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Licensed Unlicensed Requires Authentication Published by De Gruyter January 15, 2015

Good and Bad Times of Social Innovations: The Case of Universal Basic Income in Finland

Pertti Koistinen ORCID logo and Johanna Perkiö
From the journal Basic Income Studies

Abstract

This article draws on innovation and agenda-setting theories to identify critical points in the realization of basic income in Finland. Our empirical data comprise 13 models of either unconditional basic income or social security reform proposals with some similarity to basic income. The models examined were published in Finland between 1984 and 2011. Using these data, we build a conceptual framework that enables us to discuss the role of the content, players, political and macro-economic context, and public interpretations in the successes and failures of the basic income initiatives.

Appendix

Table 1

The characteristics of the basic income models in Finland in 1984–2011

Year, author and titleContent of the proposalRelation to the existing systemObjectives and alleged effectsMacro-economic contextPolitical contextReception and outcomes
1.1984 Professors Jaakko Outila & Paavo Uusitalo: Sabbatical Leave and Citizens’ WageRecipients: all 15–64-years-old who would voluntarily take 6 months leave

monthly amount: median income (approx. 3,000 mk/ inflation adjusted €1030, taxable)

other specific features: the proposal consisted of a tax-reform and voluntary sabbatical leave that was available to all citizens every 10 years
• Citizens’ wage would be a parallel system to the existing social security

• combined with a tax reform that would support small enterprises and promote employment

• reform includes reduction of employment costs and facilitating the combination of small incomes with unemployment benefits
• Solving the problems of unemployment and avoiding segmentation of the population

• equal distribution of the benefits of automatization

• decreasing the labour supply and promoting mild work redistribution

• providing citizens with opportunities for education, rehabilitation and hobbies

• promoting innovation and economic activity
• Increasing automatization of production

• transformation from an industrial towards an information- and service-based economy

• economic growth

• unemployment was peaking at over 7% in the late 1970s, but stabilized to about 5% during the early 1980s
• A government of the Social Democratic Party, the Centre Party, the populist Finnish Rural Party and the Swedish Peoples’ Party

• the government’s main objectives were tackling increasing inflation and lowering unemployment rates

• the idea of the ‘citizens’ wage’ was new in Finland
• The reform was proposed by academics with no political profile

• the Ministry of Labour supported the idea and conducted experiments on temporary leave in some municipalities and sectors

• later, a system of job alternation leave (temp. law 1996 and perm. law 2003) was established

• the initiative promoted discussions on job sharing, which was a popular idea at the time
2.1987 Sociologist Matti Virtanen: Basic IncomeRecipients: all adults

monthly amount: 3000 mk (inflation adjusted €900), tax-free

financing sources: taxation on raw materials, energy and environment

administration: employment offices

other specific features: wage subvention
• BI would replace most conditional benefits

• in order to reduce employment costs, wages are reduced by the amount of BI
• To support the transformation ‘from factory to studio’ and to reduce the workload in industrial sector

• BI would enable studying, various self-organized activities and new forms of work

• the reform would support part-time work and the independence of individuals
• Economic boom

• 5% unemployment

• ongoing transformation from industrial production towards information- and service-based production

• ongoing liberalization of the financial and capital markets
• A blue-red government including the National Coalition Party, the Social Democratic Party, the populist Finnish Rural Party and the Swedish Peoples’ Party

• academic and political debate on the crisis of work and welfare society
• The model was introduced as an overall new alternative vision of the future

• it was rejected by trade unions but welcomed by younger generations and the well-educated

• it opened up a new, widespread discourse on the future of work and the welfare society
3.1988 Left-wing economist Jan Otto Andersson: Citizens’ IncomeRecipients: all citizens

monthly amount: for children 1000 mk (inflation adjusted €288), for working-aged people 2000 mk (€576), and for the disabled 3000 mk (€864), tax-free

financing sources: 27% taxation on all incomes except for citizens’ income + 25% value-added tax. Increased taxation on the use of natural resources, property and inheritance.

other specific features: wage subsidy
• Introduction in four steps (each lasts one electoral term): 1. Recipients of social security benefits. 2. Tax relief for small incomes. 3. Those ineligible for social security benefits due to family member’s income. 4. All citizens (+ removal of the tax relief)

• cutting down the wages by the amount of CI

• the first model that contains economic calculations
• The author developed three alternative visions of the citizen’s income society: blue-red, blue-green and red-green

• inspired by the 1986-founded BIEN and global left-green intellectual circles
• Economic boom and speculation in the financial and real-estate markets

• the unemployment rate was falling below 5%

• strengthening of the neo-liberal turn in macro-economic policy
• A blue-red government including the National Coalition Party, the Social Democratic Party, the populist Finnish Rural Party and the Swedish Peoples’ Party

• left-wing parties were still politically strong

• the end of the expansion of the welfare state
• The proposal was published in a book discussing the future of the left

• Andersson developed a seemingly realistic solution to finance the citizen’s income

• the model was welcomed by the young red-greens, but considered unrealistic by most parties and trade unions

• Due to Andersson’s activism, the citizens’ income was adopted in the first party platform of the Left Alliance when it was founded in 1990
4.1989 Social Democrat economist Pekka Korpinen: Citizens’ IncomeRecipients: all

monthly amount: rather high

• financing sources: 30% income taxation, highly progressive property taxation

other specific features: abolition of free-of-charge public services
• High citizens’ income would enable citizens to pay for public services

• to increase workers’ ownership of production

• to reduce working time and make work voluntary

• taxation and citizens’ income would be the only means for income redistribution
• Criticism of bloated public sector and high income taxation

• vision of freedom without state: transforming nation states into globally integrated autonomous communities

• work as a means of self-realization; increase in creativity and working motivation
• Economic boom

• the unemployment rate falling to almost 3%

• the crises of Soviet-style socialism and Keynesian state capitalism

• critical discourse on the ‘endless expansion’ of the welfare state among political elites

• the summit of the 80s ‘casino capitalism’
• A blue-red government including the National Coalition Party, the Social Democratic Party, the populist Finnish Rural Party and the Swedish Peoples’ Party

• perestroika and the emerging discourse of the failures of Soviet-style socialism and planned economy
• The model was presented by a Social Democrat and one of the leading leftist economists, but it was neglected by the Social Democratic Party

• received some attention in the public debate, but was mostly considered utopian
5.1992 Ilpo Lahtinen (Secretary of the National Union of University Students): Partial Basic IncomeRecipients: all citizens and foreigners who have lived in the country over 5 years

monthly amount: 2000 mk (inflation adjusted €477), reduced amount for children

financing sources: 40% flat-rate income tax, removal of tax allowances

administration: a special ‘basic security centre’ and municipal ‘basic security offices’

other specific features: contains means-tested ‘basic income supplement’
• Integration of social security and income taxation

• the model consists of unconditional basic income + means-tested basic income supplement/care allowance (all tax-free) + discretionary housing allowance and subsistence subsidy

• BI would replace most tax deductions and a large part of the income transfers

• progressive income taxation

• removal of labour market regulation, minimum wages and retirement age regulations
• Inspired by Juliet Rhys-Williams’s model in the UK

• aimed at creating a model that could no longer be ignored as an irresponsible daydream

• to tackle unemployment and poverty, and remove income traps

• to reduce social divisions, increase individual freedom and diminish economic dependency between family members

• to make working time and salaries flexible

• to enhance democracy and citizenship

• BI was presented in the continuum with reforms like franchise, public health care and compulsory basic education
• Economic downturn and the deepest recession in Finnish history

• unemployment rate skyrocketed from 3.2% in 1990 to 6.7% in 1991, and further to 11.2% in 1992
• A centre-right government including the Centre Party, the National Coalition Party, the Swedish People’s Party and the Christian Democrats• The model was in many ways more developed than the previous basic income models

• it was based on the work of the 1989-founded Basic Income Working Group, which included social policy experts and representatives from almost all the political parties

• in the midst of the deep economic crisis, the proposal received relatively little attention
6.1994 Green Member of Parliament Osmo Soininvaara: Basic IncomeRecipients: all citizens

monthly amount: 1700 mk (inflation adjusted €393) for a single adult household, 2900 mk (€670) for two-adult households

financing sources: 53% flat-rate income taxation, 10% extra tax for the highest income level

other specific features: conditional extra benefit for small income households
• All existing benefits would be merged into two categories: unconditional BI and conditional extra income

• BI as a subvention to the low income sector

• the model was calculated so that it would reduce public expenditure

• model could also be implemented as a NIT

• introduction in two steps
• Inspired by Milton Friedman

• to increase economic efficiency and service-based production and to tackle the high unemployment

• possibility to cut down wages in low productivity sectors

• slogan: ‘rather underemployment than unemployment’
• The economic recovery had begun after the deep recession

• the unemployment rate peaked at 16.6%

• public sector cuts during the recession
• A centre-right government including the Centre Party, the Coalition Party, the Swedish People’s Party and the Christian Democrats

• massive political concern over high structural unemployment

• emerging discourses on incentive traps and active labour market policy
• The model was first published in a report ordered by the Ministry of Social Affairs and later in Soininvaara’s award-winning book ‘The Survival Doctrine of the Welfare State’

• the model was the first to be adopted (in a slightly modified form) by a political party (the Green League)

• triggered a widespread media debate and received some interest among social policy experts
7.1997 Kati Peltola (social policy expert and a left-wing politician):Ground Income and Civil WorkRecipients: those without other income

monthly amount: adults 3500 mk (inflation adjusted €786), includes housing benefits + children 1500 mk (€337, conditional)

financing sources: production taxation

administration: taxation and income-transfers administered by a new ‘peoples’ money institution’

other specific features: ‘ground income’ only for those whose income is below a certain threshold, has to be earned by civil work
• Everything below the 3500 mk (€786) monthly income is tax-free

• job-sharing by cutting down the weekly working time to 30 hours

• guaranteed part-time civil work provided by municipalities, unemployment benefit only temporary (max. 4 months), discretionary social security only for those unable to work

• progressive income taxation to be used for public services, production tax to be used for all income-transfers
• To simplify the taxation and benefit systems

• to include all who are able to work in gainful employment

• to guarantee all individuals an adequate income and work

• critical to the idea ofunconditional basic income: ‘everyone must contribute to the common well-being’
• Economic boom after the deep recession

• unemployment remained high (12.7%)

• the shift from Keynesianism to neo-liberal economic policy

• the cuts in the public sector made during the recession were not reversed
• A Social Democratic Party-led ‘rainbow government’ which included the National Coalition Party, the Swedish Peoples’ Party, the Left Alliance and the Green League

• widespread discussion on the future of economic policy and the welfare state throughout society

• discursive shift in the objectives of social policy: ‘from social justice to competitiveness’
• The proposal was discussed in the printed media

• political parties and ministries showed interest in the model

• the proposal was made by an individual activist, and it did not earn a notable status within the Left Alliance
8.1998 The Young Finns (a small liberal party): Basic IncomeRecipients: all citizens

monthly amount: 0–16-year-olds 325 mk (inflation adjusted €72), 16–60-year-olds 1300 mk (€288), 60+ year-olds 1820 mk (€403) (increases gradually)

financing sources: flat-rate income taxation
• Everything below a 4000 mk (€886) monthly income is tax-free

• those unable to work entitled to a higher amount of BI and means-tested benefits

• housing subsidies for those with a low income

• service vouchers and social loans

• public sector would provide ‘civil work’ with lower salary
• BI was not supposed to provide a livelihood, but instead enable one to live on a small income

• transformation into local and individual bargaining in labour markets

• the model would reduce public expenditure

• aimed at increasing work incentives and social justice
• Economic boom

• the unemployment rate was declining gradually (11.4%)
• The proposal was a part of the parliamentary election campaign of the party

• sustainability of the welfare state was on the political agenda

• the Social Democratic Party-led government had introduced cuts to the welfare sector

• despite the government’s efforts, the unemployment rate was declining slowly
• The party activists promoted their model in the media

• the party lost its two seats in parliament and then decided to dissolve itself

• the model was buried along with the party
9.1998 The Centre Party: Conditional Basic Income and Work ReformRecipients: universal social insurance

monthly amount: -

financing sources: contributions from the state, employers and employees

administration: The Social Insurance Institution of Finland (Kela)

other specific features: a model for statutory universal unemployment insurance, could also be implemented as a NIT
• Tax relief for small and medium income groups

• reductions in employers’ costs, especially in labour intensive sectors

• support for use of waged labour in households

• expanding local bargaining

• activating ‘work reform’ was an essential part of the proposal
• To simplify the social security system, remove incentive traps and create new jobs

• flexible working time and job sharing

• to support flexible movement between education, domestic work and employment

• the party distanced its proposal from unconditional ‘social transfer automats’

• to replace the old corporatist system by a new tripartite of the unemployed, employed and entrepreneurs who all share common interests
• See above, proposal 8• See above, proposal 8

• the proposal was a part of the party’s parliamentary election campaign

• at the time, the party was in opposition
• The left-wing parties and trade unions shot down the work reform proposal as neo-liberal and detrimental to workers’ rights

• the Centre Party lost the election and later abolished work reform from its agenda
10.2001 Researcher Anita Mattila: Adjusted Basic Income IRecipients: unemployed and low-income groups

monthly amount: 3600 mk (inflation adjusted €743), taxable

administration: The Social Insurance Institution of Finland (Kela)
• BI adjusted to the prevailing social security system

• replaces minimum unemployment benefits and to some extent housing subsidies and social assistance

• earnings-related benefits remain as they are
• Promotes employment and guarantees the continuity of income in irregular work

• enables withdrawal from the labour market and independent civil work

• the author proposed an empirical experiment to be conducted in a small, high-unemployment municipality

• to reduce bureaucracy and the control directed at the poor

• to increase individuals’ control of their own life and the opportunity to make free choices
• Economic growth

• declining unemployment (9.1%)
• A rainbow government of the Social Democratic Party, the National Coalition Party, the Swedish Peoples’ Party, the Left Alliance and the Green League• Mattila introduced two basic income models in her doctoral dissertation

• it was published at the time when BI had mostly vanished from the public discussion

• the Green League made a (unsuccessful) parliamentary proposal on the experiment of Mattila’s models, and some small municipalities in the Eastern Finland presented themselves as volunteers for the BI pilot
11.2001 Researcher Anita Mattila: Adjusted Basic Income IIRecipients: those eligible for social security benefits and those who have earned income

monthly amount: max. 3200 mk (inflation adjusted €659)

administration: The Social Insurance Institution of Finland (Kela)

other specific features: all income below 1500 mk (€310) tax-free, the amount of BI declines linearly when the income increases
• See above, proposal 10• See above, proposal 10• See above, proposal 10• See above, proposal 10• See above, proposal 10
12.2007 The Green League: Basic IncomeRecipients: citizens permanently residing in Finland

monthly amount: €440 in 2007, raised to €540 in 2011 (tax-free)

financing sources: 2-layer income taxation (39% / 49%) + increase in environmental and capital gains taxation

administration: The Social Insurance Institution of Finland (Kela)
• Unconditional BI at the level of current minimum unemployment benefits was intended to replace all income-transfers except for housing benefits, occasional social assistance and earnings-related benefits

• contains a micro-simulation analysis of its effects on public economy and households

• claimed to be neutral for public financing
• To reduce bureaucracy and simplify the system

• to remove income traps and to always make work beneficial

• to support micro-entrepreneurship, irregular employment and new forms of work and education

• to reduce categorization and support people’s freedom to define their own lifestyle and identity
• Long, ongoing restructuring of the economy and labour markets

• deepened social divisions and growing income inequality

• increase in atypical and self-employment

• an unemployment rate of 6.9%
• The model was published before parliamentary elections when the Green Party was in opposition

• widespread media discussion about the precarity movement including their demand for basic income

• public discussion on the problems of poverty and irregular jobs
• Triggered a major media discussion with mostly positive reactions

• the leaders of other parties did not support the idea

• the Green League won one seat and entered the centre-right-green government

• the new government set up a committee to prepare a major reform to the social security system

• due to conflicting interests, the committee failed to propose any significant reforms
13.2011 The Left Alliance: Reforms Towards Basic IncomeRecipients: all permanent residents

monthly amount: €620 universal + €130 discretionary supplement (e.g. in the cases of unemployment, illness, children’s homecare, etc.)

financing sources: progressive income and capital taxation on the scale 30–57% (BI costs €3.6 billion)

administration: The Social Insurance Institution of Finland (Kela)
• The model would replace all income transfers except for housing benefits, occasional social assistance and earnings-related benefits

• contains a micro-simulation analysis of its effects on public economy and households

• the working group proposes a gradual implementation by firstly merging all minimum benefits and raising their level
• To redistribute income and combat poverty

• to reduce the control and humiliation directed at the welfare beneficiaries

• to facilitate the combination of social security and small incomes

• to enhance the bargaining power of those in precarious employment

• to expand the concept of work and support individual emancipation

• the model would reduce the poverty rate from 13.2% to 9.1%

• the Gini coefficient would drop from 0.255 to 0.223

• all those whose monthly income is below €2980 (60% of the population) would benefit from the model
• Economic downturn and a deepening global financial crisis

• growing budget deficits

• poverty traps and the working poor as a phenomenon became topical issues

• an unemployment rate of 7.8%
• The model was first released as a discussion paper by the working group before the 2011 parliamentary elections, when the party was in opposition

• a government of the Centre Party, the National Coalition Party, the Green Party, and the Swedish People’s Party

• pre-election discussion on poverty and the insufficient level of the minimum social security

• disappointment with the modest outcomes of the social security reform committee
• At the time of its publication as a discussion paper, the model did not receive much attention

• The Left Alliance entered the government led by the National Coalition Party

• the party council of the Left Alliance approved the model on 17 Nov 2012

• the approval was noticed, e.g. by the biggest daily newspaper

• the government raised minimum unemployment benefits, removed the means-test for the labour market subsidy and facilitated the combination of small incomes with social security benefits

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Published Online: 2015-1-15
Published in Print: 2014-12-1

©2014 by De Gruyter

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