In 2017, the Finnish Government started a two-year basic income experiment to understand the following: “Could basic income increase employment and simplify the social security system”? (Rationale of the basic income trial, Youtube channel Kelanava, 1 January 2017)
Given that the basis for the social security system was laid down in the 1960s, the experiment aimed at analysing whether a simplification of the system would provide a stronger incentive for finding employment.
The experiment involved 2000 unemployed between the age of 25 and 58 who received a basic monthly income of 560 EUR for two years. The project was managed by the Finnish Social Insurance Institution (Kela).
This amount was unconditional, tax-free,and independent of other employment earnings. Moreover, the recipients of the basic income were no longer entitled to receive other insurance-based benefits (for instance some unemployment allowances) so that overall, the amount of financial support received did not change.
The recipients (the “treatment group”) were monitored and their data was compared to a sample of 173,000 unemployed (the “control group”) receiving basic unemployment benefits as well as other unemployment allowances, so that any difference in terms of employment between the two groups would be the result of the basic income.
The graph below indicates that there were no important differences in employment between the two groups, but a difference in economic security and mental wellbeing. “The results show that many factors other than just financial incentives have an effect on employment” reported Kela.
At the moment the Finnish Government is not planning to extend the experiment.
The results were considered as a failure for some and as a success for others.
As a consequence of this income, some recipients were reported to accept low paid jobs that they would not have accepted otherwise, while others felt more autonomous and refused those jobs.
The Confederation of the Finnish Industries (EK) has been closely following this experiment and considered that the original question behind it (“Could basic income increase employment and simplify the social security system?”) did not receive a proper reply for many reasons: i)irst of all, the sample was too small to allow for a proper statistical analysis; ii) it was not really a universal basic income, since the sample consisted only of unemployed; iii) it lasted only two years; iv) the information about wellbeing and stress were based on surveys with very low response rate (less than 30%).
EK highlighted that “the experiment demonstrated that financial incentives is not all is needed to incentivize employment. Active labour market policies to match demand and offer or upskilling programmes have to be part in the equation”.