Social Europe

politics, economy and employment & labour

  • Themes
    • European digital sphere
    • Recovery and resilience
  • Publications
    • Books
    • Dossiers
    • Occasional Papers
    • Research Essays
    • Brexit Paper Series
  • Podcast
  • Videos
  • Newsletter

Basic income: Finland’s final verdict

Philippe van Parijs 7th May 2020

The coronavirus crisis has renewed interest in the notion of a universal basic income. The full report of a two-year Finnish experiment has just appeared.

basic income
Philippe Van Parijs

On January 1st 2017, Finland began the most careful experiment with basic income undertaken in a developed country. Two thousand long-term unemployed, aged between 25 and 58—at the time recipients of the means-tested, minimum-income benefit of €560 a month—were randomly selected. For two years, they were given that same amount unconditionally—irrespective of with whom they were living, how much they were earning and whether they were actively looking for a job.

The experiment terminated, as planned, on December 31st 2018. As the researchers wanted to observe their subjects as unobtrusively as possible, they announced that they would publish the final report only after all relevant administrative data could be collected and analysed. This report was published on May 6th.

Key question

One key question the experiment aimed to answer was whether the unconditional character of the benefit would boost or depress beneficiaries’ participation in the labour market. Would it enhance that, as a result of the benefit not being reduced or lost when starting a job? Or would it lessen participation, as a result of the beneficiaries no longer being forced to keep looking for a job or accept a job when one became available?

In the first year of the experiment, as documented in a preliminary report published last year, the difference in working days—those in which at least €23 was earned through a wage or self-employment—with respect to the control group was slightly positive, but not statistically significant. Some feared, however, that the whole relevance of the experiment would be shattered, as a result of a major social-policy reform which entered into force precisely at the beginning of the second year.

Our job is keeping you informed!


Subscribe to our free newsletter and stay up to date with the latest Social Europe content.


We will never send you spam and you can unsubscribe anytime.

Thank you!

Please check your inbox and click on the link in the confirmation email to complete your newsletter subscription.

.

On January 1st 2018, the right-of-centre Finnish government introduced the so-called ‘activation model’, a general reform of the means-tested benefit schemes which made them more constraining: if benefit recipients failed to work a sufficient number of hours or follow suitable training in each quarter, their benefits were to be cut by about 5 per cent.

This reform, undone since by Finland’s current government, was in force throughout the second year of the experiment and applied, at the beginning of the year, to about two thirds of the control group. It also applied to slightly less than half the members of the experimental group, because they could claim, on top of their basic income, means-tested child benefits of some €150-300 according to the number of their dependent children, and means-tested housing benefits up to €600 or more according to their place of residence.

Employment went up in both groups from the first to the second year. How much was due to the ‘activation model’ is impossible to say, since no randomised experiment was conducted. However, whether large or small, this effect was necessarily more significant in the control group than among basic-income recipients, as fewer of the latter were concerned by the tightening of the conditionality.

The question then becomes: did the implementation of this activation model, with its stronger grip on the control than on the experimental group, reverse the basic income recipients’ slight advantage in terms of labour-market participation during the first year? It did not. On the contrary, the gap widened considerably and became statistically significant: in the second year, basic-income recipients worked on average six more days per year than individuals in the control group. And had the activation reform not taken place, one can safely conjecture that this differential would have been even greater.

Structural effect

Does this suffice to show an unconditional basic income is a good idea? Of course not. It hardly even contributes to showing that an unconditional basic income, introduced at that level within Finland’s current framework, would be economically sustainable.


We need your support


Social Europe is an independent publisher and we believe in freely available content. For this model to be sustainable, however, we depend on the solidarity of our readers. Become a Social Europe member for less than 5 Euro per month and help us produce more articles, podcasts and videos. Thank you very much for your support!

Become a Social Europe Member

No randomised experiment can help us with that question without including in the sample people who are currently at work and who would be enabled—as intended—to reduce their working time or take a break, thanks to the basic income. Nor can we answer the question without taking into account the implications a generalised basic income would need to have for tax profiles, none of which was simulated in the experiment.

Most importantly, the long-term sustainability of a generous unconditional basic income hinges far less on the immediate impact on labour supply than on the structural effect on health, skills and motivation that can be expected from a smoother lifelong back-and-forth between employment, education and voluntary activities.

By showing a significant positive impact on employment, the experiment did not prove the economic sustainability of a basic income of €560, conditionally supplemented in the various ways mentioned above. Nor was it supposed to do so. But it did yield interesting results which will stimulate further thinking about how best to phase in a basic income and what accompanying measures would facilitate the transition.

One striking result, for example, concerns the quarter of the subjects with a native language other than Finnish or Swedish. In this category, consisting mostly of recent immigrants, basic-income recipients worked on average 13 days more than the corresponding control group, whereas the difference was only 3.6 days for the others.

Also significant is that the positive effect was less in Helsinki (1.8 more days of employment) than in rural municipalities (7.8 more days), where means-tested housing benefits are less frequent and lower and therefore the remaining unemployment trap is less deep. By contrast, despite the availability of means-tested child benefits, the positive effect of the basic-income regime was higher in households with children (13.7 more days) and for single parents (9.5 days) than in childless households (1.6 more days).

Subjective perceptions

No less interesting are the results based on a survey conducted at the end of the second year with members of the experimental and the control groups. These results were already recorded in the preliminary report and have been refined in the light of in-depth interviews. A statistically significant difference in favour of basic-income recipients emerged in their subjective perceptions of health and stress and their trust in other people and institutions.

Making access to the formal labour market easier for the excluded is an important purpose of a basic-income reform. But it is by no means the only one. Its far broader aim is to make our economy more resilient and our society more just, by increasing the economic security and freedom of choice of those with least of those.

Four years ago, Switzerland courageously organised a national referendum on a very bold basic-income proposal. A few months later, Finland started a carefully designed, real-life experiment with a far more modest version. Whatever its limitations, this experiment provides food for thought and action to all those who believe basic income is the way to go.

And with the pandemic shattering the economic security of many around the world, there are more of them than ever before. Thank you, Finland!

Philippe van Parijs

Philippe van Parijs, a fellow of the British Academy, is a professor at the Universities of Louvain and Leuven and a Robert Schuman fellow at the European University Institute in Florence.

Home ・ Politics ・ Basic income: Finland’s final verdict

Most Popular Posts

schools,Sweden,Swedish,voucher,choice Sweden’s schools: Milton Friedman’s wet dreamLisa Pelling
world order,Russia,China,Europe,United States,US The coming world orderMarc Saxer
south working,remote work ‘South working’: the future of remote workAntonio Aloisi and Luisa Corazza
Russia,Putin,assets,oligarchs Seizing the assets of Russian oligarchsBranko Milanovic
Russians,support,war,Ukraine Why do Russians support the war against Ukraine?Svetlana Erpyleva

Most Recent Posts

trade,values,Russia,Ukraine,globalisation Peace and trade—a new perspectiveGustav Horn
biodiversity,COP15,China,climate COP15: negotiations must come out of the shadowsSandrine Maljean-Dubois
reproductive rights,abortion,hungary,eastern europe,united states,us,poland The uneven battlefield of reproductive rightsAndrea Pető
LNG,EIB,liquefied natural gas,European Investment Bank Ukraine is no reason to invest in gasXavier Sol
schools,Sweden,Swedish,voucher,choice Sweden’s schools: Milton Friedman’s wet dreamLisa Pelling

Other Social Europe Publications

The transatlantic relationship
Women and the coronavirus crisis
RE No. 12: Why No Economic Democracy in Sweden?
US election 2020
Corporate taxation in a globalised era

Hans Böckler Stiftung Advertisement

Towards a new Minimum Wage Policy in Germany and Europe: WSI minimum wage report 2022

The past year has seen a much higher political profile for the issue of minimum wages, not only in Germany, which has seen fresh initiatives to tackle low pay, but also in those many other countries in Europe that have embarked on substantial and sustained increases in statutory minimum wages. One key benchmark in determining what should count as an adequate minimum wage is the threshold of 60 per cent of the median wage, a ratio that has also played a role in the European Commission's proposals for an EU-level policy on minimum wages. This year's WSI Minimum Wage Report highlights the feasibility of achieving minimum wages that meet this criterion, given the political will. And with an increase to 12 euro per hour planned for autumn 2022, Germany might now find itself promoted from laggard to minimum-wage trailblazer.


FREE DOWNLOAD

ETUI advertisement

Bilan social / Social policy in the EU: state of play 2021 and perspectives

The new edition of the Bilan social 2021, co-produced by the European Social Observatory (OSE) and the European Trade Union Institute (ETUI), reveals that while EU social policy-making took a blow in 2020, 2021 was guided by the re-emerging social aspirations of the European Commission and the launch of several important initiatives. Against the background of Covid-19, climate change and the debate on the future of Europe, the French presidency of the Council of the EU and the von der Leyen commission must now be closely scrutinised by EU citizens and social stakeholders.


AVAILABLE HERE

Eurofound advertisement

Living and working in Europe 2021

The Covid-19 pandemic continued to be a defining force in 2021, and Eurofound continued its work of examining and recording the many and diverse impacts across the EU. Living and working in Europe 2021 provides a snapshot of the changes to employment, work and living conditions in Europe. It also summarises the agency’s findings on issues such as gender equality in employment, wealth inequality and labour shortages. These will have a significant bearing on recovery from the pandemic, resilience in the face of the war in Ukraine and a successful transition to a green and digital future.


AVAILABLE HERE

Foundation for European Progressive Studies Advertisement

EU Care Atlas: a new interactive data map showing how care deficits affect the gender earnings gap in the EU

Browse through the EU Care Atlas, a new interactive data map to help uncover what the statistics are often hiding: how care deficits directly feed into the gender earnings gap.

While attention is often focused on the gender pay gap (13%), the EU Care Atlas brings to light the more worrisome and complex picture of women’s economic inequalities. The pay gap is just one of three main elements that explain the overall earnings gap, which is estimated at 36.7%. The EU Care Atlas illustrates the urgent need to look beyond the pay gap and understand the interplay between the overall earnings gap and care imbalances.


BROWSE THROUGH THE MAP

About Social Europe

Our Mission

Article Submission

Membership

Advertisements

Legal Disclosure

Privacy Policy

Copyright

Social Europe ISSN 2628-7641

Social Europe Archives

Search Social Europe

Themes Archive

Politics Archive

Economy Archive

Society Archive

Ecology Archive

Follow us on social media

Follow us on Facebook

Follow us on Twitter

Follow us on LinkedIn

Follow us on YouTube