Finland considers universal basic income under social reform plans

HELSINKI (Reuters) - Finland may replace part of its social security net with a universal basic wage as it looks to rein in state spending, if a pilot project recommended by government advisors succeeds.

Finnish Prime Minister Juha Sipila makes a pledge during the second makes a pledge during the second 'Thematic Pledging Session' at the donors Conference for Syria in London, Britain February 4, 2016. REUTERS/Matt Dunham/pool

A government-commissioned working group on Wednesday proposed a tax-free monthly wage of 550 euros for the two-year pilot, to start next year and involve up to 10,000 adults of working age.

That sum, roughly equal to the unemployment and welfare assistance that covers food, personal hygiene, clothing and other daily expenses, would be supplemented, when necessary, with earnings-related benefits like housing allowance.

Wage-earning participants in the project would pay the money back via increased income tax.

With Finland recovering slowly from a three-year recession that ended in 2015, Prime Minister Juha Sipila’s center-right government is pushing through spending cuts of 4 billion euros ($4.53 billion) and a major labor reform pact to cut labor costs.

The government will decide in May whether the universal wage scheme will be part of that process.

“It would be secure income ...It would encourage people who are afraid of losing their unemployment or other benefits (though working part-time) to take short-term jobs”, working group leader Professor Olli Kangas told Reuters.

Switzerland will hold a referendum in June on whether to introduce basic income for all adults, and the Netherlands and France are considering similar moves.

Finland’s economy is still smaller than it was in 2008, having been hit by the decline of growth drivers including former mobile phone market leader Nokia and a thriving paper industry, together with falling demand from major trader partner Russia.

Hanna Mantyla, Minister of Social Affairs and Health, told Reuters she is confident the wage project will start in 2017.

“We need experiments like this. The Finnish social security system faces big challenges in the future, if we are not able to simplify it,” Mantyla said.

($1 = 0.8838 euros)

Reporting by Tuomas Forsell; editing by John Stonestreet