Finland: Universal Basic Income and deregulation

A series of regulatory reforms have been introduced in Finland aimed at boosting the country’s export competitiveness. The deal agreed on 7 March the Government expects will create 35,000 new jobs and follows ongoing negotiations with the country’s SAK trade union confederation.

The new agreement will lengthen annual working hours, lower holiday bonuses, freeze wages, raise pension contributions for workers and lower them for employers. It will also result in a progressive shift away from Finland’s highly centralised wage bargaining framework towards more company-level deals reinforcing the recent deregulatory moves in France.

Finland’s collective bargaining levels in 1980 stood at 77 per cent but it rose in 2007 (89.5 per cent) and continued to post-global crash to its present level of 91 percent. Trade union density in the same years progressively increased from 69.4 per cent (1980) to 70.3 per cent (2008) to 74 per cent the highest in the EU.

Visser (1992) drew attention to the comparable stability of union density in Scandinavia and Belgium compared to other advanced capitalist countries arguing that this could be explained by the role of trade unions in the provision of unemployment benefit — the ‘Ghent system’. In 2004 the OECD Employment Outlook supported this analysis by highlighting only four out of twenty countries, over twenty years, increased their density since 1970 those being Belgium, Denmark, Finland and Sweden (i.e. where unemployment benefit, as a rule, is administered by union affiliated institutions).

According to the logic of the Ghent framework, while being institutionally insulated, trade unions are also sensitive to the ideology of political parties via the State, hence dependent on the extent of reform and public expenditure cuts to the welfare state. The assertion is corroborated by the sharp drop in union density statistics in Sweden from 75.6 per cent in 2005 to 68.9 per cent in 2010 after the Swedish Government elected in 2006 made changes to unemployment insurance. The reform in Finland as part of the centre-right government’s campaign to cut spending by 10 billion euros ($11 billion) by 2030 will also encompass health care and local government reforms leaving trade unions more vulnerable.

So as a country Finland hitherto has bucked the neo-liberal and deregulatory trend in the EU. But the Government’s recent proposals will now have profound implications as a social democratic bastion of employment relations because Finland has now buckled.

Yet as the Government pursues a deregulatory agenda in conjunction it has drawn up plans to pay every adult citizen a basic income of €800 each month. Under proposals drafted by the Finnish Social Insurance Institution (Kela), the tax-free payments would replace all other benefit payments, and would be paid to all adults regardless of whether or not they receive any other income.

According to the Research Department Manager of the Finnish Social Insurance Institution (Kela), the proposal would be finalised by November 2016 and is estimated to cost Finland €46.7 billion per year. A survey commissioned by Kela found that close to 70 per cent of the population favours the idea of a national basic income. Juha Sipila, the Finnish Prime Minister has stated: “For me, a basic income means simplifying the social security system.”

According to statistics Finland’s Labour Force Survey, the number of unemployed persons in January 2016 was 245,000, which was 14,000 higher than one year ago. The unemployment rate was 9.3 per cent, having been 8.8 per cent in January of the year before. However the real crisis can be found in youth unemployment levels which stood at 21.1 per cent - 1.1 percentage points higher than one year previously.

In this context the UBI proposals are designed to assist people back into work and to work longer or different hours by providing a basic revenue stream as many people would be worse off if they took on low-paid temporary jobs due to loss of welfare payments or are penalised if they choose to work more hours i.e. poverty trap.

The critical propositions to evaluate is whether a UIB is incompatible with a highly regulated and unionised economy as Finland has been until now or is it the new safeguard in a seemingly inevitable trajectory towards a highly decentralised, deregulatory and more precarious labour market in sync with greater automation. Is the era of highly unionised and regulated labour markets over in advanced industrialised economies as evidenced by Finland? In the transition towards this post-capitalist society as described by Paul Mason what is the role of organised labour and how does it reach out to workers of all types — and those unemployed and self-employed persons — in the progressive transition towards the automated/platform economy? This is the fundamental issue facing those of us who share the belief of the redistributive, democratic and egalitarian role of organised labour in our societies.

Recalibrating our thinking and strategy in the next twenty years — and less — will confirm our relevance to the new world emerging all around us. In this world will UBI makes us more or less relevant to the labour market depends on whether organised labour is at the vanguard of arguing for its introduction and how like the Ghent system we can be potentially involved in its development and administration may provide an essential route into the workers of the future.

Update: The New Zealand Labour Party is also considering trialling UBI.