Finland’s closely watched two-year experiment with basic minimum wage came to an end on February 8 following the delivery of a final report.
The experiment entailed the disbursement of a €560 tax-free benefit to 2,000 randomly selected unemployed recipients, which allowed them to seek parallel employment or open their new business.
The pilot programme was being watched by governments around the world as a possible way to encourage the unemployed to seek low-paid or temporary work without fear of losing their benefits. The experiment was imbued with a sense of urgency due to widespread welfare cuts and the fear that automation could eliminate thousands of jobs.
The basic income experiment failed to increase employment in the first year (2017) of the two-year experiment, but there was a noticeable improvement on the recipients’ wellbeing with recipients reportedly feeling less stressed, healthier, and more confident in the future.
“During the first year of the experiment the recipients of basic income were no better or worse off than the control group at finding employment in the open labour market,” said Ohto Kanninen, Research Coordinator at the Labour Institute for Economic Research, in a government statement.
This was not entirely surprising as many jobless people have few skills or struggle with difficult life situations or health concerns. “Economists have known for a long time that with unemployed people, financial incentives don’t work quite the way some people would expect them to,” Kanninen said.
The benefits made it easier to set up a business by reducing red tape but did not boost employability in the short run.
Economists suggest that unemployment has many variables, including the geographic dispersion of job opportunities, the skill of finding work, and the need for requalification.
Unemployment in Finland has been persistently high for years but reached a 10-year low of 6.6% in December. One of the ways of pushing up employment was the imposition of benefit sanctions on unemployed people who refused work. Prime Minister Juha Sipila has proposed limiting the basic income to poor people, but they would be subject to sanctions if they reject a job offer.
Finland is not alone in having experimented with a similar benefit. Italy is planning to introduce a “citizens’ wage” in April in a major overhaul of the welfare state as it will offer income support to the unemployed and poor. France currently has a basic income for residents who are out of work and those earning very low wages.