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Experimenting with

Basic Income in Finland


Olli Kangas (olli.kangas@kela.fi)
Professor, Research Director
Kela, Social Insurance Institution of Finland
Governmental mandate

• Prime Minister Juha Sipilä’s governmental program


includes a number of social experiments
• The basic income pilot study is one of them

• The aim is to reform existing social policy to better


match with societal changes, abolish work
disincentives and diminish bureaucracy

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Governmental mandate

• After an open bid, the preliminary study was


awarded to a Kela-led research consortium
consisting of:
• The VATT Institute for Economic Research and the Swedish
School of Social Science, University of Helsinki
• Universities of Turku and Tampere
• Think tank Tänk
• The Finnish Innovation Fund (SITRA)
• Federation of Finnish Enterprises
• Experts representing municipalities and constitutional, social and
tax law

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Timetable and funding

• Timetable for the consortium:


• First hearing 5 December 2015
• Interim report 30 March 2016
• Final report 15 November 2016
• The experiment will start in the beginning of 2017
and will last for 2 years
• Results will be evaluated in 2019
• Funding comes from the Government
• €20 million for two years

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Wide popular support for basic income in
Finland

Support Wished-for level


€ (median)
2002 63% € 622
2015 69% € 1,000

• The wished-for medians are 1.3 times the level of


minimum pension
• Support among voters of all political parties:
• Left Alliance 86%, Social Democrats 69%, Greens
75%, Centre 62%, Finns Party 69%, Christian
Democrats 56%, Swedish People’s Party 83%,
National Coalition Party 54%

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Models to be explored and developed

• Full basic income (BI)


• The level of BI is high enough to replace almost all
insurance-based benefits
• Monthly sum must be rather high – realistic?
• Partial basic income
• Replaces all ‘basic’ benefits but almost all insurance-based
benefits left intact
• Minimum level should not be lower than the current
minimum level of basic benefits (net approx. €550 a month)
• Negative income tax
• Income transfers via taxation
• Other models
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• Perhaps low BI plus ‘participation’ income
Methods

• Specification of models to be explored


• Juridical aspects dealing with social legislation
• Taxation
• Juridical aspects dealing with the constitution (equal
treatment of residents and the right to social care and
income protection)

• Evaluating the costs with microsimulations


• Distribution of benefits and costs
• Which options appear to be feasible/unfeasible

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Methods

• Planning the experimental setting


• Constitutional limitations: demand of equal treatment for all
− Voluntariness → selection bias
− Two stage sampling among volunteers: Treatment and control
groups
− Obligatory:
− Local experiments to capture externalities

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Experimental settings (example of an optimal
research setting, nothing selected yet)

• To get scientifically reliable results and evidence for


policy making the experimental setting must:
• Include a sufficient number of households (rather than
individuals)
• Be nationally representative
− A national level randomization, for instance 10,000 cases
• Include a county level experiment
− A random sample of, for instance, 10% of a county’s population
• Include local experiments to capture networking, institutional
and interaction effects and various externalities
− For example, local municipalities with 10%, 30% random
sampling and perhaps 2 municipalities with 100% samples

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Working group evaluates the models,
research setting and samples

• The task for the working group is to plan the


experiment
• After the first report (due 30 March, 2016) the
Government will decide which models should be
further developed
• Later in 2016 the Government will decide which
model/s will be experimented with and what the
target population and experimental setting will be
• The expert group will prepare suggestions for the decision

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More info

www.kela.fi/web/en/experimental-study-
on-a-universal-basic-income

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