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Finnish Basic Income Experiment 2017-2018 - About the experiment and its’ evaluation

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Minna Ylikännö: Finnish Basic Income Experiment 2017-2018 - About the experiment and its’ evaluation.

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Finnish Basic Income Experiment 2017-2018 - About the experiment and its’ evaluation

  1. 1. Finnish Basic Income Experiment 2017-2018 - About the experiment and its’ evaluation Minna Ylikännö, Ph.D. Senior Researcher Kela – the Social Insurance Institution of Finland minna.ylikanno@kela.fi
  2. 2. Background The Center-True Finns-Conservatives coalition cabinet (nominated 28. May 2015) took basic income (BI) experiment in its working program by referring to: • Changes in the labor markets • Does the Finnish social security system properly correspond to changes in the labour market? – High level of structural unemployment, automatization, robotization etc. • Elimination of incentive traps in the social security system • Too many cases where work does not pay (enough) • Elimination of bureaucratic traps • Need for a more transparent and less complicated system instead of “social security jungle” • Main interest of the Government was in the possible positive effects of the BI on the employment rate
  3. 3. Steps towards the experiment… • €20 Mill. for the experiment • Some extra funds for the planning of the BI experiment • Open competition on the funds • 15. September 2016 Kela’s consortium was selected to plan the experimental setting and the model(s) • Work began in the mid-October 2015 • The first report was delivered 30th of March 2016 • The final report delivered the 16th of December 2016 • The experiment started 1.1.2017 and lasts for 2 years
  4. 4. In the planning process it was to study • Which kind of models are most suitable for the experiment? • What should be the level of the monthly payment • How to combine BI with income-related benefits and other basic benefits? • How should the taxation be taken into account in the different models? • What are the strengths and weaknesses of different models in the context of the EU legislation and the Finnish Constitution? • Also, it was required that the researchers give recommendations on the experiment – what should be the model(s) to be experimented? 4
  5. 5. Models explored and developed • Full basic income (BI) • The level of BI is high enough to replace almost all earnings-related benefits • The level of monthly payment has to be high, €1 000-1 500 • Partial basic income • Replaces all ’basic’ benefits but almost other benefits left intact • Minimum level should not be lower than the present day minimum level of basic benefits (€550 – 600/month) • Negative income tax • Income transfers via taxation system • Other models • E.g. low level of BI added with some kind of ’participation’ income 5
  6. 6. The experimental setting planned by the expert group • The entire adult population (excl. pensioners) is used as a basis for the sample • age and income selection criteria • low-income earners • Between 25 and 63 years of age • Weighted sample of particularly interesting groups • Nation level randomization to get representative results • Local experiments in order to capture networking, institutional and interaction effects and externalities • In order to have a sufficiently high sample size, Kela benefits would be used as a source of extra funding (sample size could be as high as 10,000 persons) • 6
  7. 7. What was experimented? • BI €560€ a month (tax-free) • Present taxation on income exceeding 560€ • Social benefits exceeding 560€ were paid out as previously • Housing allowance and social assistance were tested against basic income • Work income on top of BI without tax “penalties” • 2 000 unemployed who received flat-rate unemployment benefit from Kela in November 2016 • Random nation-wide selection into the treatment group • The rest of the unemployed receiving benefits from Kela (app. 170 000) form the control group • Obligatory participation • BI experiment began 1.1.2017 and ended 31.12.2018 7
  8. 8. Why the experiment ”shrank”? • Constitutional constraints • Question on equal treatment • Tax authorities had not enough time to change tax laws for the experiment • Tax-free BI combined with present tax system • Only unemployed who received unemployment benefits from Kela were selected to the experiment • Easy to make a random nation-wide sampling • Easier to write legislation for one specific group than for many heterogeneous groups • Other legal constraints • Implementing BI in a complex institutional setting is very demanding • Time pressure • There was little time to write and pass the legislation • Also, there was not enough time to create a separate ICT platform for paying out the benefit • Creating proper ICT systems for payments limited the size of the treatment group • Partially manual decisions and payments 8
  9. 9. How the experiment is to be evaluated? • Before the experiment it was decided that the receivers of BI are not to be contacted by the researchers • No surveys or interviews during experiment • The main interest is in the changes of employment and income • Registers are the main source of information – combined registers from various administrative organisations • Secondary outcomes will be studied via surveys and interviews • Economic stress, general well-being, health, social relations, experiences on bureaucracy etc. • First results was published in 8.2.2019 – the report includes register based analysis for the year 2017 and preliminary results from a phone survey collected in the end of year 2018 • The second report on the results will be published 4/2019 • The final results will be published in the early 2020 9
  10. 10. The preliminary results of the BI experiment • Multidisciplinary research project utilizing both quantitative and qualitative data • All the results are based on a comparison of the experiment group and the control group and on statistical testing of the differences • The results are preliminary insofar as the register data at this stage only cover the first year of the experiment, 2017 • We are thus unable to analyse the effects of the experiment on employment status and other behaviour for the whole experiment • The survey covers both years of the experiment, 2017 and 2018 • Later, by combining register data with the survey - in this way we obtain more reliable results as regards the wellbeing effects of the BI experiment • We will also utilize the information gathered in the interview study conducted in the research project 14.2.2019 Yksikkö/Projekti/Esittäjä | Esityksen otsikko10
  11. 11. Employment effects of the BI experiment • The recipients of a basic income were no better or worse at finding employment than those in the control group during the first year of the experiment (2017) - there are no statistically significant differences between the groups • The recipients of a basic income had half a day more of employment in the open labour market than the control group • Having earnings from the open or the subsidised labour market was more frequent among the recipients of a basic income than in the control group by one percentage point • However, earnings and income from self-employment were on average 21 euros lower in the experiment group than in the control group. •  BI experiment did not increase employment in the first year of the experiment 14.2.2019 Yksikkö/Projekti/Esittäjä | Esityksen otsikko11
  12. 12. Wellbeing effects of the BI experiment • Wellbeing of the recipients of a basic income was clearly better than that of the control group • Those in the experiment group experienced fewer problems related to health, stress, state of mind and ability to concentrate than those in the control group • Those in the experiment group were also considerably more confident in their own future and their ability to influence societal issues than the control group • Generalised trust, i.e. trust in other people, was on a higher level in the experiment group • There was almost no difference between the groups as regards trust in different institutions, such as the court system and the police • However, recipients of a basic income trusted politicians more than did the control group. 14.2.2019 Yksikkö/Projekti/Esittäjä | Esityksen otsikko12
  13. 13. Contradictory results? • On the basis of the register analysis, there is no difference between the groups as regards employment status - the survey results however showed significant differences between the groups for different aspects of wellbeing • Also, those in the experiment group were more confident of their employment prospects than the control group and replied that the basic income reduced the bureaucracy involved when claiming social security benefits and when looking for a job and that the basic income made it easier to start a business • One could argue that the results are contradictory – this is however not the case: even if the basic income had no effects on employment status one way or the other, it may still have significant effects on wellbeing • This is in line with the findings of the experiments implemented in other countries (e.g. Canada) – wellbeing effects are more pronounce than the employment effects 14.2.2019 Yksikkö/Projekti/Esittäjä | Esityksen otsikko13
  14. 14. More results later this year – final results in 2020 • The results presented in this report are preliminary - one should not draw any firm conclusions about the effects of the basic income experiment on employment status and wellbeing • We can report on the real effects of the experiment in a reliable way only when all the materials for the evaluation study - register data, surveys, interviews and different combinations of these - have been analysed in more detail and the effects of the political, institutional and schedule-related parameters that created a framework for the experiment have been evaluated • Only when we have the final results of our research projects, conclusions can be made concerning the implications that an introduction of a basic income could have on individual labour market behaviour and wellbeing in Finnish society. 14.2.2019 Yksikkö/Projekti/Esittäjä | Esityksen otsikko14
  15. 15. Thank you!

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