Finland’s basic income experiment is now underway, with the first payments having been mailed this week. With the experiment generating much media attention, here is a review of some of the basics.
On January 1, 2017, Finland launched an experiment in which 2,000 individuals–randomly selected from a pool of unemployment benefit recipients–will receive unconditional cash payments of €560 (about 590 USD) per month for two years.
The first payments were sent out on Monday, January 9.
The main goal of the experiment, as it presently stands, is to determine whether unconditional cash transfers are more effective than means-tested unemployment benefits with respect to promoting job-seeking and employment. Olli Kangas, leader of the research team at Kela that designed the experiment, has recommended expanding the experiment to other target populations (including “other persons with small incomes” and individuals under age 25).
The test subjects comprise 2,000 individuals between the ages of 25 and 58 who were receiving unemployment benefits from Kela (the Social Insurance Institution of Finland) as of November 2016. These subjects were randomly selected from a pool of about 175,000 individuals nationwide.
To avoid selection bias, participation in the experiment was mandatory for those selected.
Kela reports that, of those selected, 87% had been receiving the Labour Market Subsidy, while 13% had been receiving the Basic Unemployment Allowance. These programs provide taxable payments of €32.80 per day, five days per week, to those (and only to those) who are officially registered as unemployed job seekers. The benefits are subject to withdrawal if a recipient turns down an offer of work or training. Furthermore, if a recipient takes temporary or part-time employment, the amount of the benefits is decreased (as a general rule) by 50 cents per euro in earned income over €300 per month.
The Basic Income
Those included in the study population will be paid a monthly basic income of €560 for a period of two years. Unlike the Labour Market Subsidy and Basic Unemployment Allowance, the amount of the benefit does not decrease if the recipient earns additional income (regardless of the amount of earned income).
The basic income is not subject to tax. However, it is counted as income for the purpose of determining eligibility for additional social assistance.
Kela notes that there are some circumstances under which payment of the benefit might be terminated, such as moving abroad or entering military service.
The Finnish government is interested in testing basic income as a way to remove work disincentives in the current welfare system as well as to reduce bureaucracy.
Kela plans a study of the trial in which the group of the 2,000 individuals receiving the basic income is compared with a control group consisting of all individuals in the original target population who were not selected to receive the benefit. The study will examine, for one, differences in employment rates between these groups.
Information about individuals’ employment status will be gathered through register data. Kela will be conducting no interviews or questionnaires of the test subjects, since such interventions have the potential to influence behavior. (Kela has also expressed concern about interviews with test subjects conducted by the media.)
It is possible that the experiment will be expanded in subsequent years–as research team leader Olli Kangas has recommended–to test different levels of basic income or different taxation models, or to include additional population groups. However, no firm plans have been made, and moving forward with any expansion is contingent on the amount of funding allocated to the experiment by the Finnish government.
The latest information about the study can be found on Kela’s “Basic Income Experiment 2017-2018” webpage: https://www.kela.fi/web/en/basic-income-experiment-2017-2018.
Thanks to Danny Pearlberg for reviewing this article.
Photo: Saariselkä, Finland CC BY 2.0 Ninara.