Analysis: Finland’s Basic Income Experiment

After a week of mixed messages, KELA researcher Simo Raittila sets out what happened with Finland's basic income experiment, and explains the next possible evolution of the country's social security system.

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By Simo Raittila

Finnland’s basic income experiment will end – as planned.

In recent days there have been some news sites claiming that the Finnish basic income experiment was given an abrupt end by the government. The organization that runs the experiment, Kela, was quick to deny this.

The misunderstanding can probably be traced to a BBC story that actually got it right. The two-year experiment began in January 2017 and is due to end after this year.

An extension of the experiment and a broadening of its scope has been talked about even before it started. The current experiment only includes a random group of two thousand people who were unemployed before the trial started – those that ‘won the basic income lottery’, to cite one beneficiary. The winners got (and are still getting) an untaxable €560 per month for 2 years, no questions asked.

The researchers would have wanted to include more people, and especially more employed people. While the current trial’s budget is €20 million, an earlier plan that would have included ten thousand low-income individuals including employed people would have cost approximately 40 to 70 million euros. It has now become clear that there will be no extension by the current government, and the trial will end in December.

A failed trial? But the results are only due in 2019!

The main goal set for the trial is to find out how a basic income affects the amount participants work. This will be clear only after the tax and insurance authorities can provide finalized data on the participants’ income.

This will happen in late 2019 or early 2020. Only then can information from the tax authority’s and other registers be used to study the whole two-year experiment’s (2017–2018) effects on employment, well-being, etc.

Thus, it is premature to say that the results proved unflattering – as some commentators seem to claim. We will still have to wait and see.

If there is a failure to be found, it relates to the public discussion around basic income during the trial. Especially outside of Finland, the trial has garnered out-of-proportion hype. On the other hand, the trial and other developments have spurred up discussion that paints basic income as worse than it actually is.

Not a basic income model ‘ready-for-deployment’…

In contrast to basic income models that have been proposed by political parties such as the Greens and Left Alliance, the current trial does not include changes to taxation. A practical basic income model ‘taxes away’ the basic income from those earning more, meaning most people employed full-time would be with about the same amount of money as before – they would get the basic income but pay more tax.

If the trial’s €560 per month would be given to all Finns without changes in taxation, it would cost around 10 to 15 billion euros.

Because of its price (and because it is only paid to a small group of unemployed people) the basic income tested in the experiment is not something that Finland would put into practice as it is.

… but a first ambitious experiment in experimenting

The trial faced multiple challenges. The Finnish constitution demands people to be treated equally, which is why it was not clear if a field experiment on basic income could be implemented in the first place. So the trial was done in such a way that that no participant would be worse off than his or her peers outside the experiment.

Terms such as these make the trial an achievement in itself. It shows that social policy trials are possible and worthwhile.

Now enthusiasm in Finland has shifted to testing other models like universal credit models similar to the one in UK, in which the multitude of benefits currently in place would be lumped together. The aim is to make working more tempting and changes in the level of benefits softer.

Another model that might be tested is participatory income, in which a higher benefit will be paid to unemployed showing government-approved activity. The government has already taken a step in its direction (and away from basic income) by cutting the unemployment benefit of those that do not meet the criteria of activity.

Topics such as the OECD’s report on Finland that pitted basic income against universal credit have muddied the waters. The report’s basic income model was once again decidedly different from any model with political support, and included wild changes to the Finnish system such as ending all tax deductions and the higher earnings-related unemployment allowance. Comparing such a weird personal basic income to an universal credit paid to families made the comparison unfair.

The stage is now set for some kind of radical change in the Finnish benefit system, but it is too early to say what the role of the basic income test results will be.

Simo Raittila is a researcher working for Kela, but not on the basic income trial. Opinions expressed in this column might not be representative of those of his employer. His earlier, more extensive article on the trial can be found in the Green European Journal.