Overview of Current Basic Income Related Experiments (October 2017)

Overview of Current Basic Income Related Experiments (October 2017)

Existing and Upcoming BI-Related Experiments

By Kate McFarland

Last updated: October 15, 2017 

 

It seems that 2017 has been a watershed year for the global basic income movement, as multiple governments and private research groups have independently conceived and launched experimental trials of basic income (and closely related policies). Several new experiments in North America and Europe represent the first such experiments in the developed world since the 1970s (when a negative income tax was tested in several cities in the United States and Canada), and the largest basic income trial ever designed is about to take place in Kenya.

At the same time, rumors of other experiments have appeared only to be revealed to have been premature, and sloppy and superficial media reports have obfuscated differences in the design and motivation of these disparate studies. This article reviews the latest information (as of October 2017) on the experiments that actually are being conducted (or well along the path) [1] [2].

The federal government of Finland is currently conducting an experiment of the effects of a basic income on unemployed citizens, which began in January 2017 and will conclude in December 2018. Prior to the launch of the Finnish experiment, the provincial government of Ontario had already announced its plans to test a type of unconditional income guarantee; at the time of this writing, it is currently enrolling participants in three areas of the province, who will receive an income guarantee for up to three years. In the Netherlands, another instigator of the recent interest in basic income experiments, municipal-level experiments have faced setbacks and changes in the quest to meet compliance with federal law; however, as of October, several cities have now launched experiments with the removal of conditions on social assistance benefits. The city of Barcelona has launched an experiment testing several potential reforms of its anti-poverty programs, including new social programs as well as unconditional cash payments. Proposals to test basic income at the municipal level have also lately gained considerable political support in Scotland.

In addition, two US-based non-profit organizations have completed pilot studies, and are preparing to launch privately funded basic income experiments on a large scale. After the Kenyan elections, the charity GiveDirectly plans to initiate a 12-year randomized controlled trial (RCT) testing the effects of universal basic income on villages in rural Kenya. Meanwhile, Silicon Valley’s Y Combinator Research has completed a feasibility study in Oakland, California, and is now finalizing the design of an RCT that is to involved 3,000 participants in two US states. (Edit: A privately funded trial in Stockton, California–announced around the same time this article was published–may soon join the list. However, the project is in its early planning stages, and few details have yet been determined.)     

 


1. Finland’s “Perustulokokeilu” (Basic Income Experiment)

Status: Launched on January 1, 2017; in progress until December 2018.

Official website: https://www.kela.fi/web/en/basic-income-experiment-2017-2018

In October 2015, the federal government of Finland formed a working group to research the design and implementation of a nationwide basic income experiment, described as a means to “find ways to reshape the social security system in response to changes in the labor market”.

One prevailing concern with existing systems of social security was the steep rate at which benefits are clawed back when beneficiaries receive a job, which has been hypothesized to discourage job-seeking. Additionally, those who gain employment on a short-term basis need to reapply for benefits after their position ends, often resulting in a gap in financial support. The latter has become a particular concern due to the increase in precarious work, such as temporary and contract positions (see, e.g., Marjukka Turunen’s presentation to Kela). Thus, the idea of unconditional basic income gained attention as a possible means to remove practical and psychological barriers that might currently deter unemployed Finns from looking for work.     

“Finland!” CC BY 2.0 Dave_S.

After reviewing several design suggestions proposed by Kela, the Social Insurance Institution of Finland, the government settled on the program that was launched on January 1, 2017. The experimental group consists of 2,000 persons, who were randomly selected from Finns between the ages of 25 and 58 who had been receiving unemployment benefits from Kela in November 2016. (The remainder of the sample population, totaling around 175,000 individuals nationwide, constitutes the control group.)

These 2,000 participants are receiving unconditional monthly cash payments of €560 (about 590 USD), an amount insufficient to meet basic living expenses, but approximately equal to that provided by Finland’s existing programs of unemployment assistance.

In contrast to those who continue to receive Kela’s existing unemployment benefits, participants in the basic income pilot are not required to demonstrate that they are seeking employment, nor are they required to accept jobs offered to them, and those who do obtain work will continue to receive the full benefit.   

The first payouts to experimental participants were distributed on January 9, 2016, and payments will continue through the end of the trial in December 2018. To avoid selection bias, participation was mandated for those chosen, and exit from the experiment is prohibited. However, the experiment has been designed to ensure that no participants will be placed in a worse financial position than they would have experienced under their previous benefits.

Labor supply effects are the main outcome of interest: the experiment will assess whether the final unemployment rates differ significantly between those individuals receiving the basic income and those receiving traditional employment benefits. Kela has also stated plans to examine difference in expenditure on medication, health care usage, and income variation.

To avoid observer effects, Kela aims to minimize interaction with experimental subjects during the duration of the trial, and will conduct no surveys or interviews of subjects until the experiment has concluded. Most analysis will be based on registry data that can be obtained without direct interaction with participants. No results of the experiment will be released prior to 2019, after the period of data collection has concluded. (Rumors of early results demonstrating a decrease in stress level were, in fact, based on a single anecdote voluntarily divulged to media.)

While many basic income supporters and “BI-curious” individuals have praised Finland’s initiative launching the first nationwide experiment of a basic income program, many activists have also expressed disappointment with the final design of the experiment, questioning its ability to produce useful results and even whether it should be called a “basic income” at all [3]. Particularly controversial have been the decisions to test only a “partial” basic income (i.e. an amount insufficient to meet basic living expenses), limit the target population to those who had previously been receiving unemployment benefits, and focus primarily on labor supply effects.

Research director Olli Kangas has recommended expansion of the experiment in future years in order to test different models of a basic income or broaden the target population. This, however, will depend on budgetary decisions of the federal government.


2. Ontario’s Basic Income (Guaranteed Minimum Income) Pilot

Status: Officially announced in April 2017; currently enrolling participants.

Official website: www.ontario.ca/page/ontario-basic-income-pilot

Before describing Ontario’s “Basic Income Pilot” (as the study is officially called) on BIEN’s website, a word about terminology is in order: in the Canadian context, the term ‘basic income’ is commonly used in a more expansive manner than the definition adopted by BIEN to refer to programs that guarantee minimum income, with no type of work requirement, for all members of society without any type of work conditions. This is more expansive that BIEN’s definition in that it omits the conditions that policy must provide payments to individuals (rather than households) and in an amount not dependent on additional earned income.

For example, Canadian writers and policymakers often use ‘basic income’ to refer to programs in which cash payments are not distributed universally, such as  a negative income tax or top-up of low incomes. (In common Canadian terminology, the word ‘demogrant’ is used equivalently to BIEN’s use of ‘basic income’, and to refer to a sub-type of the programs that most Canadians call ‘basic income’.)

River in Lindsay, Ontario, CC BY 2.0 RichardBH

This clarification is important given that, in fact, Ontario’s experiment employs cash transfers that depend in their amount on both income and household status. Specifically, single participants will receive a guaranteed annual income of 16,989 CAD (€11,340), while couples will receive a minimum of 24,027 CAD (€16,038) per year (amounts pegged to 75% of the Low Income Measure or LIM, where the LIM is roughly 50% of area median income).

Moreover, the above amounts are the maximum payments; that is, they are the amounts that would be paid out to individuals and couples with no external income source. The amount of the benefit will be reduced by the amount of 50% of any earned income (e.g. if a single individual in the study receives 20,000 CAD per year in earned income, she will receive an additional 6,989 CAD per year through the pilot program, or 16,989 CAD less 10,000 CAD). This entails, for example, that single individuals will not receive any payment through program if their annual earned income rises above 48,054 CAD.

Additionally, only Ontarians with an annual income below a certain level (34,000 CAD for single individuals or 48,000 CAD for couples) are eligible to participate in the experiment. (In contrast to the experiments in Finland, the Netherlands, and Barcelona, the target population is not restricted to current welfare recipients; it is, however, restricted to the low-income population.)

Although the amount of the cash supplement depends on income and household status, it does not depend on employment status, participation in job-seeking activities, training, or any other prescribed activity, or proof of an inability to work (although individuals with disabilities can receive an additional amount of up to 500 CAD per month).

Compared to the Finnish government, the government of Ontario is less focused on employment effects in particular, and more interested in the ability of a guaranteed income program to reduce poverty, food insecurity, and mental and physical health problems caused or exacerbated by low or unstable income. This is one reason that, in the context of the Ontario experiment, it may be less significant that the cash benefit is clawed back with earned income; researchers and policymakers are less focused, if at all, on reducing or removing the “benefits cliff”. Meanwhile, poverty–the prevailing concern to Ontario–is not an issue motivating the trial in Finland.

Thunder Bay lighthouse, CC BY-NC 2.0 C Hanchey

Since June 2017, the Ontario government has been enrolling participants from the three regions chosen as sites for the experiment: the Hamilton, Brantford, and Brant County region, Thunder Bay and surrounding area, and the city of Lindsay.

Residents of these regions have been randomly selected to receive application packages, and are eligible to enroll if they are between the ages of 18 and 64 with income below the levels mentioned above. Unlike the situation in Finland, participation is voluntary, and participants may opt out of the experiment at any time.

At the time of this writing, 400 participants have been enrolled from Hamilton and Thunder Bay areas. The government intends to enroll at total of 2,000 participants from these two regions, in addition to 2,000 from Lindsay (where enrollment will begin later in the year).

Participants will be regularly surveyed about topics such as their health, employment, and housing situation. Those assigned to the control group will receive no cash benefit but will be administered the same surveys. A third-party research group will evaluate outcomes in a variety of areas, including food security, stress and anxiety, mental health, health and healthcare usage, housing stability, education and training, and employment and labor market participation.

The experiment will continue for three years after its launch, with payments distributed on a monthly basis, and results are expected to be reported to the public in 2020.


3. Dutch Social Assistance Experiments

Status: Two-year experiments have been launched in four cities in October 2017, after meeting compliance with federal legislation; a fifth will follow in December (Nijmegen), and two cities (Amsterdam and Utrecht) are discussing revisions necessary for legal compliance.

In contrast to the cases in Finland and Ontario, in which the national and provincial governments (respectively) have called for and overseen the implementation of the trial programs, social assistance experiments in the Netherlands have developed “from the bottom up”: municipal leaders and university researchers in several Dutch cities planned experiments to test the replacement of the nation’s “workfare” benefits with unconditional cash assistance, and sought permission to carry out these experiments under the auspices of the Participation Act.

This national law, passed in 2015, tightened conditions on the receipt of welfare benefits, with the goal of promoting reintegration into the labor market. For example, individuals are commonly required to complete five job applications per week, attend group meetings, and participate in training activities in order to continue to receive their benefits. However, the law also granted municipalities the opportunity to implement new forms of social assistance on a trial basis for up to two years–subject to certain constraints (to be discussed below). Hence, the Participation Act might be said to have provided both the impetus to experiment with basic income (as an alternative to its workfare-based to benefits) as well as the license to do. As will be seen, however, the conditions of this legislation have also effectively precluded the ability of researchers to test a truly unconditional and non-means-tested basic income.

The Dutch municipal experiments, like the Finnish experiment, were motivated in large part by concern about the ability of existing welfare programs to incentivize work. However, while the Finnish experiment focuses on the role of monetary incentives (e.g. the ability to retain cash benefits after taking a job), the Dutch experiments have also stressed individuals’ intrinsic motivation to work. For example, drawing upon work in behavioral economics, Utrecht University economists Loek Groot and Timo Verlaat have argued that coercing individuals to work, as in the case of the nation’s “workfare” programs, can undermine their intrinsic motivation to perform fulfilling work and make productive contributions to society.

Thus, although the Dutch municipal experiments are designed to investigate the effect of removing financial disincentives to work (reducing the withdrawal rate on means-tested benefits), as described below, the most discussed experimental intervention has been the removal of coercive reintegration requirements on welfare recipients.    

Nijmegen train, CC BY 2.0 Rob Dammers

Researchers at the Universities of Groningen, Tilburg, and Utrecht initially proposed to test a policy close to a basic income. However, research teams experienced setbacks in 2016 and 2017, as interaction with the national Ministry of Social Affairs and Employment made clear that the terms of compliance with the Participation Act would prohibit experimentation with a truly unconditional benefit.

For example, if an experiment involves the removal of work reintegration requirements on benefits, the Ministry mandates that municipal officials survey test subjects after six and twelve months to verify that they have made adequate effort to find employment: if any participants are determined not to have made adequate job-seeking efforts during this time, they are subject to dismissal from the experiment. The Ministry has also required that any experiment including a treatment group with relaxed conditions on the receipt of benefits also must include a treatment group with stricter conditions (such as more intense reintegration activities). Finally, the Participation Act caps the amount of earned income that participants are permitted to retain on top of their social assistance benefits at €199 per month, meaning that a completely non-withdrawable (non-means-tested) benefit cannot be tested.

Despite such setbacks and constraints, however, several municipalities have designed–and are beginning to launch–experiments that meet the conditions of the Participation Act.

On July 3, 2017, the Dutch Ministry of Social Affairs and Employment granted permission to four municipal-level social assistance experiments–in Groningen (with the neighboring village of Ten Boer), Wageningen, Tilburg, and Deventer. An application from Nijmegen was also approved shortly thereafter. Meanwhile, discussions are ongoing in Amsterdam, where the city has so far refused to adopt the stricter conditions required by the Participation Act, and Utrecht, where an application to experiment was approved conditionally on revising a city law to meet compliance with the act (to be decided in December).

Deventer, CC BY-NC 2.0 Jens-Olaf Walter

In each of the two-year experiments, participants will be (or have been) randomly selected from a pool of current social assistance beneficiaries, and assigned either to a control group or to one of several treatment groups.

As in Ontario’s experiment, but in contrast to Finland’s, participation is voluntary for those selected.

The experiments in Tilburg and Wageningen include three treatment groups: (1) a group with the removal of reintegration requirements, such as job application quotas and participation in training programs, on welfare benefits; (2) a group with a more intensive form of reintegration service for welfare recipients (as per the requirements of the Participation Act); (3) a group permitted to keep additional income earned on top of welfare benefits (subjects in this group may retain 50% of additional earned income, up to the mandated maximum of €199 per month, for the duration of the two-year experiment; under current policy, welfare beneficiaries are permitted to keep only 25% of additional income, and only for up to six months).

The Groningen / Ten Boer experiment includes a fourth treatment group, in which participants are permitted to choose to join any one of the three preceding groups.

The Nijmegen experiment, in contrast, will combine features of above treatment groups into two group. In one group, reintegration requirements will be removed; in the other, more intensive reintegration requirements will be implemented, but subjects will be allowed more autonomy and discretion in selecting reintegration activities (e.g. volunteer work, help obtain full-time work, or assistance for entrepreneurship). In both, subjects will be able to retain of 50% of additional income (up to the €199 maximum).

Researchers plan to examine outcomes such as health, stress level, subjective well-being, financial well-being (such as amount of debt), education, employment (including part-time and temporary employment), and participation in social and cultural life.

The experiments in Tilburg, Wageningen, and Deventer began at the start of October 2017, with Groningen / Ten Boer to follow at the end of the month. Nijmegen plans to launch its experiment in December.  


4. Barcelona’s B-MINCOME

Status: Launched in October 2017

Official website: https://ajuntament.barcelona.cat/bmincome/

Launched in October 2017, Barcelona’s B-MINCOME experiment is exploring several potential solutions to address poverty and social exclusion. The experiment is being conducted in Besòs area, the city’s poorest region, and, as in the above experiments, the target population consists of low-income individuals and households. As in the Finnish experiment and Dutch municipal experiments, participants are drawn from current recipients of social assistance benefits (in this case, Barcelona’s Municipal Social Services). Once again, although the program is thereby not a test of a truly “universal” benefit, this restriction is sensible in the context of the experiment, the main objective of which is to test the effectiveness of alternative anti-poverty programs.

“Panorama sobre el Besòs” CC BY-SA 2.0 Jordi Domènech i Arnau

A stratified random sample of 2,000 households was selected for the experiment, with 1,000 households assigned to the control group, and the other 1,000 assigned (at random) to one of ten treatment groups. (As in the Ontarian and Dutch experiments, but in contrast to the Finnish experiment, participation in the experiment was made voluntary for the selected households.)

All of the treatment groups will receive cash income supplements (called “Municipal Inclusion Support” or, in the Spanish acronym, “SMI”), but differ according to whether the SMI is accompanied by an additional social program and whether the SMI is means-tested. In general, the amount of the SMI will depend upon household composition and financial status, and is expected to range from 100 to 1,676 per month per household. A total of 550 households in the experiment will be assigned to participate in one of these four social programs, including an occupation and education program, a social and cooperative economy program, a guaranteed housing program, and a community participation program. The remaining 450 households will receive the SMI without any associated programs. Within this group, the receipt of the SMI is not conditional on work, willingness to work, or willingness to participate in any other type of program. Furthermore, for some of these 450 households, the SMI will not be means-tested.

Hence, although B-MINCOME is not only a test of basic income–it is also a test of the effectiveness of the additional social programs–it includes a trial of basic income. This is not coincidental: the project team contains several members of BIEN’s Spanish affiliate, Red Renta Básica, and consulted with representatives from Finland, Ontario, and Utrecht who have been involved with the design of the experiments in their respective regions (not to mention that its name refers to Manitoba’s well-known experiment with unconditional income guarantee, in the form of a negative income tax, in the 1970s).

To examine the impact of the cash transfers (SMI) and social program on poverty and social exclusion, researchers will examine a number of outcome variables, including labor market participation, food security, housing security, energy access, economic situation, education participation and attainment, community networks and participation, and health, happiness, and well-being. They will additionally investigate the question of whether the SMI reduces the administrative and bureaucratic responsibilities of social workers.

B-MINCOME is being administered by the Barcelona City Council, with consultation from five research organizations (the Young Foundation, the Institute of Governance and Public Policy at the Autonomous University of Barcelona, the Polytechnic University of Catalonia, the Catalan Institution for Evaluation of Public Policies, and NOVACT-International Institute for Non-Violent Action), and was awarded financial support by Urban Innovative Actions, an initiative of the European Commission formed to support projects investigating “innovative and creative solutions” in urban areas.

The leading political party in the City Council, the left-wing Barcelona en Comú, has expressed interest in implementing a municipal cash transfer program if results of the experiment prove favorable.


5. GiveDirectly’s Basic Income Experiment in Kenya

Status: Full experiment (consisting of 300 rural villages) planned to launch after the Kenyan election on October 26, 2017; pilot study running in one village since October 2016. [Update: Official launch occurred in November 2017.]

Official website: www.givedirectly.org/basic-income.

GiveDirectly, a US-based charitable organization, has been providing unconditional cash transfers to poor residents of Kenya and Uganda since 2009, when it was founded by a team of economists who had become interested in the hypothesis that cash transfers are the most effective means to combat extreme poverty. Since this time, its practice of delivering cash grants directly to those in need has proven efficient and effective, earning the organization recognition as one of GiveWell’s top charities.  

In 2016, GiveDirectly announced a new ambition: the first long-term and large-scale randomized controlled trial (RCT) of universal basic income. The experiment will provide unconditional cash transfers to the residents of 120 villages, comprising more than 16,000 people in total, with some receiving payments for up to 12 years. This makes the experiment the largest of its type, in terms of the number of individuals who will receive assistance, as well as the longest in duration [4]. The cost of the experiment will amount to $3o million, most of which has been now raised by private donors.  

Rural Kenya, CC BY-NC 2.0 ViktorDobai

In contrast to all experiments taking place in developed nations, GiveDirectly’s experiment examines the impact of programs that are indeed universal–that is, in which the unconditional cash transfers are distributed to all individuals residing in the villages where the program will be implemented [5]. 

Indeed, the experiment is designed as an RCT in which villages (not individuals or households) are the experimental units: 300 villages in rural Kenya will be randomly assigned to either the control group (comprising 100 villages), in which no cash transfers are given to any residents, or one of three treatment groups, in which all residents receive some form of unconditional cash transfer. In the first treatment group (comprising 40 villages), residents will receive cash payments of about 23 USD (€21)–roughly half of the average income in rural Kenya–every month for 12 years. In the second treatment group (80 villages), residents will receive monthly cash payments of the same amount, but only for two years. In the third treatment group, residents will receive a single lump-sum payment equal in amount to the two-year basic income (that is, about 276 USD).

As GiveDirectly explains on its website, “Comparing the first and second groups of villages will shed light on how important the guarantee of future transfers is for outcomes today (e.g. taking a risk like starting a business). The comparison between the second and third groups will let us understand how breaking up a given amount of money affects its impact.”

The organization further indicates that it will investigate outcomes including the following: “economic status (income, assets, standard of living), time use (work, education, leisure, community involvement), risk-taking (migrating, starting businesses), gender relations (especially female empowerment), [and] aspirations and outlook on life.”

GiveDirectly had initially planned to launch the experiment in September 2017, but has postponed the launch to after the Kenyan elections on October 26.

An initial pilot study commenced in one village in October 2016, in which all 95 residents now receive monthly unconditional cash payments, which will continue in this village for 12 years. This preliminary study is intended to help experiments fine-tune the implementation of the full experiment, and is not itself to be included in the analysis of the full experiment. Because of this, GiveDirectly is making public much of its data that is collects from the pilot village (e.g. responses to a survey of participants). (It will not, however, publicize data as it is collected from villages that are part of the experiment.)

GiveDirectly expects to publish its first results one or two years after the experiment’s commencement.


6. Y Combinator’s plans for a United States experiment

Status: Completed feasibility study in Oakland; issued draft of research plan for randomized experiment (3,000 participants in total) in two US states.

Official website: https://basicincome.ycr.org/

In January 2016, Silicon Valley entrepreneur Sam Altman (president of the start-up incubator Y Combinator) announced his intention to fund a test of basic income in the United States. Like many tech entrepreneurs, Altman cited concerns about job loss due to automation in explaining his interest in basic income: “I’m fairly confident that at some point in the future, as technology continues to eliminate traditional jobs and massive new wealth gets created, we’re going to see some version of this at a national scale.” The experiment is now the main project of the non-profit arm of Altman’s company, YC Research.

Since the initial announcement, YC Research has hired social work and political science PhD Elizabeth Rhodes as Research Director and assembled a team of expert advisors. This research team has designed and implemented a feasibility study in Oakland, California [6], and is now working to finalize the design of its full-scale experiment.

CC BY-SA 2.0 Bill So

According to a project proposal released in September 2017, Y Combinator has decided to design the experiment as a randomized controlled trial, with a target population of low-income young adults–specifically, adults aged 21 to 40 whose incomes fall below the area median–in two US states. (Researchers will employ a stratified sample to ensure adequate representation across race, gender, and income categories.)

On the tentative design, researchers will select a total of 3,000 participants, of which 1,000 will be randomly assigned to the treatment group–whose  members will receive unconditional cash payments of 1,000 USD per month–and the remaining 2,000 to the control group. (Individuals in the control group will provide the same type of feedback and data to researchers but receive only a much smaller cash payment, tentatively set at 50 USD per month, for their participation.) As currently planned, some individuals will receive the cash payments for three years, others for five.

Y Combinator emphasizes that its interest is a “holistic approach to understanding the individual-level effects of basic income”, in contrast to many past and present experiments which have focused on the labor market impacts of unconditional cash payments (such as Finland’s experiment and the negative income tax experiments conducted in the US in the 1970s). Among these individual-level effects, the research group is particularly interested in time use, mental and physical health, subjective well-being, financial health, decision making and attitudes toward risk, as well as  political and social attitudes. Furthermore, although individual-level effects will be the focus of the experiment, researchers also hope to examine spillover effects on recipients’ families, friends, and communities.  

While the research group has not finalized its choice of data sources and collection methods (see its project proposal for a discussion of possibilities currently under discussion), it plans to combine quantitative analysis with regular surveys and interviews. However, according to Rhodes, receipt of the cash payments will not be contingent on participation in surveys and interviews; payments will continue for the duration of the experiments even if recipients do not respond to requests for data and information.  

To conduct the experiment, YC Research has partnered with the Center on Poverty and Inequality (CPI) at Stanford University. The research has been approved by Stanford’s Institutional Review Board for research involving human subjects. YC Research is also in the process of working with state and local governments to coordinate mechanisms for distributing payments without affecting recipients’ future eligibility for existing government benefits.

No specific launch date has been set for the experiment, as YC Research is still gathering feedback on its project proposal. However, at a plenary lecture at the 2017 BIEN Congress, Rhodes indicated that the research group hopes to commence the trial in early 2018.


7. Scotland’s plans for local experiments

Status: Government support pledged; preliminary reports in progress.

In November 2016, the Councils of Fife and Glasgow committed to investigate the feasibility of municipal-level basic income experiments. An important step forward occurred in February 2017, when the Glasgow City Council passed as a resolution to convene workshops on the financial, administrative, and constitutional feasibility of an experiment, partnering with the Royal Society of Arts (RSA), a British think tank responsible for a highly regarded report on potential for a basic income in the UK (“Creative Citizen, Creative State”).  

Fife and Glasgow were later joined in their interest by North Ayrshire and Edinburgh.

In September 2017, the Scottish government announced its commitment to provide funding and support for basic income experiments in the four municipalities (see the RSA’s announcement), and RSA Scotland is now working with the government to prepare an initial report on the possibilities for an experiment in Glasgow.

No design decisions or prospective launch dates have yet been announced.

In general, the RSA and local authorities are attracted to basic income as a potential means to address poverty, precarious employment, economic insecurity, and the changing nature of work.

Scottish Highlands, CC BY-NC-ND 2.0 Peter Coughlan

 

Notes 
[1] The coverage of the present article is limited to projects that qualify as experiments in a social scientific sense. Thus, it does not include several projects that are sometimes listed–incorrectly–as “experiments” of basic income. Missing, for example, are lottery programs like Mein Grundeinkommen, as well as any pilot studies that lack a control group, such as the ReCitivas Institute’s pilot in Quatinga Velho and Eight’s two-year pilot study in Uganda (see “Some thoughts on basic income ‘experiments’” by Michael A Lewis).

Programs and policies such as Iran’s fuel subsidy reform and Alaska’s Permanent Fund Dividend are occasionally misconstrued in sentences like “Iran and Alaska have tested basic income”. These programs are also not experiments in the scientific sense, and thus omitted from inclusion in this article.


[2] Of course, no experiment can fully test the effects of a basic income, which, by definition, would guarantee cash stipends to all individuals in a community, and it would guarantee this support for life. Experiments, in contrast, are bound by their nature to be non-universal (since there must be a control group) and limited in duration. Furthermore, it is likely that additional changes to the taxation of benefit system, which are not captured in the experiments, would accompany the introduction of a basic income.

(In a forthcoming article, I will argue that, in the case of my own interest in basic income as a possible stimulus to long-term cultural change, the above facts preclude limited trials from having the capacity to produce usefully informative results.)


[3] According to many definitions, including those adopted by some of BIEN’s affiliates (although not BIEN itself), a “basic income” is a recurring payment sufficient to meet basic living expenses. On these definitions, it is indeed inaccurate to call describe the Finnish experiment a “basic income experiment” given €560 per month falls below average minimum monthly living expenses in Finland (although it might plausibly be called, as Kela sometimes more precisely describes it, a “partial basic income experiment”).

One may also raise concern regarding the universality of the program–or, rather, the lack thereof–given that a sample of adult recipients of unemployment benefits is clearly not representative of all Finns, and no “true” basic income (on any definition) would not be restricted only to the unemployed. One might alternatively say, however, that the Finnish experiment is indeed a test of a (partial) basic income, albeit one using a non-representative sample.


[4] In 2016, the Brazilian non-profit institute ReCivitas initiated a project, Basic Income Startup, which promises a “lifetime basic income” of 40 Reais (about 10 USD) per month to members of the village Quatinga Velho. The project targets volunteer recipients in areas where 40 Reais per month makes a significant impact on quality of life.

ReCivitas’s Basic Income Startup, however, is not an experiment (although occasionally miscategorized as one). Indeed, project founders have stated that they are already convinced that basic income is effective; their goal is not to test but to implement it.


[5] Previous trials of basic income and related policies have used saturation sites. Notably, Manitoba’s MINCOME experiments of the 1970s, which tested a type of minimum income guarantee in the form of a negative income tax, featured a saturation site in the town of the Dauphin.

The basic income experiment in Madhya Pradesh was also a saturation studym in which all members of the nine villages in the experimental group received monthly unconditional cash transfers (equal about one quarter of the median income in the state).


[6] Contrary to some misconceptions, the Oakland project was not itself an experiment. Its purpose was merely to test and fine-tune the mechanisms for conducting the experiment–such as the selection of participants, disbursement of funds, and collection of data–not to analyze the effects of unconditional cash transfers on recipients. The latter will be the goal of the project described in a newly released research proposal, and which has yet to be finalized and launched.


Addendum on Stockton, California (October 20, 2017)

Only a few days after this updated article was published, Michael Tubbs, Mayor of Stockton, California, announced his intention to carry out a pilot of basic income or guaranteed income in his city, the Stockton Economic Empowerment Demonstration (SEED).

The project will be privately funded, and has already received a $1 million SEED grant (if you will) from the Economic Security Project, a two-year initiative launched in December 2016 to fund basic income related projects in the United States.

At present, however, few details have been announced or decided.

According to its website, the project is “in the very early stages of development”.

Regarding the current state of the project, the site notes:

We will kick off the demonstration with a six-nine month design period that will prioritize community engagement and feedback. In that time period, we’ll identify research and storytelling partners […]. We will identify research priorities that complement existing research on unconditional cash transfers in the United States and invest in storytelling that honestly and authentically uplifts the experiences of recipients.

Thus, based on publicly available information, it is presently unclear when the project planned in Stockton will be launched, as well as what form it will take–including whether or not it will be an experiment (note the above emphasis on “storytelling” rather than comparison of data collected from control and treatment groups).

Basic Income News reporters will follow up with the conveners of the Stockton project, and provide more thorough, comprehensive and up-to-date information in a future stand-alone news article.


Reviewed by Heidi Karow

“Lab stuff” photo: CC BY-NC-SA 2.0 Rawbert|K|Photo

The OECD and the problems of basic income

The OECD and the problems of basic income

According to the OECD, basic income (BI) is not an effective tool for reducing poverty. However, the outcome would depend on the model chosen for implementing a BI system, as well as the changes made in other parts of social protection.

 

The Organisation for Economic Co-operation and Development (OECD) published in May a Policy Brief paper studying the feasibility of a basic income model in four OECD countries, one of which was Finland.

On June 16, Kela organized a seminar in which Herwig Immervoll, a senior economist at the OECD, discussed the findings of his study and analysed the strengths and weaknesses of a BI scheme. After the seminar, the national broadcasting company YLE reported: “Universal basic income might increase poverty and inequality”.

Apart from Finland, the OECD study includes France, Italy and the United Kingdom. The analysis was done with the help of the EUROMOD microsimulation model. In each country, the starting point for the analysis was to take all existing spending on social cash-transfers together and see what level of BI they would amount to. Eventually, the level of BI was set near the existing levels of guaranteed minimum-income benefits for single individuals in each country, adjusted so that it would not increase the public expenditures.

In Finland, this resulted a BI of 527 euros for the working age adults and 316 euros for children and youth under 18 years of age. Those entitled to old-age pensions within the current main statutory retirement age (in Finland over 65-year-olds) were excluded from the BI model.

In the BI model used in the OECD analysis, all existing working-age benefits (including social insurance benefits) apart from cash transfers for housing and disability would be abolished. Also, the zero-rate tax bands of income-tax schedules and equivalent tax-free allowances would be abolished, and all income-tax thresholds would be shifted downwards by a corresponding amount. BI would be made taxable under personal income taxation alongside other taxable incomes.

The OECD model would create many gainers and losers

The most important outcome of the OECD study is that the simulated BI model would strongly impact the income distribution in all studied countries. However, the effects vary greatly among the countries.

In all income groups, the BI model would create many gainers and losers. It would change the net income of most people in one way or another. It would lift some groups out of poverty and thrust others below the poverty line.

The simulated BI model would increase the income level of those small income groups who are currently not receiving any social benefits, or whose benefit level is very low. In turn, those receiving earnings-related benefits or several means-tested benefits would see a decline in their standard of living.

In Finland, those below 65-years-old receiving old-age pensions and single parents with low incomes would be among the losers of the model. The middle-income earners instead would generally benefit from the model.

The conclusion of the OECD is that particularly in countries with a comprehensive social protection BI is not an efficient tool for reducing poverty, since it does not target the benefits effectively. According to the OECD, a budget-neutral BI would not be distributionally neutral. High enough to be socially and politically meaningful and fiscally realistic, a BI would still require tax rises as well as reductions in existing benefits.

A very low basic income, instead, would have little other significance but increase poverty.

The outcomes of BI depend on reforms in taxation and social protection

How the findings of the OECD study are to be interpreted in the Finnish context?

Perhaps the most important issue that the research sheds light on is the fact that there are many institutional challenges in implementing a BI system, and those challenges differ among countries due to their different systems of social security and taxation.

As the OECD report (p. 5) notes, BI as an idea is simple, but the existing social protection systems are not. Therefore, there are grounds to argue that the same model of BI does not fit everywhere. If a reform such as BI were to be carried out, it needs to be adjusted to the existing institutions of social protection and taxation in each country separately. The parameters of the model should be adjusted so that it will not produce excessive changes in people’s incomes.

The greatest problems of the OECD’s microsimulation are that the income taxation is not changed to correspond with the BI model, and that the existing systems are demolished by the same means everywhere without examining the structures of social protection in each country separately. Due to this, BI seems to have unpredictable effects to income distribution.

The income distribution produced by a BI model can be influenced by adjusting the parameters of taxation and social security. In his presentation at the Kela seminar, Herwig Immervoll mentioned that tax reforms should be discussed in parallel with BI. Indirect taxes, such as environmental or value added taxes, have often been proposed as a complementary source for financing a BI scheme, combined with income taxation.

However, the OECD report does not mention these alternatives, and the premise seems to be that taxation in any form should not be increased.

In Finland, as well as in many other countries, some organisations and individuals have launched models of BI adjusted to the local context. Their objective has often (yet not always) been to not radically alter the income distribution or cause reductions in people’s after-tax incomes, especially in the lowest income groups. Microsimulation has been employed at least in the models of partial BI by the Green Party and the Left Alliance, and in the preliminary study for the national BI trial conducted by Kela.

In these models, BI is linked with a reform in income taxation that is designed so that radical changes in after-tax incomes will not occur in any income group. The aim is also to make the models budget neutral, that is, to cover the costs of BI by reforms in taxation and replacing the existing benefit systems. In these models, the old system will be abolished only in those parts where the level of benefits is lower than the BI.

One of the problems with the BI trial currently underway is that due to time constraints, the taxation reform proposed by the research team that designed the experiment was not included.

Will Finland implement a BI?

Though there exist BI models in Finland that would technically allow implementation of a BI system without radical changes in income distribution or public financing, the road of BI will probably be rocky even here.

The preparations of the BI experiment scheme revealed many institutional challenges in implementation of a BI model. The greatest obstacles for a BI are, however, ideological.

In Finland, BI has gained interest especially as a possibility to improve the incentives for paid work. The possibility to combine wages with social benefits more smoothly than today is an issue that no party opposes. Yet, many still find it morally wrong to give people money with no obligations. The opponents of BI fear that the “free money” would reduce people’s willingness to work and give a moral legitimacy to not apply for jobs.

If the only, or at least the most important function of BI is to improve work incentives, the great promises of BI may not be fulfilled after all. The preliminary studies for the BI trial revealed that BI models do not always unambiguously remove incentive traps, if parts of the old social security stay intact.

However, it seems likely that in Finland, as well as in other industrialised countries, the social security will be reformed in a direction that may contain some elements of BI, but not necessarily a ‘pure’ BI model.

If the political thinking emphasizing the labour supply and austerity in public economy prevail, the prospects for more generous BI models seem to be low. In the framework of current economic policies, the implementation of a BI would most probably mean at least demolishing large parts or other forms of social security.

BI as a social dividend?

The OECD report (p. 8) ends up recommending some kind of ’partial’ alternative of a BI model. One option mentioned is a possibility to introduce BI as a separate system from the existing social protection, whose function would be to share the benefits of globalisation and technological progress more equally.

This idea of ‘social dividend’ has often appeared in BI discussions. The state of Alaska is already giving an annual share of the permanent fund based on oil revenues to each citizen as a social dividend. There is similar thinking linked also to the idea of “helicopter money”, originally introduced by Milton Friedman, a cash transfer paid by the central bank to people’s accounts to stimulate consumer demand in economic downturns.

Considering BI as a social dividend would locate it in a new frame, where its function would not be to fix the problems of social security systems, but to distribute purchasing power also to those who lose their jobs or end up in low paid precarious jobs in the labour market turmoil caused by digitalization.

If BI were paid on top of other social benefits, its level could even be lower, or for instance connected to macro economy indicators. In that case, it could also be used to stimulate economies in downturns.

 

Johanna Perkiö
M.Soc.Sc., Doctoral Candidate
University of Tampere
email: johanna.perkio(at)uta.fi

 

Original article:

Johanna Perkiö, “The OECD and the problems of basic income“, Kela, June 30, 2017.

FINLAND: “Is a basic income feasible? An OECD perspective” (June 16)

FINLAND: “Is a basic income feasible? An OECD perspective” (June 16)

In May 2017, the Organisation for Economic Co-operation and Development (OECD) released a policy brief on the cost and feasibility of basic income schemes in developed nations, looking in detail at the implementation of such a policy in Finland, France, Italy, and the United Kingdom.

The authors used a EUROMOD microsimulation model to predict the cost of replacing certain existing welfare programs with a universal basic income. The mircosimulation was also applied to forecast the effects of such a reform on personal income and poverty.

On June 16, 2017, one of the authors, Herwig Immervoll, will discuss the OECD study and its conclusions at Kela, the Social Insurance Institution of Finland. Immervoll is a Senior Economist and Head of Employment-Oriented Social Policies at the OECD.

Before Immervoll’s presentation, Olli Kangas, Kela’s Director of Government and Community Relations at Kela, will deliver a short overview of the current status of Finland’s Basic Income Experiment. Kangas is the leader of Kela’s research team responsible for designing and administering the pilot.   

Markus Kanerva, Senior Specialist at the Prime Minister’s Office and founder of the independent Finnish think-tank Tänk, will deliver concluding comments.  

The event will take place 9-11 AM Finnish time (GMT+3) and will be recorded and live-streamed. Coffee will be provided to attendees at Kela’s auditorium but not to online viewers.

For more information, and to register, see “Toimisiko perustulo – mitä OECD arvioi? Is a basic income feasible? An OECD perspective at Kela’s website.


Reviewed by Heidi Karow

Photo (Helsinki, Finland) CC BY-NC 2.0 Mariano Mantel

Olli Kangas and Heikki Hiilamo, “Universal Basic Income: Does the Carrot Work Better than the Stick?”

Olli Kangas and Heikki Hiilamo, “Universal Basic Income: Does the Carrot Work Better than the Stick?”

Meeting of the Minds, an organization that aims to identify and raise the profile of practical innovations in the field of urban sustainability, has published an article explaining the motivation for the Finnish basic income experiment, initiated earlier this month, co-written by one of its designers. 

The “stick” mentioned in the article’s title refers to the sanctions claimants face under existing workfare policies, while the “carrot” refers to the fact that the basic income will continue to be paid to study participants even if they take up work or gain income through entrepreneurial endeavours.

The authors explain that the experiment “is designed to reform the Finnish social security system to better correspond to changes in modern working life, to make social security more participatory and diminish work-disincentives, and to reduce bureaucracy and simplify the overly complex benefit system.”

The article is written by Olli Kangas and Heikki Hiilamo. Kangas is Director of Government and Community Relations for Kela, the Social Insurance Institution of Finland, and one of the designers of the basic income trial administered by that organization. Hiilamo is a professor of social policy at the University of Helsinki and Kjell Nordstokke Professor at the VID Specialized University in Oslo.  

Read the full article here:

Olli Kangas and Heikki Hiilamo, “Universal Basic Income: Does the Carrot Work Better than the Stick?”, Meeting of the Minds, January 25, 2017.

Reviewed by Dawn Howard

Photo: Sibelius Monument, Helsinki. CC BY 2.0 Dennis Jarvis

FINLAND: First Basic Income payments sent to experiment participants

FINLAND: First Basic Income payments sent to experiment participants

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 Sample

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.

 

Research Objectives

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.

 

More Information

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.