The Strategist

Finland shows first results of basic income experiment

02/11/2019 - 11:20

Unconditional basic income improves welfare of payees, but does not affect employment - this is the conclusion reached at the Ministry of Social Protection and Health of Finland. Recall, the country was the first to implement a large-scale experiment in this field. It was assumed that preservation of guaranteed social benefits would increase employment in low-wage positions. However, during the first year, those who received guaranteed benefits of € 560 net, worked only half a day more than others.

Matti Mattila
Matti Mattila
The experiment on the payment of unconditional basic income did not result in increase in employment among its beneficiaries during the first year, a statement from Kela, the Ministry of Social Protection and Health of Finland, published on Friday, reads. “Recipients of unconditional basic income in the first year of the experiment were no worse and no better in founding work in the open labor market than the control group,” said research coordinator Ohto Kanninen from the Institute for Labor Market and Economic Research. At the same time, on average, the income recipients worked half a day more than the others — only 49.64 days versus 49.25 days. But from self-employment (those who worked in both groups were 42–43%), the first received on average € 21 less than the second (€ 4,230 and € 4,251 for the whole year).

Recall that Finland began the two-year experiment in January 2017. Participants of both groups were recruited from receiving unemployment benefits in November 2016. By the end of 2018, 2,000 people received a tax-free monthly payment (basic income) of € 560, regardless of whether they were actively searching for a job at the time of selection and what their previous income was. In addition, participation in the program was not voluntary to exclude distortion of the results.

The experiment’s goal was to “explore the possibilities for changing the social security system with the transformation of the labor market”. In particular, proponents of the concept of basic income indicated that receiving a payment would facilitate employment for low-wage vacancies (other social benefits cease, which reduces motivation to work). Note that earlier citizens of Switzerland spoke out against the payment of basic income (the referendum was held in 2016); in Italy, the government announced introduction of benefits of € 780 (but only for non-working and low-income people) starting in April of this year (the IMF have already warned that, given the recession in the country, such an increase in costs may lead to the need for their sharp compression in the future).

Despite the fact that employment of the beneficiaries did not change, they noted an improvement in their position compared to respondents from the control group: 55% of the former said they rate their health as good (against 46% in the second group), and only 17% of the participants groups said they experienced high levels of stress (25% in the second). "Income recipients also showed greater confidence in the future - including with regard to the ability to find work and the ability to influence social processes," the study notes. In addition, they more often stated that earning an income makes it easier to accept a job offer or start their own business. Kela points out that the results are only preliminary at the moment, and the second stage of the experiment will be summarized in a year.