Senior fellow (on leave for public service)
Political philosopher and Political Economist, Université catholique de Louvain,
Head of Research department, The Finnish Social Insurance Institution (Kela) and Professor, University of Helsinki,
Chief Executive Officer, Institute of Labor Economics (IZA),
The idea of granting an unconditional income to every citizen of society, called Universal Basic Income (UBI), has been discussed in academic and intellectual circles for several centuries. By now, several countries have implemented small scale UBIs to study the economic effects. Grégory Claeys, Research Fellow at Bruegel, opened the discussion on the UBI by highlighting its potential to solve urgent problems such as inequality and the future of work. Yet, the UBI remains controversial with advantages and disadvantages discussed controversially by the panel.
Olli Kangas, Head of Research department of the Finnish Social Insurance Institution (Kela) and Professor at University of Helsinki, shared first-hand insights about his experience in implementing the UBI in Finland. Finland has decided to test out the UBI as a new generation of social security measures. A changing labor market, shaped increasingly by digitalization and the 4th industrial revolution, calls for new solutions. In addition, unemployed suffer from the incentive trap in traditional social security systems. Unemployment benefits are harshly cut when receiving a self-earned salary which makes it extremely unattractive to accept a job. The UBI also aims to tackle the bureaucratic trap as it provides the opportunity to simplify the social security system.
Olli Kangas outlined the difficulties to choose from different kinds of UBIs and to align it with the still existing social security system of Finland and EU legislation. Finland decided to opt for a partial basic income of 560 euro paid to 2000 randomly chosen unemployed citizens.
Hilmar Schneider, Chief Executive Officer and Professor at Institute of Labor Economics (IZA), pointed out several false promises of the UBI. Additional income in general does not translate into more happiness. Besides that the UBI will not raise incomes as much as promoters hope. The false incentives of the UBI feature a reduction of hours worked (income effect), an increase of prices of (low-skilled) services melting down the real value of the UBI, a possible reduction of investment in education, and a pull effect on immigration. Olli Kangas disagreed with the claim of lower investments in education as not being backed by research. Philippe Van Parijs argued that the pull effect on immigration would not be new to the UBI as it already exists in the current system. Hilmar Schneider argued that certain social security benefits can be cut for immigrations unwilling to cooperate while these cuts would not be possible in a UBI system. Hilmar Schneider also debunked a number of false arguments in favor of the UBI. He questioned the devastating impacts of the digitalization of the labor markets used as a reason to promote the UBI. He also pointed out that many so-called UBIs are not true UBIs, including the Finnish and the Swiss model whereas the later being rather a relabeling of certain incomes. Hilmar Schneider complained that many of these experiments are abused by proponents in the public debate to show a widespread implementation of UBIs.
Finally, he also asked why governments run so many experiments on UBIs instead of looking into existing data on lottery winners or pensioners. He also wondered why proponents are waiting for governments to implement UBIs instead of starting their own.
Philippe Van Parijs, political philosopher and political economist and Professor at Université Catholique de Louvain, stressed the unique characteristics of the UBI: independence from work, unconditionality, and strict individuality. Regarding the latter, the UBI could help to reduce the problem of intra-household inequality and promote women's independence. Due to its independence from work and unconditionality, the UBI could help to build a fairer society in which no citizen could fall through the social security network. Philippe Van Parijs agreed to Hilmar Schneider’s scepticism on happiness coming from income and admitted the negative effects of the UBI on work supply. Yet this falling supply could also has it positive aspects, especially when talking about low-paid jobs. Philippe Van Parijs pointed out that an increase in inflation will not be a consequence of the introduction of an UBI when financed by redistribution. However, price effects on the labor market might be possible. He criticized the current labor market as being absurd in which high-quality jobs are paid better than low-quality jobs. Philippe Van Parijs suggested that a UBI could lead to a better enumeration of low-quality jobs as the it will empower citizens to accept or decline certain jobs more easily.
Event notes by Alexander Roth.
Presentation by Olli Kangas