A brief history of basic income in Finland

The concept of basic income (perustulo) emerged in Finnish policy discourse after the mid-1980s and dominated the debate around the mid-1990s (Koistinen and Perkiö, Reference Koistinen and Perkiö2014; Perkiö, Reference Perkiö2018).Footnote ² The context of the early debate in the 1980s was a small increase in unemployment at a time of economic affluence, with primary focus on the flaws of the social security system and the persistence of poverty in the recently matured Finnish welfare state. The idea of a ‘guaranteed minimum income’ gained momentum on the agenda of the 1983–1987 government in an attempt to streamline the different social protection systems, improve their coverage and strengthen the social rights of all citizens by guaranteeing a minimum standard of living. In the latter half of the 1980s, most parties supported some variant of the proposal. Meanwhile, during this time the related but distinct concept of a ‘citizen's wage’, focused on the income-work nexus against the backdrop of technological progress, also featured in the debate.

A second wave of the basic income debate can be located in the second half of the 1990s. In the aftermaths of the 1990s economic recession, the idea of basic income was strongly reframed by its advocates in a way that resonated better with the evolving political climate in social policy (Perkiö, Reference Perkiö2018). Basic income became predominantly understood as a tool for activation policy, albeit distinct from conventional activation measures focused on bureaucratic control and sanctions. By eliminating incentive traps inherent in social security and guaranteeing a small secure income, basic income is expected to increase individuals’ economic activity. In the middle and late 1990s, both the Centre Party and the Green Party (as well as a small liberal party, the Young Finns) advocated basic income from an activation perspective. By contrast, the Left Alliance advocated for a progressive ‘citizen's income’, aimed at reducing income inequality and increasing bargaining power for vulnerable workers.

Following several years in which the debate was muted, in 2007 the Green Party published a model for implementing a partial basic income system that for the first time used microsimulation modelling to estimate the impact on the public economy and income distribution (Koistinen and Perkiö, Reference Koistinen and Perkiö2014). Subsequent proposals in this third wave of the debate broadly followed the design of the Greens’ model, including the 2011 Left Alliance proposal as well as the models examined by the research team preparing the basic income experiment (Kangas and Pulkka, Reference Kangas and Pulkka2016). These models share a number of design features: minimum unemployment security as a reference point; leaving social assistance, earnings-related benefits and housing benefits untouched; and financing basic income through income taxation.

In recent years, several organisations put forward proposals for streamlining the benefit system and integrating taxes with benefits, which often contained some elements of basic income. The topic also received regular coverage in mainstream media. In 2013 the debate accelerated when the advocacy group BIEN Finland ran a citizen's initiative campaign; while ultimately failing to collect the requisite amount of signatories, the initiative boosted media attention for basic income. In 2015 the new government under Prime Minister Juha Sipilä launched its Government Program which contained a direct reference to conducting a nation-wide basic income experiment intended ‘to explore whether basic income could be used to reform the social security system so as to reduce incentive traps relating to working.’Footnote ³ While its restricted remit came under heavy criticism, this experiment has since been rolled out in January 2017 and will continue until the end of 2018.

One striking feature of the Finnish basic income debate, when contrasted with other countries, is the continued involvement of the majority of political parties (Koistinen and Perkiö, Reference Koistinen and Perkiö2014; Perkiö, Reference Perkiö2018). Though individual supporters can be found in nearly all parties, the Green Party and the Left Alliance and – to a lesser extent – the Centre Party are the main proponents of the basic income idea (Stirton et al., Reference Stirton, De Wispelaere, Perkiö and Chrisp2017). Where smaller left-wing or green parties are regularly counted amongst the political support base of the basic income proposal (De Wispelaere, Reference De Wispelaere2016b), Finland stands out by having one of its leading centrist parties consistently showing favourable interest. This interest in flat-rate universal benefits may be partly explained by the historical roots of the Centre Party as the voice of the agrarian population (Kangas et al., Reference Kangas, Lundberg and Ploug2010). Equally peculiar, the coalition government conducting the Finnish basic income experiment is also comprised of the Conservatives and the Finns Party, historically robust opponents of basic income (Stirton et al., Reference Stirton, De Wispelaere, Perkiö and Chrisp2017). This puts the most committed basic income advocates in Finland – the Greens and the Left Alliance, currently in opposition – in a distinctively awkward position.

Social protection in the Finnish labour market

The Nordic welfare state is commonly regarded as distinct from other regimes (Esping-Andersen, Reference Esping-Andersen1990; Kautto and Kvist, Reference Kautto and Kvist2002), but within this group significant variation in expenditure, policies and outcomes can be observed (Kvist, Reference Kvist1999; Kangas and Palme, Reference Kangas and Palme2005; Kananen, Reference Kananen2012; Kantola and Kananen, Reference Kantola and Kananen2013). Kananen (Reference Kananen2012) reports that whereas Sweden has strengthened its social insurance in the mid-1990s, Finland has weakened the principle of social insurance by introducing more stringent conditions of receiving basic unemployment insurance and introducing a new layer of means-tested support for the unemployed. This restriction of benefit eligibility was also parred with increased behavioural control of labour market outsiders and the imposition of a harsher sanctioning regime (Kananen, Reference Kananen2012).

The development and recalibration of the Finnish welfare state in the past decades is partly due to distinct gradualist reform pathways – a type of political path-dependency (Kangas et al., Reference Kangas, Lundberg and Ploug2010) – but also a response to the economic situation at the time. In the early 1990s, Finland experienced a severe economic crisis that resulted in mass unemployment for years to come. The unemployment rate rose from 3.4 per cent in 1990 to 17.7 per cent in 1993 (Ploug, Reference Ploug, Kautto, Heikkilä, Hvinden, Marklund and Ploug1999), and never fully recovered. In 2015 the unemployment rate was recorded at 9.4 per cent (OSOF, 2016). During this time precarious employment in the form of atypical contracts or job insecurity is said to have increased (Jakonen, Reference Jakonen2014), although the rate of increase remains contentious. From 2000 to 2014 the share of self-employed has increased from 20,000 (0.9 per cent) to 45,000 (1.9 per cent), while long-term part-time contracts have increased from 163,000 (7 per cent) to 208,000 (8.7 per cent) and 83,000 wage-earners were working on the basis of a ‘zero hour’ contract in 2014 (Pärnänen, Reference Pärnänen2015). Even those who deny a large increase in the ‘precariat’ accept around a tenth of Finnish employees work in precarious conditions, which is often clustered within certain groups with gender, age and education level being singled out as key determinants (Pyöriä and Ojala, Reference Pyöriä and Ojala2016).Footnote ⁴ Recent graduates, for instance, have faced declining employment rates year upon year between 2010 and 2015 and are now facing a 14 per cent unemployment rate compared to a national average of 9.4 per cent (OSOF, 2017).

The persistence of unemployment and precarious employment is a main driver of labour market policy development. The 1990s recession played a major role in causing a social policy paradigm shift from universalism and equality to a strong policy focus on activation and competitiveness (Kantola and Kananen, Reference Kantola and Kananen2013). While this increased focus on competitiveness has not necessarily reduced job protection or the overall generosity of unemployment benefits (Shahidi, Reference Shahidi2015) – for a large part because of continued high unionisation and the corporative/collaborative nature of Finnish industrial relations – it drives a government agenda of reforming social protection to further activate those currently outside or at the margin of the labour market. Amongst Finnish decision-makers, the interest in basic income must be understood against this strong activating policy agenda, as is evidenced in the design of the Finnish basic income experiment.

A good fit? Basic income and the Finnish welfare state

Political decision-makers have responded to recent developments in the Finnish labour market by debating several variants of the basic income proposal (Perkiö, Reference Perkiö2018). At the same time, Finnish policy-makers also instituted incremental reforms of the existing social security system. Over time, and quite unintentionally, these reforms have jointly shifted the unemployment benefit system to a point where its main institutional features can be said to closely resemble, and perhaps even represent a stepping stone towards, a genuine basic income (De Wispelaere, Reference De Wispelaere2016a). In other words, current social security arrangements make Finland uniquely suitable for introducing a modest partial basic income at the current basic security level (Halmetoja, Reference Halmetoja2017). Although this final step may yet prove exceedingly difficult, the importance of having appropriate institutional frameworks in place should not be underestimated (Jordan, Reference Jordan2012).

The Finnish unemployment benefit system comprises three different tiers (Table 1).Footnote ⁵ Working age adults who are unemployed are divided into two main trajectories, depending on whether they satisfy past work requirements. To meet the work requirement, a person must have completed thirty-four calendar weeks of eligible employment during the preceding twenty-eight months (Kela, 2016). Those that have established sufficient previous employment history either are entitled to earnings-related benefits (Ansiosidonnainen työttömyyspäiväraha) if they are members of an unemployment fund, or to basic unemployment benefit (Peruspäiväraha) if they are not. Those that fail to satisfy the work history requirement, or outrun their maximum benefits under the first two tiers, end up in a third tier of labour market subsidy (Työmarkkinatuki). While there are some differences in terms of the entitlement duration for earnings-related and basic unemployment benefit (300, 400 or 500 days, depending on work history and age), labour market subsidy guarantees an entitlement of unlimited duration (Kela, 2016). The amount of the basic part of the earnings-related unemployment benefit, basic unemployment benefit and labour market subsidy are equal (€32,40 per day).Footnote ⁶

Table 1 Schema of unemployment benefits in Finland

Source: Halmetoja, Reference Halmetoja2017

Three key steps in the Finnish social security development jointly produce the fertile institutional ground for implementing a modest partial basic income, such as the model currently experimented with by the Sipilä Government. In 1993 the Government introduced the legislation for labour-market subsidy (GP 235/1993) in direct response to the severe economic crisis. The Bill was aimed at those entering the labour market for the first time, who hadn't built up the required work history to become eligible for earnings or basic unemployment benefit, as well as long-term unemployed who maxed-out their entitlement to unemployment benefits (Ploug, Reference Ploug, Kautto, Heikkilä, Hvinden, Marklund and Ploug1999). The Government initially proposed to restrict the duration for receipt of labour-market subsidy to 300 days, while also reducing the unlimited duration of basic unemployment benefit to 500 days. In a two-pronged approach, the aim was for the new legislation to upgrade basic unemployment benefit to match earnings-related benefits and simultaneously institute labour-market subsidy as a new lowest category of unemployment benefits. However, in its review of the proposed Bill, the Finnish Constitutional Law Committee stated that limiting the duration of labour market subsidy to 300 days would shift the burden too much onto the social assistance programs arranged by the municipalities, which would be in contradiction with the state's responsibilities for unemployment protection under the Constitution (CC 32/1993).Footnote ⁷ Subsequently, the Bill was changed and revised legislation implemented labour-market subsidy with unlimited duration (Finlex 1542/1993), effectively offering a basic income floor for the long-term unemployed.

One of the differences between labour-market subsidy and the other two unemployment benefit tiers was that the latter were individual benefits, whereas labour-market subsidy took the partner's income into account. This distinction between the different unemployment benefits became contested at the turn of the century. In 2002 both the Constitutional Law Committee (CC 46/2002) and the Social and Health Committee (SHC 43/2002) had strongly argued that a partner's income should not be considered when determining eligibility for labour-market subsidy. In a first move, the legislation was reformed in 2003 by changing the threshold at which a partner's income would be taken into account from €236 to €536 (Finlex 1009/2003). However, the issue wasn't fully resolved because income-testing remained in place until 2012, when a new Bill finally removed this feature (GP 115/2012). The Government's argument was to prioritise labour market participation by reducing disincentives and bureaucratic regulation, but the resulting individualisation of labour-market subsidy again contributes to establishing a basic income floor accessible for all unemployed.

A third major step to making unemployment benefits more congruent with a partial basic income took place in 2014 with the easing of means-testing of the income flow of unemployment benefit recipients. This reform facilitates the combination of small wages from part-time or temporary employment with continued eligibility for unemployment benefits, promoting both labour market insertion and income security. The Government proposed a €300 earned-income threshold after which unemployment benefits would start to withdraw at a rate of 50 per cent (GP 176/2013). The Social and Health Committee supported the change, arguing that having a robustly protected income floor reduces the reliance of the unemployed on social assistance measures aimed at temporary support (SHC 24/2013). The new legislation was approved by the Finnish Parliament and came into force in 2014. This last measure again moves social security closer to a modest basic income scheme by supporting the principle that a firm income floor must remain in place independent of economic activity of its recipients, including earnings from part-time or temporary employment that can be used to propel one towards more secure employment (Van Parijs and Vanderborght, Reference Van Parijs and Vanderborght2017).

Finnish social security is a complex system, with different programs put in place for different target groups. But when focused on unemployment support more specifically, we find an institutional development that has shifted support for the (long-term) unemployed in a direction that closely resembles a partial basic income. Each of the three steps outlined above contributes to establishing an individual secure income floor for those in receipt of unemployment benefits. Over time, critical differences between the three types of unemployment support were reduced and the resulting program, while formally still operating as three distinct tiers, could be said to constitute a single layer of basic income support of unlimited duration for all Finnish unemployed. Interestingly, these reforms were introduced piecemeal and independent of each other, without any overarching rationale to move towards a comprehensive basic income reform. Additional characteristics of how the Finnish social security system is administered and funded are supportive of a move towards a partial basic income (Halmetoja, Reference Halmetoja2017). For instance, both labour-market subsidy and basic unemployment are administered centrally by Kela (the Finnish Social Insurance Institution) and funded almost entirely out of general taxation.Footnote ⁸ But importantly, the basic level of the earnings-related unemployment benefit (at €32,40 per day equal to the other two tiers) is also funded out of general taxation, which makes a merger of the three basic tiers into a single partial basic income scheme administratively more feasible. Needless to say, the current system is still far removed from a universal basic income policy. Furthermore, the continued reliance on conditions and sanctions for receipt of unemployment benefits is a major stumbling block to be overcome to establish a genuine unconditional basic income policy.

Universality and unconditionality as persistent stumbling blocks

In post-crisis austerity-driven Europe, a persistent activation agenda primarily focused on employment incentives rather than protection against poverty or human capital expansion reigns supreme (Marchal and Van Mechelen, Reference Marchal and Van Mechelen2017). Fiscal responsibility appears the primary driver of post-2008 European labour market and social policy (Shahidi, Reference Shahidi2015), with early expansion of minimum income support rapidly declining and recent reforms commonly resulting in increased conditionality and a focus on work incentives (Marchal et al., Reference Marchal, Marx and Van Mechelen2016).

Against this backdrop, the Finnish basic income experiment has led to sweeping predictions of Finland becoming the first European country to put a genuine unconditional basic income place. But as soon as political reality kicked in, the initial exuberance amongst global spectators rapidly dampened. The strict remit of the Finnish government to focus the experiment on assessing the labour market effects on a small sample of unemployed Kela recipients filtered through in the limited experimental design (Kangas and Pulkka, Reference Kangas and Pulkka2016). Political resistance by political parties inside the government and in opposition – as well as by social actors such as the trade unions – affects not only the experiment itself, but also the prospects for basic income once the results are in.Footnote ⁹ Public support too remains unclear: recent polls show solid support amongst the general public, but equally demonstrates this support is subject to important priming and framing effects – notably reference to taxation to fund basic income (Pulkka, Reference Pulkka2018). These political stumbling blocks are real and difficult enough to overcome in their own right. In this section we briefly touch upon two institutional hurdles that impede moving to a fully-fledged basic income model.

The first hurdle pertains to universalising the unemployment benefit system to achieve a full flat-rate and uniform payment scheme for all. Our concern here is not with expanding the scheme to include those currently not covered under the relevant regulations – students, the self-employed, those on disability or long-term sickness, etc. – although this would certainly pose numerous difficulties. Instead we want to focus on the difficulty of bridging even the initial steps currently in place, as outlined in the previous section. Suggesting that a Nordic country such as Finland, where universalism is already firmly embedded (Anttonen and Sipilä, Reference Anttonen, Sipilä, Anttonen, Häikiö and Stefánsson2012), is uniquely well-placed to introduce a basic income fails to appreciate the contested nature of universalism in the Nordic policy development. Universalism within the basic income debate refers to a scheme that applies to all members in society, but it is intricately linked with flat-rate benefits that are funded through general taxation rather than earmarked social insurance contributions. This is precisely the sort of ‘flat-rate universalism’ criticised by Esping-Andersen (Reference Esping-Andersen1990: 26) for enabling dualism and leading the better-off to revert to market-based policy solutions. In contrast with flat-rate universalism, the universalistic solidarity of the Nordic welfare state is grounded in broad access to earnings-related benefits, which historically have weakened market-based commodification, especially when compared to liberal welfare regimes. However, this type of universalism decidedly runs counter to the flat-rate universalism of the basic income proposal.

In Finland, the tension between basic security and earnings-related schemes dates back to the 1950s (Kangas et al., Reference Kangas, Lundberg and Ploug2010). Non-contributory types of universalist policies are a persistent feature of Finnish social policy, but their importance has been declining in recent decades with basic security becoming increasingly more means-tested and access to earnings-related benefits more restricted. Esping-Andersen (Reference Esping-Andersen1990) may be correct in arguing that earnings-related schemes manage to ward off dualism at times of high employment, but this argument fails when the unemployment rate is persistently high. Such circumstances produce dualism within the protection system for the unemployed. Whereas in 1995 approximately 75 percent of unemployed people were receiving either earnings-related unemployment benefit or basic unemployment benefit (Tuomala, Reference Tuomala2018), by the end of 2016 167,000 people were on earnings-related unemployment benefit, 38,300 were receiving basic unemployment benefit and a whopping 204,500 were in receipt of labour market subsidy (Kela, 2017). This produces a structural dualism between those entitled to a means-tested flat-rate basic security scheme and those who can access the more superior earnings-related benefit scheme.Footnote ¹⁰ This persistent dualism within Finnish unemployment policy remains an important stumbling block to universalising the scheme across the unemployed population when powerful actors such as trade-unions or the Social Democrats resist moves that they view as eating into earnings-related income support (cf. Van Parijs and Vanderborght, Reference Van Parijs and Vanderborght2017). Even where the three layers of unemployment support get us close to a de facto partial basic income, formalising the current situation into a de jure partial basic income scheme will meet important resistance – let alone trying to build up the scheme either by improving its generosity or expanding its reach.

The second hurdle pertains to the degree of conditionality that remains a persistent feature of Finnish unemployment benefits. Clasen and Clegg (Reference Clasen, Clegg, Clasen and Siegel2007) offer a useful tripartite typology to understanding the different dimensions of conditionality applied to welfare policies. ‘Conditions of category’ pose few problems: eligibility depends in the first instance on proving one's jobless status to the gatekeepers in the unemployment office. ‘Conditions of circumstance’ are more complicated because eligibility criteria vary among the three layers, determining whether unemployed are entitled to earnings-related benefits or relegated to basic security benefits. In line with other countries, means-testing is more strict for basic security and less strict regarding earnings-related benefits. Despite this, as we argued before, recent developments such as individualising benefits or allowing recipients to earn some income on top of benefit receipt have weakened the conditions of circumstance.

The crucial obstacle in Finland, however, is the trend to tighten what Clasen and Clegg (Reference Clasen, Clegg, Clasen and Siegel2007) call ‘conditions of conduct’, the behavioural requirements that regulate benefit eligibility. Activation policies for the unemployed are the most prominent example of the increased importance of this third level of conditionality in the Nordic welfare state. Finland is no exception and recent developments clearly pull unemployment security away from a basic income-friendly pathway. The focus on activation was already present when the Sipilä government announced the basic income experiment, but even while the experiment itself is ongoing the Finnish policy debate is taking a decidedly ‘conditional turn’. At the start of 2018, legislation has been enacted that introduced a new ‘activation model’ into Finnish social security (Finlex 1138/2017). This new scheme sets additional behavioural requirements that an unemployed person needs to meet: in a nutshell, an unemployed person has to work at least eighteen hours or participate for five days in an employment promoting service for every examination period of sixty-five days or face a 4.65 per cent benefit reduction.Footnote ¹¹ While the objective of the new activation legislation is the same as the basic income experiment – to increase the employment rate – the resulting policy instrument couldn't be further from establishing an unconditional basic income floor for all.