May 2001

Subsidising unprofitable work

In the newly emerging debate about Citizen's Income, one of the original supporters of the idea, Osmo Soininvaara, writes about the necessity of combining this universal payment with an obligation to accept a job. In an article in Helsingin Sanomat (19 May 2001), Soininvaara — now Minister of Public Services — says that he actually prefers the term Basic Income to Citizen's Wage (which is the expression most often used in the Finnish debate). Wage, in his opinion, creates a false impression about what is involved.

"The idea of Basic Income is to put together the most important social transfer payments, and together with taxation create a unified whole which guarantees every citizen a reasonable basic security. In this way, doing a job is also economically worthwhile.

"Normally Basic Income is connected to a fully linear tax scale: there is no need for progression because Basic Income creates a just distribution of income. Income would be taxed 40-50 per cent, after which one would have as disposable income the Basic Income plus 50-60 per cent of earned income."

Soininvaara says that the biggest winners would be the low-paid.

"They would be able to keep both the Basic Income and more than half of their pre-tax income. Basic Income makes even a low-paid job economically worthwhile. Currently, many low-paid can reach the same income without working."

Soininvaara writes that new technology has increased inequality in the labour market. As a solution, he says that it is possible to subsidise unprofitable work — or at least avoid taxing it to death.

"Those whose work contribution does not meet ever growing demands would get part of their income from the job and part as social transfer or at least they could work without paying tax as has happened in France.

"During the Clinton years, a subsidy of low-paid work was introduced. Consequently, the income level of the poor started to grow and employment level rose significantly. Many European countries have followed suit.

"Labour-led Britain have ended up near the American system of tax allowances. Holland integrated a moderate Basic Income model into their tax system. Denmark supports low-paid work through an income support system, and lately France is adopting a negative income tax which supports the low-paid.

"This is a road which Finland should follow."

Soininvaara believes that Basic Income would turn the Finnish self-service society into a rich service society and would return a supporting labour force to working places. There would be opportunitites for those who have been excluded because of growing demands of working life, he says.

"Normally an obligation to work has not been connected to Basic Income. This is why many people resent the idea. If this is a problem, why not combine an obligation to accept a job similar to the one connected with income support — or make it even stronger, because a very high unconditional Basic Income could attract young people who are in danger of social exclusion as a fish would be drawn to a bait."

According to Soininvaara, the next step could be combining many kinds of social transfers into one means-tested basic social security, in which family conditions, housing expenses and other factors would play a role.

"All this could be done irrespective of anyone's opinion about Basic Income. The reform would take us both nearer an overall Basic Income system and a better functioning means-tested system. What the next step might be, will be decided later."

See also:

From the archive:

Why a Citizen's Income should be combined with a Citizen's Wage

November 1998


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