KELA: the social security body of Finland
By: Arjun Katechia
Since the start of this year, Finland has begun testing a base income policy, which consists of 2,000 of its citizens receiving a guaranteed basic income of €560 per month (currently $598), regardless of whether the citizens are employed or not. This policy was enacted by Kela, the social security body of Finland. The guaranteed basic income replaces existing unemployment benefits that citizens in Finland typically receive. Implemented due to Finland’s high unemployment rate of 8.1%, this program aims to discourage “benefit-induced” unemployment by removing the incentive to be unemployed. Though the poverty rate is already relatively low at 5.5% in Finland, this project also aims to reduce poverty.
The many benefits that will be realized from the implementation of this program outweigh its few flaws. The program assures protection for workers so that they can sustain themselves even if they are unable to find steady work. Additionally, this program provides a disincentive to staying unemployed. In the current system, unemployment benefits can potentially be more substantial than income from a low-paying job. The basic income policy ensures that working will always be a net benefit.
With the elimination of unemployment benefits for those receiving a basic income, members of Kela theorized that this basic income will provide the necessary foundation for voluntary unemployed citizens to find work. However, this will only prove true if unemployed citizens use the income as Kela intended, as a base to be built upon. Critics argue that the idea of a basic income might result in even more unemployment spurred by laziness because people will be able to have some financial security with a guaranteed income and will not look for work. Since they are receiving a startup income without having to do anything, workers may find no incentive to look for a job.
However, the reason why the income will prove beneficial is that it will still be necessary to find a job. In Finland, the average cost of subsistence living is €950/month, placing this income well below the line of subsistence. Therefore, the program clearly provides the necessary incentive for its recipients to find a job. Workers can be guaranteed a sense of security, however, as they know even if they can’t find a job they can default on the base income and not worry about starving.
If successful, the Kela hopes to expand this program in 2018 to much of the country. Similar basic income programs have also gained many proponents outside of Finland and have been, or are set to be implemented, in various cities in the Netherlands, the city of Livorno in Italy, the province of Ontario in Canada, and possibly the city of Glasgow in Scotland. While the benefits of this program seemingly outweigh the flaws, it is still unclear how this program will affect the unemployed population in Finland. Once tested for a sufficient amount of time, the effectiveness of this plan will be revealed. The base income model, if successful, can offer a great solution to any country hoping to reduce poverty and unemployment.