January 1999  


The decline of the ‘employment society’

The industrial societies as we have known them for the last few decades are slowly changing into something new. What this new reality is, is difficult to grasp, probably because we are using the very concepts of a fading social order.

From the wage earners’ perspective, unemployment or the fear of losing one’s job are central features of today's reality. Most politicians of our time, however, see the employment society – to borrow John Keane’s phrase – as the final solution to organising the relationship between work and income.

In the seminar on the Future of Work, held at the Finnish Institute in October, the employment society was scrutinised both from the inside and from the outside. But both perspectives criticised government policies for letting unemployment grow in the name of current economic orthodoxies.

Kati Peltola, a social services director from Helsinki, explained how in the EU countries, the taxation of human labour has increased considerably. The reason has been the difficulty of taxing capital in production because of the liberation of capital flows. The same applies to taxing capital incomes.

It seemed easier to tax human labour because it was supposed to be less mobile. The problem is that this is the way to increase unemployment. Human labour also moves – but out of employment. High taxation of labour leads to high prices and a low level of demand. When investment in domestic production is not profitable, capital is exported in search of profit to countries with low taxation or low salaries.

New welfare model

As a solution, Kati Peltola offered a model for the fundamental renovation of the Nordic welfare state.

In her model, production taxes would be levied in varying degrees according to the nature of production. Exported, socially acceptable production would have the lowest tax rate, harmful domestic production the highest. Labour and capital intensive production would be taxed at the same level. Legally determined social insurance is, in this model, financed through a general production tax, not through social insurance payments.

Low personal incomes would not be taxed. The amount of income exempted from taxes would equal a sum which in general terms should meet basic needs. The sum in Finland is approximately 600 ecus a month or 7,000 ecus a year. Income tax would be progressive above the basic rate. This would encourage people to earn additional income above the minimum level, even though they might receive social benefits to top up low income.

According to Peltola, the combination of production tax and progressive income tax creates more jobs and favours low-income earners in production.

"By equalising the taxation of labour and capital inputs in production, there would be a dramatic increase in labour utilisation. This would diminish unemployment costs and increase the national product. It would also create an incentive to use the capital inputs more efficiently. Capital investment and human labour would compete on the same tax level. In the current situation capital investment is subsidised by much lower taxes."

Citizen’s Income – Citizen’s Wage

Kati Peltola was strongly against the idea of a Citizen’s Income. Not only does she think that the system would be impossible to finance but she also believes that people who cannot sell their labour often lack the kind of social and intellectual resources which give people the capacity to enjoy a good life on a basic income.

Jan Otto Andersson, an economist from Åbo Akademi, on the other hand, believes that a Citizen’s Income (CI) scheme would invigorate civil society.

"My vision of a future society is one in which a substantial part of the National Income would be distributed through unconditional CIs and another, equally important part, would be used for a Citizen’s Wage (CW).

"The Citizen’s Wage would be paid out for activities which society wants to encourage. It would be more like a scholarship than an ordinary wage."

According to Andersson, the CWs should be taxed and should also give people the right to income-related social benefits, such as pensions and insurance in case of sickness or unemployment.

The CWs would help to create and expand a ‘third’ non-state and non-market sector. This would include socially and ecologically valuable activities which are not well-suited to administration by the state or to production solely guided by market demand.

Andersson believes that combining a CW with the unconditional CI, a personcan earn enough not to be dependent on means-tested benefits. Also, the existence of CWs would provide a motive and focus for a continuing political discussion of how to allocate human resources in modern society.

Photograph by Christine Fitzwater

See also:

            Archbishop of Finland supports Citizen’s Income

Index of back issues

Theuuslogo.jpg (2196 bytes) in London