Experimenting Basic Income in Finland

Olli Kangas (olli.kangas@kela.fi)Professor, Research DirectorKela, Social Insurance Institution of Finland

A Governmental Mandate

• Prime Minister Juha Sipilä’s governmental program includes a number of social experiments• The basic income experiment is one of them

• The aim is to reform the existing social policy to better match with societal changes, abolish work disincentives and diminish bureaucracy.

• In an open bid the Kela-led research consortium consisting of • the VATT Institute for Economic Research and Social & kommunalhögskolan• Universities of Turku and Tampere, • think tank Tänk, • the Finnish Innovation Fund (SITRA), • Federation of Finnish Enterprises.• There are also experts representing municipalities and constitutional, social and

tax legislation2

Time table and funding

• Time table for the consortium: • the first hearing 5. December 2015, • the interim report 30 March• the final report 15.11.2016.

• The experiment will start in the beginning of 2017 and it will last 2 years• In 2019 results will be evaluated

• The funding comes from the Government • € 20 bill for two years

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There is a wide popular support for the 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 for all political parties: • Left League 86%, Social Democrats 69%, Greens 75%,

Centre 62%, True Finns 69%, Christian Democrats 56%, Swedish People’s Party 83%, Conservatives 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 • Must be rather a high monthly sum

• Partial basic income• Replaces all ’basic’ benefits but almost all insurance-based benefits

left intact • Minimum level should not be lower than the present day minimum

level of basic benefits (ca net € 550 a month)• Negative income tax

• Income transfers via taxation system• Other models

• Perhaps low BI plus ’participation’ income 5

Methods

• Specification of models to be explored• Juridical aspects dealing with social legislation• Taxation • Juridical aspects dealing with constitution (equal treatment of

residents and right to have social care and income protection)• Evaluating the costs by micro simulations

• distribution of benefits and costs• Which options appear to be im/possible

• Planning the experimental setting • Constitutional limitations: demand of equal treatment of all

− Voluntariness -> selection bias − Two stage sampling among volunteers: Treatment and control group

− Obligatory: − Local experiments to capture externalities 6

Experimental settings (an example of an optimal research setting, no areas 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 nation level randomization of 10 000 cases

• Include a county level experiments • A random sample of 10% of a county

• local experiments in order to capture institutional and interaction effects and various externalities • e.g. as follows: local municipalities with 10%, 30% random sampling and

perhaps 2 municipalities with 100% samples. 7