Basic income: Finland's final verdict

[Celerity]

The coronavirus crisis has renewed interest in the notion of a universal basic income. The full report of a two-year Finnish experiment has just appeared.

https://www.socialeurope.eu/basic-income-positive-results-from-finland

On January 1st 2017, Finland began the most careful experiment with basic income undertaken in a developed country. Two thousand long-term unemployed, aged between 25 and 58—at the time recipients of the means-tested, minimum-income benefit of €560 a month—were randomly selected. For two years, they were given that same amount unconditionally—irrespective of with whom they were living, how much they were earning and whether they were actively looking for a job. The experiment terminated, as planned, on December 31st 2018. As the researchers wanted to observe their subjects as unobtrusively as possible, they announced that they would publish the final report only after all relevant administrative data could be collected and analysed. This report was published on May 6th.

Key question

One key question the experiment aimed to answer was whether the unconditional character of the benefit would boost or depress beneficiaries’ participation in the labour market. Would it enhance that, as a result of the benefit not being reduced or lost when starting a job? Or would it lessen participation, as a result of the beneficiaries no longer being forced to keep looking for a job or accept a job when one became available? In the first year of the experiment, as documented in a preliminary report published last year, the difference in working days—those in which at least €23 was earned through a wage or self-employment—with respect to the control group was slightly positive, but not statistically significant. Some feared, however, that the whole relevance of the experiment would be shattered, as a result of a major social-policy reform which entered into force precisely at the beginning of the second year.

On January 1st 2018, the right-of-centre Finnish government introduced the so-called ‘activation model’, a general reform of the means-tested benefit schemes which made them more constraining: if benefit recipients failed to work a sufficient number of hours or follow suitable training in each quarter, their benefits were to be cut by about 5 per cent. This reform, undone since by Finland’s current government, was in force throughout the second year of the experiment and applied, at the beginning of the year, to about two thirds of the control group. It also applied to slightly less than half the members of the experimental group, because they could claim, on top of their basic income, means-tested child benefits of some €150-300 according to the number of their dependent children, and means-tested housing benefits up to €600 or more according to their place of residence.

Employment went up in both groups from the first to the second year. How much was due to the ‘activation model’ is impossible to say, since no randomised experiment was conducted. However, whether large or small, this effect was necessarily more significant in the control group than among basic-income recipients, as fewer of the latter were concerned by the tightening of the conditionality. The question then becomes: did the implementation of this activation model, with its stronger grip on the control than on the experimental group, reverse the basic income recipients’ slight advantage in terms of labour-market participation during the first year? It did not. On the contrary, the gap widened considerably and became statistically significant: in the second year, basic-income recipients worked on average six more days per year than individuals in the control group. And had the activation reform not taken place, one can safely conjecture that this differential would have been even greater.

Structural effect

Does this suffice to show an unconditional basic income is a good idea? ..............................

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[smirkymonkey]

1. K&R

[jimfields33]

2. I think it'd be hard to get it for two years and then have it stop

People typically live on what they get whether a thousand a month or five thousand a month.