FINLAND: Basic income experiment – what we know

finland

In the last week, the basic income experiment in Finland has gone viral, making headlines around the world, from UK-based Telegraph to Russia Today. Not all the reports however were correct. Here is what we know.

Update March 2016: KELA has published its recommendations – see a summary here.

Some articles mistakenly gave the impression that the Finnish government has already made plans to introduce a nation-wide basic income. As we reported before here and here, for now the government has committed to implement a basic income experiment. KELA, the Finnish government agency in charge of welfare benefits, rectified the misperception on Tuesday.

In a previous statement released on November 19, KELA provided additional information about the experiment. It highlighted four objectives behind the program. It aims to find feasible options for an overhaul of the social security system in response to labor market changes. Some of these trends include the growth of temporary contracts and freelance work that is not covered by the current work-based benefits structure. The experiment will also explore how to make the system more effective in terms of providing incentives for work, and avoiding the poverty trap – benefit recipients are discouraged from taking up employment, if the additional income received from a job is only marginally higher than means-tested benefits. Another goal is to reduce bureaucracy and simplify complex and costly procedures for administering benefits.

The experiment will be carried out in a context marked by three years of economic downturn, which has led to rising unemployment and pressures on public spending. The current center-right government took office after general elections in April this year, and is carrying out a wide-ranging program of cuts that will affect education, health and welfare provisions.

A working group has been created with the task of providing a preliminary study that will lead to the actual experiment. The study will identify a model for basic income to be tested. The experiment will evaluate the effects of giving a basic income to members of different population groups, and produce an overall cost estimate.

The preliminary study is a collaboration between Kela’s Research Department, the Universities of Helsinki, Tampere, Turku and Eastern Finland, the Sitra Innovation Fund, the think tank Tänk, and the VATT Institute for Economic Research. Kela’s research director Professor Olli Kangas is the project’s head. The study is already under way. A decision by government on the details of the basic income experiment is expected in the second half of next year. The experiment is scheduled to start in 2017.

The American news website Vox published a PowerPoint presentation by Kangas that highlights some of the issues currently under discussion in the working group. BIEN-Finland President Otto Lehto stresses that this should be read as a general indication, rather than an official position of government or the working group.

The government has set aside 20 million euros for two years for the experiment. There are several options that the working group will consider. The first is a full basic income, where the amount paid to participants would be high enough to replace “almost all insurance-based benefits”, hence a significant monthly sum. As in other European welfare states, Finland has an insurance system where workers receive their unemployment and pension benefits from sector-specific funds. These are usually higher than the basic benefits administered to welfare beneficiaries regardless of their occupational status. The figure of 800 euros per month circulated by many news outlets is to be read as a possibility under this option, rather than anything set in stone.

The second option is a partial basic income that would replace basic benefits, but leave intact almost all existing insurance-based benefits. The presentation notes that, in this case, the monthly sum should not be lower than the existing level of basic benefits, which is around 550 euros per month. The same figure was reported in several media without the appropriate context.

A third option is that of a negative income tax, where income transfers are made through the taxation system. Other models might also be considered, including the option of a participation income given to unemployed people as an incentive to seek additional income – this alternative is discussed by Kangas himself and Jan Otto Andersson in a 2002 paper.

The size of the sample and the geographical areas covered are other key topics to be addressed. According to Kela, the next step will be the delivery of a review of available evidence from universal basic income models tested in other countries, which will be presented to government in spring 2016. In a recent survey carried out by Kela, nearly 70% of respondents support the idea of a universal basic income, and most of them think it should be set at around 1000 euros per month.

Here is a list of relevant sources for more information:

Kela, “Universal basic income options to be weighed,” November 19, 2015.

Kela, “Contrary to reports, basic income study still at preliminary stage,” December 8, 2015.

Kela, “Experimental study on a universal basic income.”

Olli Kangas, “Experimenting basic income in Finland,” presentation, December 8, 2015.

Liam Upton, “Finland: New government commits to a basic income experiment,” Basic Income News, June 16, 2015.

Stanislas Jourdan, “Finland: Government forms research team to design basic income pilots,” Basic Income News, October 15, 2015.

“Kela to prepare basic income proposal,” Yle, October 31, 2015.

Ben Schiller, “How Finland’s exciting basic income experiment will work – and what we can learn from it,” Fast Company, December 7, 2015.

Dylan Matthews, “Finland’s hugely exciting experiment in basic income, explained,” Vox, December 8, 2015.

Jan Otto Andersson and Olli Kangas, “Popular support for basic income in Sweden and Finland,” Conference paper presented at the 9th BIEN Congress, 2002.

Vito Laterza

About Vito Laterza

Vito Laterza has written 16 articles.

Vito Laterza is a research fellow at the University of Cape Town and the editor of the Human Economy Blog. He is an anthropologist, labour expert and political analyst focusing on politics, economy and society in Africa and the West. He writes regularly for international media such as Foreign Affairs and Al Jazeera English.

10 comments

  • Tanu Kaskinen

    The presentation from Olli Kangas has an unfortunate typo: instead of 20 billion, the real budget for the experiment is 20 million euros. Source (in Finnish): http://valtioneuvosto.fi/documents/10184/321857/Toimintasuunnitelma+strategisen+hallitusohjelman+k%C3%A4rkihankkeiden+ja+reformien+toimeenpanemiseksi.pdf/92b90c0e-9154-487f-bbf8-543cb6433dd6 (page 48).

  • Hornet

    Objective critique :

    c) None of the Options involves wealth redistribution to any meaningful degree.

    b) The amount of basic income for each option is opinion based instead of being correlated to the spending of the people in the country.

    a) All options start with, “Here we have certain amount of money, let see what we can do with it for the people”, where as the correct approach is, “Here is the amount people spend to have dignified living in this country, let see how we can find that amount of money”. There is a big difference between those two approaches as far as priorities go.

    • .Z.

      I think you have a good few points here. Logic teaches us that changing one side of the balance won’t leave the other side unaffected. I will not say that this experiment will not work. But the truth is that something , somewhere in the cycle , will feel the blow of this significant change.

      People will pay for their wealth , one way or another.

    • Roderick S. Beck

      It certainly does involve income redistribution. But it is naive to think the basic income is going to be a 1000 Euros per month. That would lead to lots of people skipping work. Lots of people would substitute leisure for work. It has to be set at a low level since the aim to increase labor force participation, not discourage it. European labor force participation levels are very low.

  • russell morris

    all it takes is one country to implement the basic income. then the world can see, how big an effect this has on life. businesses set up in the name of basic income (even a basic income bar or pub), with some amount of the proceeds going to support the global movement) will quickly help this concept to engage, and we will move on to the surfacing of all the incredible ideas waiting just beneath the surface, to save our world, because with basic income, the people are enabled to activate the good stuff.

    • Hornet

      We are made to believe that Alaska has Basic Income already.

      Judging from what is reported, if true, the prices of goods and services in Alaska has increased to a level that makes basic Income so low that it is not worth talking about it.

      The experiments in India gave positive results, because there was no presence of concentrated wealth within the scope of the experiments.

  • Tatjana

    This is an excellent idea and it will show the world how a normal and forward-thinking society should exist. Also, it is a known fact that, once you stop worrying about the basics, work becomes more productive and thw whole society elevates to a far greater level. Well dobe Finland!

  • It all started here: Dauphin, Canada- Fascinating story: A Town without Poverty, with Better Well-being and Health

    http://economicsociology.org/2014/04/07/fascinating-story-a-town-without-poverty-and-with-better-well-being-and-health/

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