“The UBI Bait and Switch” by Bruenig, Jauhiainen, and Mäkinen: A Critical Response
By Otto Lehto, political economist, King’s College London; former chairman of BIEN Finland (2015-2016).
A recent article in Jacobin Magazine on the Finnish UBI experiment is mostly an accurate and well-researched piece of journalism. I was especially impressed by its fastidious attention to detail in its account of the timeline of events leading up to the experiment. However, as someone well-acquainted with Finnish UBI experiment, allow me to bring another perspective on the matter. Jacobin Magazine has all the right to be as firebrand leftist as it wants to be. No question, the rhetoric of the commentary is in line with its socialist ethos. But I would just like to point out a few things that are inaccurate or misleading.
I, too, have written about the government’s proposal in harsh and unforgiving tones in the past, so I really can’t fault them for that. The experiment, let us not mince words, is badly mangled, expert advice is ignored or distorted, and the government coalition’s commitment to any form of basic income is half-hearted, with the gracious exception of a few MP’s. The narrow focus on reducing unemployment and increasing workforce incentives is unfortunate. It becomes tragic when one realises that this ideological agenda drowns out the human rights perspective.
But this is where it gets tricky to fully agree with the Jacobin article’s apocalyptic spin. It describes the current experiment as a “UBI-as-workhouse nightmare”. Now hold on a minute. A workhouse is a place where you must work in exchange for basic amenities. This is a preposterous description of the UBI proposals and experiments underway today. Even under the most critical lens, the (partial) UBI model under experimentation in Finland, while obviously targeted too narrowly and with too many exclusions, significantly reduces the “workhouse nightmare” nature of the benefit system.
What are we to make of the conundrum? It would be useful to separate the general political ambitions of the Sipilä government and the UBI experiment itself. The Sipilä government has an admittedly “schizophrenic” attitude towards basic income. While, on the one hand, it is committed to seeing through the UBI experiment, it is simultaneously, via other channels, pushing for stringent workfare conditionality. These draconian practices – nonsense baked in the tears of unemployed people – are truly deplorable, even from the point of view of austerity itself, i.e. even if one believes the anti-Keynesian line that one must balance the budget when national output is down. The proposed and enacted cuts are disproportionately hurting poor people, relative to the cuts affecting the mid income and high income sectors. The richest people have even been given delicious tax cuts, while students, pensioners, sick people, disabled people and others have suffered.
All that is worth criticising. Some other enactments of the government, like drastically deregulating the opening hours of stores, or shaking the stiff and moribund government monopoly on alcohol sales, I personally find most welcome developments. But all things considered, the general direction of the austerity program, and the government’s attitude towards poor people, leaves a lot to be desired. But I would argue that one shouldn’t judge the UBI experiment on this basis.
I will concede that the general ethos of the Sipilä government certainly permeates the parameters of the experiment. The limits of the experiment were decided after the 2015 elections. The result is a predictable beast built upon the sorrowful soil of a Protestant work ethic that fetishises work incentives and bemoans the metaphysical sinfulness of laziness. It involves the misguided and conscious exclusion of people who are either too old or too young, or who are not currently recipients of the mainline unemployment benefit. This distorts the experiment from the start.
But here’s something to consider. The only people for whom the current UBI experiment is a significant welfare-reduction are people who fulfill all of the following criteria: 1) they happen to be long-term unemployed, 2) they happen to be taking part in the UBI lottery and 3) they happen to have received a slightly higher level of benefit from the state in the past. The diversity of benefits in Finland translates to a diversity of levels of income security, with some people relatively well-off while others receiving pennies (if anything at all). The universal UBI level of approximately €560 can be a reduction to people who have received approximately €650 in the past. The UBI is topped off with housing benefits and other types of discretionary benefits. But a few will obviously be net losers in any equalizing scheme. This is understandable. But this hardly qualifies as a “workhouse nightmare.” In fact, the reduction in quantity comes with many obvious upsides that may or may not compensate for the marginal reduction in the absolute level of welfare income for some people.
Even with net-losers mixed in with net-gainers (in a yet-to-be-determined proportion), the proposed UBI model is an improvement over the current system in almost every respect: 1) it is given automatically and without hassle (for the duration of the experiment), 2) it provides a long-term safety net (a steady shower rather than a drizzle of sporadic benefits) and 3) it is not withheld from people who take up part-time or full-time work (thus improving work incentives). I will surely not need to enumerate for my audience the other well-known benefits of a non-utopian UBI system.
In fact, since the tax system hasn’t (yet) been reformed to account for the UBI system, those lucky participants in the experiment who find employment, full-time or part-time, will also gain significantly in terms of post-tax income. To this extent the experiment is arguably too generous. The tax system obviously needs to be reformed as well, since money doesn’t just grow on trees.
But there’s another thing. Some of the aims of the utopian left, as evinced by this piece, are just contradictory or confused. One cannot simultaneously call for more legal power to the unions, in the style of the old corporatist model of the Nordic welfare state, and to call for a truly universal basic income guarantee. This, however, is the paradoxical cry of the Jacobin piece, whose logic I simply cannot comprehend. The power of the unions has been traditionally very strong in Finland. This has meant, e.g., the legally protected collective bargaining of wages and benefits. For all the good this has brought to industry-insiders, this has meant very little for people outside the framework. It has created a natural opposition between “inside” and “outside” groups: the “insiders” being the members of the protection racket of the unions and the employer’s associations, who receive good and generous benefits, while the “outsiders” being all the other people that fall outside the “standard” model of employment. The insiders have received semi-automatic and hassle-free benefits for a long time, while outsiders have suffered from the “workhouse nightmare” of the discretionary welfare bureaucracy. The guarantee of a non-union-based unemployment and sick leave benefit scheme in the form of a UBI naturally chips away at the monopolistic power of unions to determine who deserves what, when and under what conditions. This is a good thing.
Out of the four demons conjured by the authors of the Jacobin article in the concluding paragraph – “forcing unemployed workers into bad jobs while undermining organized labor, earnings equality, and the welfare state” – the first one, about forcing people into bad jobs, is simply false (nobody is forced under the UBI system to accept any bad jobs, either de jure or de facto); the second one, about undermining organized labor, is actually a mixed blessing (since it actually helps “outsiders” gain benefits at a cost to “insiders”); the third one, about earnings equality, is something that the authors give no reason to think is threatened by the experiment (and indeed, it seems like a complete throwaway line); and the fourth point, about undermining the welfare state, is a tad question-begging.
The real question is, which structures should be reformed and which not. The existing welfare state has obviously failed in many ways to provide effective welfare for all people, and it is impossible to reform the system (for the better) without breaking a few eggs.
If the accusation is levelled at the other stuff the Sipilä government is doing, or the broken moral compass of the austerity crowd, the accusation sticks much better. But I have tried to show these should be kept separate. The UBI experiment is, indeed, severely compromised as a result of a confluence of factors. It survives, barely, within narrow ideological bounds. But the important thing is that the experiment tests the waters for a paradigm shift – slowly, ineluctably.
Even a compromised UBI marks a steady improvement over the status quo in almost all conceivable dimensions. And those are just the conceivable dimensions.
Reviewed by Kate McFarland
Photo: Finland’s “frozen waves”, CC BY-ND 2.0 Marjaana Pato
“The tax system obviously needs to be reformed as well, since money doesn’t just grow on trees.”
No, but in the vast majority of cases it does not come from taxation either. The biggest argument against UBI I always hear is, in fact, that it would be impossible to implement because more money would be put into the economy than is actually collected. And face it – the whole “taxing the rich enough” is a pipe dream.
The EU works like a variety of provinces rather than nations, but if the USA were to implement an UBI, nothing would stop it from doing so regardless of tax system.
Thank you Otto for your comments on our article. Here are some of my thoughts in response.
1) The term “UBI-as-workhouse nightmare”
It was a summary we made of the political analysis presented in our article. We didn’t use the phrase to compare UBI to the current benefits system, as you did. The point of our article wasn’t to compare UBI experiment to present day benefit systems, instead it was more of an attempt to correct biases in international media reporting, which have made the Finnish experiment look like a progressive policy maker’s dream come true. It’s more a matter of literary tastes, whether you like this sort of summarizing rhetorics or not.
2) Unions
It’s true that unions have prioritised earnings-related benefits above many other objectives. However, this doesn’t mean that the only way to make benefits system better is to diminish the negotiationg power of labour, as you seem to suggest.
3) Forcing people into bad jobs
If the UBI levels are low, as in the experiment, in practice people have to take low income, low productivity jobs, to survive. If the benefit levels are higher, this pressure decreases.
4) Undermining earnings equality and the welfare state
We wrote: “But it is just as possible to redirect the energy behind a liberatory UBI into implementing a conservative one – forcing unemployed workers into bad jobs while undermining organized labour, earnings equality, and the welfare state.”
So, we were making the point that a UBI can be implemented in a conservative way, and in our view Finnish experiment is a step in that direction. We didn’t mean this as an imminent effect of the current experiment.
What I found most interesting about the January 17, 2017 JACOBIN magazine article, “The UBI Bait and Switch”, are the two following paragraphs:
“Perhaps more puzzling is the relative antipathy among Social Democrats, the traditional party of the welfare state. But they are also the traditional party of organized labor, which is where their skepticism of the UBI originates.
“In Finland, unions are responsible for managing the country’s unemployment funds and benefit payouts. One of the reasons union density is so high is because workers must be union members to be covered by an unemployment fund. Replacing the current earnings-related unemployment benefit with a meager UBI would thus reduce the income security of unemployed workers and reduce the strength of organized labor, both of which are naturally anathema to the country’s historic workers’ party.”
Of course, the second paragraph, alone, might explain the doubts the Finnish Social Democratic Party might have to proposals for a Universal Basic Income (UBI) from the Finnish political Center. But, as also described in the Jacobin article, Finland’s Center Party, which led by Juha Sipilä won the 2015 elections and pursued negotiations that produced a nationwide general strike by Finnish labor unions – ultimately leading to their signing a “competitiveness” agreement that cut unit labor costs (ULC) by about 5%. (The OECD defines “unit labor costs” as: “the average cost of labour per unit of output” and is calculated as “the ratio of total labour costs to real output.”) The “competitiveness” agreement also “liberalized” the number of hours stores were permitted to stay open (as late as they wanted to), and passed pension “reforms” that raised the retirement age to 65 by 2027.
Needless to say, labor unions and their preferred party the Social Democrats would probably be distrustful of anything the Center Party proposed after that.
From this, I understood for the first time, as an American looking at Scandinavia from abroad, just how large the gaps in my knowledge about Finland and the rest of Scandinavia might be if I knew so little about these significant pieces of the history of the Social Democratic Party and the Scandinavian welfare state. Obviously, labor union control over “unemployment funds” and “benefit payouts” greatly encourages workers in Finland and I’m guessing elsewhere in Scandinavia (though what applies to Finland may not apply to Denmark, Iceland, Norway, or Sweden) to join labor unions. High union membership in the private business sector also provides a lot of voter support for the Social Democratic Party and strikes me as the key to what is going on in Finnish politics (as well as perhaps all of Scandinavian politics) that has given Finland (and Scandinavia) its social welfare state.
I found all three of the 1.) the January 17, 2017 article in Jacobin magazine, “The UBI Bait and Switch: Finland’s UBI experiment serves as a cautionary tale for basic income proponents on the Left.” by Matt Bruenig (founder of People’s Policy Project), Antti Jauhianen (Helsinki-based writer focused on poverty, climate change, and the new economy), and Joona-Hermanni Mäkinen (Helsinki-based educator and writer researching economic democracy and economic history); 2.) the January 2017 Op-Ed opinion’s evaluation in BIEN, by Otto Lehto (political economist, King’s College London, the former chairman of BIEN Finland, 2015-2016) of the Jacobin article; and 3.) Joona-Hermanni Mäkinen’s reply to Otto Lehto’s opinion in Bien to all three contributions to be both informative and civil.
Perhaps being informative occurs in direct proportion to the amount of civility we write and speak to each other with.