Results from the Finnish basic income experiment: No impact on employment
Finland conducted a basic income experiment in 2017- 2018. Based on the first-year results, the basic income did not increase employment. Participation in public employment services only decreased a little.
The 2000 participants in the experiment were randomly selected by the Finnish Social Insurance Institution (KELA) among unemployment benefit recipients in November 2016. Each participant received a basic income of 560 euros a month. The payment was unconditional and non-taxable.
- The basic income experiment was well executed. The participants were randomized and thus we can reliably assess the impact of the experiment using register data. We hope that the new government will also use randomized experiments to evaluate social security reforms, says Senior Researcher Jouko Verho.
Basic income did not increase employment
The financial incentive to find employment is substantial. The participants received 560 euros monthly, regardless of whether they had worked or not. If they found employment, they would keep on receiving the basic income in addition to their work income.
In effect, the participation tax rates could drop by as much as 30 percentage points. For example, in the control group earning 2000 euros a month would equate a monthly income of 1690 after taxes. In the treatment group, the monthly income would be 2150 euros after taxes.
Despite the financial incentive, the register data from the first year of the experiment do not show a statistically significant impact on employment.
- In the experiment, the financial incentives to find employment are much larger than they could be in any national scheme. If we would adopt basic income on a national level, the basic income would have to be taxed away as labour income increases. Even this generous basic income model did not seem to increase employment within the experiment’s relatively hard-to-employ target group, says Verho.
Basic income recipients voluntarily participated in public employment services
Basic income can potentially reduce labour supply because it is completely gratuitous. The recipients did not have to participate in any active measures or meet any requirements set by the employment agency to maintain their entitlement to unemployment benefits.
Based on research literature, the threat of active measures or sanctions increase employment. In particular, face-to-face meetings with case workers have been shown to have a positive effect on employment.
If public employment services improve employment, then not participating in these measures could reduce the employment effect of the basic income experiment. However, this did not happen on a large scale.
- Based on this evidence, the active measures offered by the public employment services are not negatively perceived. Despite the option to avoid all active measures, the basic income recipients participated in these measures almost as much as the control group, says Chief researcher Kari Hämäläinen sanoo.
The basic income experiment was carried out in 2017-2018. The 2000 participants in the experiment were randomly selected by the Finnish Social Insurance Institution (KELA) among unemployment benefit recipients in November 2016. The research data consists of registry data data from the Finnish Social Insurance Institution (KELA), Finnish Centre for Pension (ETK), TE offices, Finnish Tax Admnistration, Finnish Population Registration Office (VRK).
This report is a collaborative research effort by KELA research, the Labour Institute for Economic Research and VATT. This report only examines the first-year of the experiment, 2017. The second-year results will be examined once the registry data for 2018 is ready. The final research on the basic income experiment will be published in April 2020.
Research:
Kari Hämäläinen, Ohto Kanninen, Miska Simanainen, Jouko Verho: Perustulokokeilun ensimmäinen vuosi
http://urn.fi/URN:ISBN:978-952-274-234-6
Jouko Verho
Kari Hämäläinen
Press release
Press release
Uutiset ja tiedotteet
basic income
labour demand
randomized field experiment
social benefits
social experiments
social security
unemployment
unemployment benefit
