UPDATE 2-Finland's basic income trial boosts happiness but not employment

Finland's basic income scheme did not spur its unemployed recipients to work more to supplement their earnings as hoped but it did help their wellbeing, researchers said on Friday as the government announced the trial's initial findings. The two-year trial, which ended a month ago, saw 2,000 Finns, chosen randomly from among the unemployed, become the first Europeans to be paid a regular monthly income by the state that was not reduced if they found work.

Finland, which will hold parliamentary elections in April, is exploring alternatives to its current social security model. The project is being watched closely by other governments who see a basic income as a way of encouraging the unemployed to take up often low-paid or temporary work without fear of losing their benefits. That could help reduce dependence on the state and cut welfare costs, especially as greater automation sees humans replaced in the workforce.

Finland's minister of health and social affairs Pirkko Mattila said the impact on employment of the monthly pay cheque of 560 euros ($635) "seems to have been minor on the grounds of the first trial year". But those in the trial reported they were happier and healthier than the control group.

"The basic income recipients of the test group reported better wellbeing in every way in comparison with the comparison group," chief researcher Olli Kangas said. Sini Marttinen, 36, said that knowing her basic income was guaranteed had given her enough confidence to open a restaurant with two friends during the trial period.

"I think the effect was a lot psychological," the former IT consultant told Reuters. She had been unemployed for nearly a year before "winning the lottery", as she described the trial. "You kind of got this idea you have two years, you have the security of 560 euros per month... It gave me the security to start my own business," she said.

The basic income was only 50 euros a month more than her jobless benefit had been, "but in an instant you lose the bureaucracy, the reporting", Marttinen said. Mira Jaskari, 36, who briefly found a job during the trial delivering newspapers but lost it due to poor health, said losing the basic income had left her feeling more insecure about money.

OVERHAUL The centre-right government's original plan was to expand the basic income scheme after two years as it tries to combat unemployment which has been persistently high for years but reached a 10-year low of 6.6 percent in December.

It took a different tack last year, however, by imposing benefits sanctions on unemployed people who refused work. The basic income has been controversial in Finland, with leaders of the main political parties wary of offering "money for nothing". Prime Minister Juha Sipila said in December that he saw it as a means of simplifying Finland's "screamingly complex" social security system.

On Thursday, Sipila's Centre Party proposed a welfare model in which only the poor could claim the basic income, with sanctions if they reject a job offer. Conservative finance minister Petteri Orpo has meanwhile said he favours a scheme like Britain's Universal Credit, which consolidates six different types of state benefits into one.

Italy is due to introduce a "citizens' wage" in April in a major overhaul of the welfare state, which will offer income support to the unemployed and poor. One issue with the Finnish pilot is that it did not include any tax claw-back once participants found work and reached a certain income level, which the researchers had said would make the results more realistic. The Organisation for Economic Co-operation and Development has warned that basic income schemes would need to be paid for with higher taxes.

Participants were generally positive, however, with Tuomas Muraja, a 45-year-old journalist and author, saying the basic income had allowed him to concentrate on writing instead of filling out forms or attending jobseekers' courses. He published two books during the two-year trial period but said its closure meant it had again become difficult for him to accept small freelance commissions. "I ... can earn only 300 euros per month without losing any benefits," he said.

"If people are paid money freely that makes them creative, productive and welfare brings welfare," Muraja told Reuters about his experience of the scheme. "If you feel free, you feel safer and then you can do whatever you want. That is my assessment."

($1 = 0.8817 euros) (Reporting by Anne Kauranen; Editing by Catherine Evans)

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