Saturday, February 11, 2017

Finland's Biggest Trade Union Blasts "Free Money Experiment"

As "Unworkable, Uneconomical And Ultimately Useless"

Tyler Durden's picture

Just over a year ago, we reported that in what was set to be a pilot experiment in "universal basic income", Finland would become the first nation to hand out "helicopter money" in the form of cash directly to a select group of citizens.
As of January 1, 2017, the experiment in "basic income" has officially begun, with Finland becoming the first country in Europe to pay its unemployed citizens the guaranteed monthly sum of 560 euros ($587), in a "unique social experiment which is hoped to cut government red tape, reduce poverty and boost employment." According to Olli Kangas from the Finnish government agency KELA, which is responsible for the country's social benefits, the two-year trial with the 2,000 randomly picked citizens who starting on the first day of the year, will receive a guaranteed income, with funds that will keep flowing whether participants work or not.
The money, which is guaranteed regardless of income, wealth or employment status, is well below the average private sector income in Finland of €3,500 per month, but is still revolutionary in its broad-sweeping approach and will be closely watched by economists around the globe for its social consequences.
The idea, at least in theory, is that a universal income offers workers greater security, especially as technological advances reduce the need for human labor. It will also allow unemployed people to pick up odd jobs without losing their benefits. The 2,000 lucky participants in the trial were randomly selected, but had to be receiving unemployment benefits or an income subsidy. The money they are paid through the program will not be taxed.  
According to Kangas, the scheme's idea is to abolish the "disincentive problem" among the unemployed. Cited by AP, he said that the trial aims to discourage people's fears "of losing out something", adding that the selected persons would continue to receive the 560 euros even after receiving a job.
Of course, not everyone is convinced that the creation of such a socialist utopia whereby everyone always acts in the interest of promoting the greater good of the collective is all that feasible.  Among that group of naysayers is the chief economist of the Central Organization of Finnish Trade Unions (SAK) who says that Finland’s basic income experiment is unworkable, uneconomical and ultimately useless. 
"We think it takes social policy in the wrong direction," said Ilkka Kaukoranta, chief economist of the Central Organization of Finnish Trade Unions (SAK), which has nearly 1 million members.
Not only does SAK say that the system may reduce the labor force -- for instance by tempting mothers of small children or those close to retirement to take more time off -- but the union also suggests that making it easier to refuse unpleasant jobs may create inflationary
In any case, the model being tasted in Finland is "impossibly expensive, since it would increase the government deficit by about 5 percent" of gross domestic product, said Kaukoranta.
That said, common sense arguments are in no way impacting the resolve of Europe's educated elites, with Guy Standing, a University of London professor, aruging that "99% of people" who receive free money for doing absolutely nothing will still continue to seek employment because they "want to improve their lives by earning more."
Guy Standing, a University of London professor and co-founder of the Basic Income Earth Network, calls Europe’s social-protection system "dysfunctional" and a "disincentive" to work. In a country like Finland, people who opt for a low wage job while on benefits may end up with a marginal income tax rate of "over 90 percent," he said in a telephone interview.
"It is very much the belief of us who favor a basic income that 99 percent of people want to improve their lives" by earning more, Standing said. Besides, a basic income has potential psychological and social benefits as well. "If you do not have basic security you cannot be rational," he said.
While we're not sure that 99% of people could agree on even the color of the sky, we're certain the great professor must be right.  After all, if the government decided to give its citizens an unlimited supply of apples every month we're sure that 99% of the population would still buy more's just simple economics really.