A Finnish woman holding a KELA card in her hand.
In January, 2,000 Finnish residents began receiving monthly cheques of €560 for a two-year pilot project meant to test the viability of an idea known as a guaranteed minimum income (GMI).
Whereas a true universal GMI would go to all citizens, this program targets randomly chosen Finns between the ages of 25 and 58 who currently receive unemployment insurance benefits. The GMI payment replaces existing social benefits, but is structured to encourage those currently out of work to re-enter the workforce without the prospect of losing government support – escaping what is often called the “welfare trap.” The system is described as particularly onerous for those working in part-time jobs, where recipients need to make their case to the government on a monthly basis to continue receiving benefits.
The Finnish government agency in charge of the program will wait the full two years before releasing the results to the public, but will mostly be tracking whether or not it increases labour force participation. The country has been mired in a decade-long period of low growth and stagnating wages, with unemployment hovering at around eight per cent. The centre-right governing coalition is hoping that a GMI could help shrink the numbers of Finns on long-term unemployment.
Not all Finns are on board with the plan, including the centre-left opposition Social Democratic Party. The Central Organization of Finnish Trade Unions, the country’s biggest trade union that represents almost a million members, has also strongly denounced the idea as a stealth attempt to undermine the power of organized labour and ultimately eliminate minimum wage regulations.
Once endorsed by such disparate figures as civil rights legend Martin Luther King Jr. and free-market evangelist Milton Friedman, the idea has resurged in the world among policy circles as a viable solution to poverty. Various Latin American countries have adopted a version of Mexico’s cash transfer program for poor households, first instituted in 2002. The idea has also taken on new import in western countries following the financial crisis, galvanized by a growing focus on wage stagnation, income inequality and stubborn poverty levels.