Olli Kangas: Finnish Basic Income Experiment

Olli Kangas: Finnish Basic Income Experiment

• 1.
  THL, Helsinki 4October 2019 Olli Kangas [email protected] Some reflections on the Basic Income (BI) experiment in Finland INVEST
• 2.
  The Center-True Finns-Conservativescoalition cabinet (nominated 28. May 2015) took basic income (BI) experiment in its working program by referring to: • Changes in the labor markets • Does our social security system properly correspond to changes in labor markets? • Or are there any changes at all? • ‘No’, say the opponents of BI • ‘Substantial’, say the proponents of BI • Elimination of incentive traps • Too many cases where work does not pay (enough) • Elimination of bureaucratic traps • Clients’ fears on bureaucratic machinery • To create a more transparent system Background
• 3.
  •There is anumber of income-tested ‘basic’ benefits paid on top of each other •That leads to effective marginal tax rates of 80%-100% (or higher) • labor market subsidy + housing allowance + social assistance and income-related day care fees • Work does not pay (enough) • How the benefit receivers value their free-time? •Could the BI be a solution? To abolish incentive traps
• 4.
  Steps towards theexperiment… • €20 Mill. for the experiment • Some extra funds for planning the experiment • Open competition on the funds • 15. September 2016 Kela’s consortium was selected to plan the experimental setting and the model(s) • Work began in the mid-October 2015 • The first report delivered 30. March 2016 • The final report delivered the 16 December 2016 • The experiment started 1.1. 2017 and was planned to last 2 years • Political promises on new experiments 2018 / 2019 • Promises did not materialize • In the governmental program of Antti Rinne’s left-centre coalition cabinet there is promise to start an experiment with negative income tax 4
• 5.
  Models explored anddeveloped • 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, e.g.1 000€-1 500€. Realistic? • 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 (€ 550 - € 600 a month) • Plus income-related benefits and housing & child allowance • Negative income tax • Income transfers via taxation system • Other models • Perhaps low BI plus ’participation’ income 5
• 6.
  The experimental settingplanned by the expert group (by 30 March 2016) • The entire adult population excl. pensioners) is used as a basis for the sample • age and income selection criteria • low-income earners • 25 and 63 years of old • Weighted sample of particularly interesting groups • Nation level randomization to get representative results for the whole country • local experiments in order to capture networking, institutional and interaction effects and externalities • A number of municipalities with 10%, 30% random sampling. • To increase the sample size: • Kela benefits will be used as a source of extra funding (sample 10,000) 6
• 7.
  Experimental setting Model BI€ / month Tax rate A0 590 PRESENT A1 590 40% A2 590 45% B1 690 45% B2 690 50% 7
• 8.
  The final setting •BI 560€ net a month • Present taxation on income exceeding 560€ • Social benefits exceeding 560€ will be paid out as previously • Nobody will loose • Housing allowance and social assistance are tested against basic income • Work income ’float’ on BI • Obligatory participation • 1.1. 2017 to 31.12.2018 • 2 000 unemployed who get flat- rate benefit from Kela • Random nation-wide selection into the treatment group • The rest of the Kela unemployed (app. 170 000) form the control group • The follow up studies: • Registers on income, employment, use of medicine, medical treatment • Surveys and interviews on: • Other aspects of welfare • Experiences on bureaucracy 8
• 9.
  WHY THE EXPERIMENTWAS SQUEEZED / DWARFTED? (except the too small budget) • Constitutional constraints • Question on equal treatment • Different levels and different tax systems ruled out • Tax authorities said that they have no possibilities to change tax laws for the experiment • Tax-free benefit & present tax system • Only Kela unemployed • Easy to make a random nation- wide sampling • Easier to write legislation for one specific group than for many heterogeneous groups • Kela benefits can be used for experimental purposes • Other legal constraints • Implementing BI in a complex institutional setting was very demanding • Time pressure • To write and pass the legislation • To create a ICT platform for paying out the benefit • Creating proper ICT systems for payments limited the size of the treatment group • Partially manual decisions and payments 9
• 10.
  THE EU PLAYS A ROLE Kalliomaa‐Puha, Tuovinen & Kangas (2016): “The basic income experiment in Finland”,  JSSL Vol 23:2, pp. 75‐88;  • Must belegislated • Goals must be acceptable; • The law must be precice • The duration of the experiment must be limited • However long enough to produce reliable results • Unequal treatment must not be too unequal • Must be based on acts on the role of the public authorities • Duties and rights of each partner • The role of the EU –legislation • Portability of the UBI 10 TAXES CONTRIBUTIONS
• 11.
  • Not agenuine BI experiment • Employment experiment • Van Parijs, Standing etc • Local experiment would be better • Not a cost-neutral model • Not possible to implement to the total population • Huge deficit • Unrealistic model • Only unemployed included • Substitution effect • Too small treatment group • The experiment period is too short • People would react differently if the experiment lasted longer • Obligatory experiment • No selection bias • Nation-wide experiment • Random sampling • Well-defined target group • A treatment group and an identical control group • A well-functioning payment system • Possibilities to use registers in ex anted, ex tempore and ex post evaluations Cons and pros of the experiment
• 12.
  Days in employment,the TG and CG in 2017 (Hämäläinen & al. 2019) • No major differences between the TG (black dots) and the CG (circles) • Some fluctuations in differences (employment in the TG minus employment in the CG) • In summer 2017 employment rate in the TG was lower • Since Sept 2017 it is higher
• 13.
  Sample Number of interviews Response rate TG1 869 455 24,3% CG 5 161 826 16,0% All 7 030 1 281 18,2% • No differences in • Gender • Age • Education • Region • Some differences in • Income • Size of the household • Representativeness??? Telephone SURVEY carried out in November 2018; surveys will be linked to registers
• 14.
  • https://www.youtube.com/watch?v=aYjVQ8BYLDk Some preliminaryevidence from the Finnish basic income experiment