Re-engineering Capitalism: Finland’s Universal Basic Income Experiment

I’ve posted a number of blog entries about the issue of vanishing jobs due to automation and AI, the need to consider measures such as a universal basic income as more people work in the so-called “gig” economy (a seemingly gentle word for something that is, for most people, a stressful and frustrating existence).

There is now in Finland a fairly large pilot about to begin to test a Universal Basic Income scheme. The Finnish government, describes The New York Times, is

…initiating an experiment in a form of social welfare: universal basic income. Early next year, the government plans to randomly select roughly 2,000 unemployed people — from white-collar coders to blue-collar construction workers. It will give them benefits automatically, absent bureaucratic hassle and minus penalties for amassing extra income.

The government is eager to see what happens next. Will more people pursue jobs or start businesses? How many will stop working and squander their money on vodka? Will those liberated from the time-sucking entanglements of the unemployment system use their freedom to gain education, setting themselves up for promising new careers? These areas of inquiry extend beyond economic policy, into the realm of human nature.

The answers — to be determined over a two-year trial — could shape social welfare policy far beyond Nordic terrain. In communities around the world, officials are exploring basic income as a way to lessen the vulnerabilities of working people exposed to the vagaries of global trade and automation. While basic income is still an emerging idea, one far from being deployed on a large scale, the growing experimentation underscores the deep need to find effective means to alleviate the perils of globalization.

The search has gained an extraordinary sense of urgency as a wave of reactionary populism sweeps the globe, casting the elite establishment as the main beneficiary of economic forces that have hurt the working masses. Americans’ election of Donald J. Trump, who has vowed to radically constrain trade, and the stunning vote in Britain to abandon the European Union, have resounded as emergency sirens for global leaders. They must either update capitalism to share the spoils more equitably, or risk watching angry mobs dismantle the institutions that have underpinned economic policy since the end of World War II.

Universal basic income is a catchall phrase that describes a range of proposals, but they generally share one feature: All people in society get a regular check from the government — regardless of their income or whether they work. These funds are supposed to guarantee food and shelter, enabling people to pursue their own betterment while contributing to society.

One of the aspects of Universal Basic Income that is not discussed as much as it should is that it has the potential to greatly enhance the ability of companies large and small to gain access to talent on an as-needed basis. At the moment many workers must assess whether to risk their certain but low unemployment benefits in exchange for a precarious job; employers face large transactional costs of bringing and letting go full-time workers. The potential, on which the Finland pilot will help shed some light, is for workers to have a foundation of a basic income that allows them to more assuredly take on part-time work or a full-time contract assignment that ends in a few months.

Oulu, a city of nearly 200,000 people on the Nordic Sea, stands as a potentially fertile testing ground. Three years ago, Microsoft purchased Nokia’s handset business, raising local hopes of a revival. But last year, Microsoft went on to shutter the operation. Local Nokia jobs have been halved, falling to 2,500 from 5,000. Oulu’s unemployment rate now sits above 16 percent, more than double the national average.

City leaders portray this as an opportunity to start over, describing a future centered on companies like Asmo Solutions.

With its office in a first-story walk-up, the company checks the boxes for requisite elements of a modern start-up. Coders stare into laptops while leaning against beanbag chairs arrayed across red shag carpeting. The founder, Asmo Saloranta, 35, wears a silver hoop earring, his blond hair pulled back into a ponytail. He used to be chief executive; now he is chief visionary. He has designed a phone charger that draws power only when a phone is connected.

Oulu is an ideal place to start a technology business, he says: “There are highly talented tech people.”

But hiring them is maddeningly complicated.

Mr. Saloranta has his eyes on a former Nokia employee who is masterly at developing prototypes. He only needs him part-time. He could pay 2,000 euros a month (about $2,090). Yet this potential hire is bringing home more than that via his unemployment benefits.

Basic income would fix this, he says: “It would activate many more unemployed people.”

This is a part of the debate that often gets missed. Monthly checks for everyone may look like socialism, but proponents advance it as a way to invigorate capitalism.

From Italy to India, companies that would like to leave behind unprofitable enterprises in favor of fresh pursuits hold back because of the expense and reputational damage of firing people. Basic income could be the tool that makes restructuring palatable.

With basic income in place, companies might be more inclined to take a risk on hiring more aggressively — adding vigor to the local economy — knowing they have the freedom to be ruthless in cutting loose those workers who prove disappointing.

“Basic income is kind of a symbol that we believe in your capacity and we think that you are actually able to do things which are beneficial to you, and also for your community,” says Heikki Hiilamo, a professor of social policy at Helsinki University. “It’s built on a kind of a positive view of human beings. People want to be autonomous. They want to improve their well-being.”

Jaana Matila has three degrees in computing and an obsessive interest in software, and intense aspirations to forge a career in the Oulu technology scene.

What she does not have — has never had — is a full-time job.

At 29, she has completed three unpaid internships. Her last stint ended when her employer folded.

She teaches adults to swim. She catches freelance jobs, recently designing a website for a hair salon. Mostly, she lives on unemployment benefits — 700 euros a month (about $732).

Ms. Matila would like to do more freelance work, but she lives in fear of derailing her unemployment benefits. She is supposed to fill out forms that account for every bit of income while providing pay stubs, bank documents and work contracts. Earlier this year, she failed to secure a receipt for the swim lessons. While she tracked one down, she lost her benefits for a month.

“I had to ask my boyfriend, ‘Can you give me some monthly money so I can buy some food?’” she says. “It’s really frustrating.”

The most compelling argument against basic income is the most obvious: If everyone gets money without a requirement to do anything, humans may become morally depraved slackers.

Jari Viljala finds this notion ridiculous.

An electrician by trade, Mr. Viljala is accustomed to braving Arctic blasts of wind in minus-35-degree temperatures while threading wires into the spines of new housing complexes. He has left his wife and two daughters behind for as long as eight months at a time to venture north for construction projects.

His gaze intense, his arms covered in tattoos, he takes pride in his reputation as the guy who will do anything.

“The dirtiest, trickiest job that no one else wanted to do,” he says, “I have always volunteered.”

But since the summer, Mr. Viljala has been out of work. His 3,300 euros in monthly wages (about $3,450) have given way to 650 euros (about $680) in monthly unemployment benefits.

He needs money for new brakes on his 11-year-old Ford sedan, which failed inspection. Without a car, he cannot get to what work he may secure. He also needs money to get current on the rent, having fallen more than two months behind.

At 36, he is wiry and strong. He could earn additional cash on the side. But the unemployment rules say otherwise.

So he stays home and does what he can — making dinner for his girls, doing the laundry. He rides the bus through the gray dawn to the unemployment office.

He waits and he worries. He wonders how it makes any sense that an able-bodied man with every compulsion to work must stay idle to ensure that he can support his family.

HR leaders have an opportunity to act more strategically than ever before by shifting the thinking in their organizations from the traditional approaches to talent management, to a much larger canvas of action and opportunity. They can help to perform the analyses that shows the benefits of a redesigned approach to work.

Business leaders have the opportunity, one might even say the requirement, to shape public policy, to support and advocate for basic guaranteed income pilots. It is not about “welfare” but about how to transform capitalism before forces tear apart communities. It’s not particularly a good for business if societies fail.