might ask, for
example, if consumption of antidepressants changes among grant recipients.
Some lessons in how to run such an experiment are emerging. Olli Kangas, who
says he is agnostic on basic incomes, helped to design the study and now runs
it for Kela. The process is far harder to implement than expected, he says with
a sigh. I never anticipated how difficult it is to put such a simple thing
into a complex system. It is a nightmare.
He laments fickle politicians who blow hot and cold, yet insist the study must
be wrapped up before an election in 2019. He grumbles that they don t use
calculators , calling them small boys with toy cars, who become bored and move
on . Finnish politics is intricate: the Centre party, Greens and a far-left
party back the study. So does a libertarian wing of the conservatives, hoping
to simplify the welfare state. Sceptics include traditional conservatives, many
Social Democrats and big unions.
Such unions, with (mostly male) members in permanent jobs in heavy industry,
manage unemployment funds and do not want to lose control, so they dislike the
idea of a basic income, says Mr Kangas. In contrast the idea appeals to those
that represent part-time service staff, such as (mostly female) cleaners or
retail workers. He says surveys show the wider public wavering: 70% like the
idea of the grant in theory, but that drops to 35% when respondents are told
already high income taxes would have to rise to pay for it.
The study s design faced constraints. The constitution ordains equality for
all, so getting permission for some welfare recipients to get special treatment
was difficult. That limitation, and a budget of only 20m (plus diverted
welfare funds that would have otherwise gone to the recipients), restricted the
sample size to just 2,000 people. Mr Kangas frets that might prove too few to
be statistically robust.
A larger sample might also suggest answers to more questions than the one of
whether a basic income makes the unemployed keener to work. Mr Kangas would
like to try similar grants on those with low-income jobs, to see if such
recipients choose to work less, for example. It would also have been
instructive but too expensive and politically difficult to give grants to
residents of entire municipalities to see how local economies are affected:
would the local demand for goods and services rise, for example.
Sympathisers see other limitations. Elina Lepomaki, a parliamentarian and chair
of Libera, a liberal-minded think-tank, argues a more affordable and hence
realistic approach would give recipients an option of saving a basic income for
later use. Kate McFarland, of the Basic Income Earth Network, which has
promoted the idea of basic incomes since the 1980s, says a two-year study is
too short to learn how the psychology of beneficiaries changes.
Whatever its flaws, the pilot is a good example of a Finnish fondness for
social experiments. Participants will be followed for ten years to identify
long-term effects. International interest has been intense: this month
television crews from South Korea and Sweden have been queuing up to see Mr
Kangas; he regularly lectures abroad and advises others on similar studies.
Just getting started counts as a success, he says. This is trial and error,
and the door is now open for better experiments.