OPINION
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With the world economy thrown into disarray by the COVID-19 crisis, policymakers have their hands full as they struggle to imagine what a post-crisis world might look like. In a sea of swirling uncertainty and unknowns, only one thing is certain: it will be very different from the past.
While the idea of a Universal Basic Income - a government guarantee that each citizen receives a minimum income - has been around for a long time in various iterations, more than usual interest has been shown in the evaluation published last month of a two-year trial in Finland of a UBI scheme, hailed by the New Scientist as the most robust study of its kind yet undertaken.
Interest in the concept has intensified since lockdowns across much of the globe destroyed millions of jobs and put whole industries at risk, depriving many people of a living wage for the foreseeable future.
The idea of UBI had been discussed in Finland since the 1980s, mainly as a way of addressing the economic and social consequences of falling industrial employment by freeing all - from students to the elderly; stay-at-home parents to the unemployed - to make meaningful contributions to society by, for example, volunteering.
Interestingly, while the UBI idea had been associated with left-of-centre political parties, Finland's trial in 2017 was launched - at a cost of about 20m euro ($33m AUD) - by a centre-right, austerity-focused government seeking to reduce its social security budget and bring down Finland's stubborn 8 per cent-plus unemployment rate. The goal of the study had a very clear purpose: to determine whether an unconditional income might act as an incentive for people to take up paid work.
Under the Finnish trial, the government provided 2000 randomly selected unemployed people aged between 25 and 58 with unconditional monthly payments. The payments of 560 euro per month ($934 AUD) were not means tested nor were there any strings attached. The payments were not reduced if an individual obtained employment or later received a pay rise. The study was nationwide and selected recipients were not able to opt out, because the test was written into legislation.
The results from Finland, however, are mixed.
The long-awaited report found that paying the unemployed a fixed allowance provided only a modest boost to the jobs market, falling short of what the trial's proponents had hoped for. However, it had a positive effect on mental health with a notable improvement in happiness levels. The analysis, based on questionnaires, looked at the health, mental and economic well-being, trust and bureaucratic experiences of basic income recipients compared with a control group.
When surveyed, people who received UBI instead of regular unemployment benefits reported better financial wellbeing, mental health and cognitive functioning, as well as higher levels of confidence in the future. In addition, better opportunities for social participation and increased autonomy were highlighted regardless of changes in participants' own employment.
The research team leader said the findings suggested that basic income did not appear to provide a disincentive for people to work.
The study compared the employment and wellbeing of basic income recipients against a control group of 173,000 people who were on unemployment benefits. It found that between November 2017 and October 2018, people on basic income worked an average of 78 days, which was six days more than those on unemployment benefits. There was a greater increase in employment for people in families with children, as well as those whose first language was not Finnish or Swedish - but the researchers are not yet sure why.
Releasing the report, the research team leader, Minna Yliknn, of the Social Insurance Institution of Finland, said the findings suggested that basic income did not appear to provide a disincentive for people to work. "Money matters, but alone it's not sufficient to significantly promote either labour supply or demand," said Ms Yliknn.
Asked whether basic income could help people dealing with situations such as the economic fallout of the coronavirus pandemic, Ms Yliknn said that it could help alleviate stress at an uncertain time. "I think it would bring people security in very insecure situations when they don't know whether they're going to have an income," she said.
Following the release of the report, the Finnish government has remained non-committal with the prime minister, Sanna Marin, saying there are no plans to introduce a basic income, as such. Instead, her five-party coalition wants to look into a negative income tax, whereby low income earners would stop paying taxes to the government and instead receive a payment.
Elsewhere, however, the Finnish report has sparked new interest. In Spain, the government says it aims to roll out a basic income "as soon as possible" to about a million of the country's poorest households, with the economic affairs minister, Nadia Calvio, saying the Socialist-led government hopes a universal basic income will become "a permanent instrument". It has yet to be decided how much will be paid per month and the government declined to say what it would cost.
In Scotland, first minister Nicola Sturgeon said the coronavirus pandemic and its economic consequences had "made me much, much more strongly of the view that [universal basic income] is an idea that's time has come". And in his Easter message, Pope Francis suggested that "this may be the time to consider a universal basic wage".
In Australia, the idea of UBI has been around for some time, attracting both support and opposition. The current crisis, however, is certain to see interest revived.
Professor John Quiggin from the University of Queensland has long been an advocate for UBI. He has argued that it could be achieved by increasing unemployment benefits, at least to the poverty line; replacing the job search test for unemployment benefits with a "participation" test; and fully integrating the tax and welfare systems.
Professor Quiggin told the ABC that after the coronavirus is contained, the government should substantially boost Newstart payments and stop quarantining welfare payments, which would put the country "well on the way to UBI". He added: "The government has had a whole range of policies aimed at pushing people off Newstart, which are now essentially impossible to apply and irrelevant where large sections of the labour force will not be able to work".
According to Professor Quiggin, the government's response to the pandemic has moved Australia much closer to a liveable income guarantee, at least temporarily. "The JobSeeker allowance is twice the amount of Newstart, and compliance testing such as the requirement to make 20 job applications per month has been dropped (at least officially - some case managers haven't got the message on this). And JobKeeper implies a willingness to intervene to prevent involuntary mass unemployment.
"Since this is very much at odds with the government's policy position before the pandemic, it is unsurprising that they are seeking to 'snap back' once the immediate crisis is over. But this neither feasible (because the economy will take a long time to recover) nor desirable (because of the benefits of a liveable income guarantee)."
On the other side of the debate, Simon Cowan from libertarian think tank, the Centre for Independent Studies, published a report in 2017 that disputes the claimed benefits of a UBI.
Among his key findings were that those currently receiving income support would not see an increase in their disposable income from a UBI, as there was little likelihood the payment would exceed their welfare payment. In addition, those working full-time and earning above the median wage were likely to be worse off as a result of the additional taxation needed to fund a UBI.
Mr Cowan concluded that any such scheme would be grossly unaffordable given Australia's current taxation system. "For UBI to achieve the outcomes touted by its proponents, Australia's taxation system would have to generate more than $100 billion more in taxation by either broadening the base or raising the rate," he wrote.
The policy debate is certain to continue.
- Dr Norman Abjorensen formerly taught at the Australian National University's Crawford School of Public Policy.