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Finland's grand universal basic income experiment raises more questions than it answers

Universal basic income (UBI) was once considered fringe and politically unpopular – the idea that everyone in society would get an unconditional source of money, which they could then use however they wanted, seemed unthinkable. But in recent years UBI has gained traction with multiple pilots taking place around the globe, although solid evidence about the impacts of the policy has remained elusive.

Now, research from the largest complete UBI study is finally giving us a glimpse of its effects. Kela, which is the Finnish government body responsible for unemployment benefits, implemented a two-year-long study on basic income in order to examine whether the Finnish social security system was working. What the researchers found was that the income people received made an negligible difference in employment rates, but it did make a difference to people’s wellbeing.

The study, which released preliminary results on Friday, February 8, results from the study involving 2,000 people across Finland. Participants had to be unemployed, and were paid a tax-exempt income of 560 euros. There were no other conditions to receiving the payment.

People who received a basic income saw their wellbeing as being better than the control group, with 55 per cent of the recipients of basic income saying their state of health was good or very good, while 46 per cent of the control group said the same. Broadly, people who were on basic income said that their levels of stress went down too.

“Our results weren’t that surprising as it kind of confirms what we know from other pilots,” says Minna Ylikännö, who is a lead researcher at Kela. “People’s wellbeing is enhanced when they have some kind of financial security. They feel secure, so they feel better – that’s something which we see in other countries too, not just a Finnish experience.”

The study ran in two parts – the first focused on employment, looking at whether basic income affected employment levels, and the second was a phone survey, where the researchers called the people involved to ask them about their health during the pilot study. “This is something we have to work on, because we had a bit of a problem with getting people to pick up and take the phone survey,” Ylikännö says. “The more people we have, the more reliable the results are – but when we did the phone survey, the response rates were very low.”

Given the amount of people who were involved, as well as the data that the researchers collected, other interesting connections emerged from the data too. People who were on basic income found that the welfare system was less bureaucratic than before, and as a group, they had more trust in institutions, other people, and even in their future ability to find work. That could suggest all kinds of other effects from basic income, particularly if it was to be rolled out across larger parts of society.

“Basic income is figuring more in policy debates, but we don’t have a big evidence base about what we can expect to actually happen,” says Luke O’Malley, a professor at Bath University who researches basic income. “On one hand, basic income would make it possible for more people to enter employment – and go in and out of it quite easily – but if you give people an unconditional income, perhaps they’ll focus on other things. But this study has generated some really significant empirical evidence.”

Read more: Legacy banks are fighting back against the Monzo insurrection

“There are some other interesting parts about this study which we didn’t know before – for example, people who had basic income found that their trust in other people, in the government, and even in their future prospects for work went up,” says Anthony Painter, the director of Action and Research at the RSA. “So for example, there could be a positive lag effect on employment.”

But this design of the Finnish study makes it hard to know how basic income would work in other countries. In this instance, everyone who was receiving universal basic income had to be registered as unemployed – and it was 560 euros, which is less than most of the proposals for UBI. Other pilots, such as in India and Kenya, involved much larger swathes of the population across longer periods of time. Also, as the Finnish study has run for two years, it remains to be seen how the people who received basic income would feel about the process of finding work after, as well as whether anything else in their lives would change as a result.

Some of the findings, such as trust in institutions may not be replicated in other countries. Finland is a Nordic country with a relatively robust welfare system, and the labour market in Finland has its own characteristics, as it does in every country. In a country such as Brazil, or the UK, people’s relationships to institutions are quite different too. “The existing system of welfare will affect people’s labour prospects, and how the institutions work too,” says O’Malley.

However, this study isn’t the first basic income pilot – in fact, there have been trials as far back as the 1970s, with one in Manitoba, Canada. Three provinces in the Netherlands have also implemented basic income pilots, and there are two large scale studies currently underway in India and Kenya. Councils in Scotland are looking into UBI on a city-wide level, for cities like Fife or Edinburgh.

But the Finnish trial was the first that was nationwide – rather than just being in one area – and randomised. It generated empirical evidence on a large scale, partially because of the registers which the researchers used. As this was run in conjunction with an arm of the government, researchers had access to the employment data of the individuals who were involved in the experiment, which helped them measure the effect on employment, rather than relying on self reporting.

“There’s no substitute for doing detailed studies in particular contexts,” says O’Malley. This has been a significant feature of problems with basic income studies. Some groups are likely to benefit from universal basic income more than others – for example, 1,000 pounds in London could potentially have less purchasing power than 1,000 pounds in Dorset.

There would have to be some kind of conditions, as millionaires wouldn’t benefit from an additional income, and there’s the question of how it would be financed (although there is much research which has gone towards theoretical policies). Then there are practical considerations: simply having economic security doesn’t replace a robust support system. “There are some libertarian versions of UBI, but you do still need support to help people back into work, and give them some kind of community support,” says Painter. “It needs to be progressive.”

In order to better understand how people would use basic income, there needs to be more people involved – not just people who are unemployed. Young parents may use the financial security provided by UBI in a different way from recent graduates, or a recent immigrant.

“What would be valuable is a UBI pilot that gave basic income to everyone in a certain area,” says Painter. “So you get a range of life circumstances. UBI is meant to provide economic security, and so you have to ask whether it will give people the opportunity to retrain, try other kinds of jobs, even go back to school, rather than living hand to mouth.”

“The thing that public policy analysts and economists are most interested in, which is how it would affect people’s incentives, or employment, and it could create all kinds of societal changes,” says O’Malley. “Providing income security does have broader effects.”

Advocates of basic income tend not to restrict their arguments to just employment – a society where people don’t have to worry about rent or putting food on the table (theoretically) could alleviate many public health problems, and it could give people more time to pursue things that they’re interested in. Those side effects were glimpsed in the preliminary findings, as people said their levels of stress went down and their wellbeing went up.

“Even with these experiments, it’s very difficult to say anything conclusive about basic income,” says Ylikännö. “Whatever experiments we do – we’re working in a society where people behave very unexpectedly. In order to know what basic income’s effects will be, we have to implement it.

This article was originally published by WIRED UK

The Finnish Basic Income Experiment: A Primer

• First Online: 28 September 2019

Cite this chapter

• Jurgen De Wispelaere 3 ,
• Antti Halmetoja 4 &
• Ville-Veikko Pulkka 5  

Part of the book series: Exploring the Basic Income Guarantee ((BIG))

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De Wispelaere, Halmetoja and Pulkka describe how in 2015 a newly-elected centre-right coalition government committed to launching a Basic Income experiment. Since then, Finland has been propelled onto the global stage, and portrayed as one of the leaders in Basic Income policy development. The authors describe the specifics of the Basic Income experiment—its design and implementation features, the background to the government’s decision, and the several decades of public and political debate surrounding the Basic Income proposal that preceded that decision—and they reflect on the lessons to be learned for social security policy development in Finland, and in the wider Basic Income policy community.

We are grateful to John Baker, Joe Chrisp, Markus Kanerva, Pertti Koistinen and Miska Simanainen for comments and suggestions. All remaining mistakes are our own. Jurgen De Wispelaere gratefully acknowledges financial support from the Economic Security Project and the Portuguese Foundation for Science and Technology (FCT) (PTDC/FER-FIL/28078/2017).

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De Wispelaere, J., Halmetoja, A., Pulkka, VV. (2019). The Finnish Basic Income Experiment: A Primer. In: Torry, M. (eds) The Palgrave International Handbook of Basic Income. Exploring the Basic Income Guarantee. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-23614-4_20

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Finland sees promising results after nationwide experiment with universal basic income

October 6, 2020 The results of a two-year Finnish study of 2,000 unemployed people who were given a basic income showed a huge increase in life satisfaction versus the control group of all other unemployed people. They reported fewer mental-health issues, better physical health, slightly higher employment levels, and more trust in their future.

To read the article, see “ An experiment to inform universal basic income ,” September 15, 2020.

share this!

June 8, 2021

The Finnish Basic Income experiment failed to produce short-term employment effects

by VATT Institute for Economic Research

Finland carried out the first nationwide randomized experiment on basic income. A study by the VATT Institute for Economic Research and the Labour Institute for Economic Research shows that replacing minimum unemployment benefits with a basic income of equal size has minor employment effects at best. Additionally, participation in reemployment services remained high.

Finnish Experiment Basic Income

Universal basic income models have generated a large interest in many countries. Finland carried out the first nationwide randomized experiment on basic income Finland in 2017–2018. The participation in the experiment was mandatory and randomized.

The experiment included 2,000 persons whose minimum unemployment benefit was replaced by a monthly basic income of €560 ($631) that improved employment incentives considerably. The effective marginal tax rates of the treatment group decreased from 66% to 43% at a monthly wage level of €2,000 ($2,255).

A novel feature of the experiment for a Nordic welfare state was that the treatment group received basic income payments regardless of their labor market status or job search efforts. Basically, it removed all obligations for job search set by the public employment services.

The experiment had minor employment effects at best.

The Finnish experiment failed to produce any sizable short-term employment effects despite offering larger improvements in employment incentives than any realistic nationwide policy could provide. This was shown in the study "Removing Welfare Traps: Employment Responses in the Finnish Basic Income Experiment" by Jouko Verho and Kari Hämäläinen (VATT Institute for Economic Research), and Ohto Kanninen (Labour Institute for Economic Research).

Despite the considerable increase in work incentives, days in employment remained statistically unchanged in the first year of the experiment. Moreover, even though all job search requirements were waived, participation in reemployment services remained high.

The study concludes that that improving monetary incentives for employment can be an ineffective policy tool for some groups of unemployed, especially if the increase in incentives peaks at relatively high wage levels.

The experiment explored how the bundle of a new social benefits, reduced administrative barriers, and lower marginal tax rates affected employment. The study compares the randomized treatment group to the control group using detailed administrative data. The point estimate for the first-year treatment effect is 1.5 days (95% CI -2.3-5.4), which can be contrasted with the average of 49 days in employment per year in the control group. The upper bound for the employment effect in the first year of the Finnish experiment suggests that we can rule out any participation elasticities exceeding 0.16, assuming that the removal of active labor market programs (ALMP) in the treatment group had no negative employment effect. The treatment group spent almost 100 days, on average, in different active labor market programs in 2017.

Open access version: Removing Welfare Traps: Employment Responses in the Finnish Basic Income Experiment, VATT Working Papers 142, urn.fi/URN:ISBN:978-952-274-275-9

Provided by VATT Institute for Economic Research

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Finland: Final results of Finland’s Basic Income Experiment released on May 6th

by Andre Coelho | Apr 28, 2020 | News , Research | 13 comments

Finland’s Basic Income Experiment was the world’s first statutory, nationwide and randomized basic income experiment. That experiment, in which preliminary results have already been reported on, several research questions were asked: How did the Basic Income Experiment affect participants’ employment? What were the effects on health, livelihoods and experiences of government bureaucracy? In interviews, how do the participants perceive the significance of the experiment in their lives?

The final results of the basic income experiment will be released on Wednesday, May 6th 2020, online. In this webcast, researchers present findings of the basic income experiment on employment and well-being of the participants.

The results presented are based on an analysis register data from both pilot years as well as on face-to-face interviews with the participants in the experiment. In addition, survey data has been analyzed more comprehensively than before.

The webcast will be held, in Finnish, from 1 pm to 2:15 pm and, in English , from 2:20 pm to 3:00 pm (Finnish time, GMT+3). The webcast is open to anyone interested.

The results are predictable: net recipients of the program fared well (money with no strings attached improved their situation). This is not hard to believe, it’s what has also been found elsewhere and is entirely unimportant. The important question to be answered wrt. UBI is the effect on people who become net contributors to such a program. Is there a randomised controlled trial where people are forced to fork over an extra portion of their income so that the others can get their net payout? I didn’t think so.

Some of the highest tax countries (highest government expenditure per capita or as a percent of GDP) also have the highest quality of life. Higher taxes don’t increase quality of life per se, but they also don’t reduce quality of life per se. It seems that people don’t mind being taxed if the government uses the money to maintain a high-performing economy and society. So the question is what public policies will produce that effect? A universal basic income might be very effective.

Buongiorno Manuel Barkhau La traduzione automatica non mi è particolarmente chiara . In ogni caso, la conoscenza dei sistemi monetari e della moneta fa comprendere che il denaro utilizzabile per un reddito di base (magari gestito con una contabilizzazione complementare) non va assolutamente a gravare sui redditi dei cittadini. Il perchè non gravi sui cittadini è ovviamente da spiegare. Vedremo se riusciamo a dialogare. Carlo A.

As I was the director of the Canadian experiment with basic income in the 1970s , I have maintained an interest in BI since then and am now focusing on how the Covid-19 crisis might help to advance government interest in basic income.

Ron Hikel Certamente le difficoltà create dalla pandemia Covid-19 potrebbe essere una opportunità, la comprensione circa la creazione del denaro è seme indispensabile per chi deve o voglia prendere decisioni in merito. Se credi, prova a prendere in considerazione una complementarietà promozionale come il Progetto VAL.AZ.CO. propone. E fammi sapere cosa ne pensi, potremmo coordinarci e approfondire. Ciao Carlo A.

The argument that UBI cannot be afforded and the question of how it will be paid for need to be dealt with. It will cost money, even if replacing some benefits. Knowledge of the money creation system is needed. This information can be found in The Bank of England Quarterly Bulletin Q1 2014 website article “Money Creation in the Modern World: an introduction.” Bank of England working Paper No. 529 explains the role of The BoE in supporting the private=for-profit creation of the UK money supply. This is the “Western” model of money creation. Money is debt and both are commodities. How money is created, who gets to create it and who gets to benefit from the operation of the money system are all political decisions and the keys to human progress, or more of the same but worse.

la mancanza di una cultura generale intorno ai sistemi monetari e la creazione del denaro sono una difficoltà certo. Gordon Wilson L’equilibrio tra potere politico (per il bene pubblico) e potere privato (banche con finalità speculative) sarebbe una chiave possibile. qui in Italia un certo equilibrio vi è stato fino al 1981 . poi quell’equilibrio è stato distrutto,….. “””””In soli quindici anni dal suo avvio è costato agli italiani oltre mille miliardi di euro, per poi continuare a gravare sulla nostra economia fino a soffocarla: è il divorzio tra Banca d’Italia e Tesoro, avvenuto nel 1981 per volere dell’allora ministro Beniamino Andreatta. Con un atto quasi univoco, cioè una semplice corrispondenza epistolare con l’allora Governatore della Banca d’Italia Carlo Azeglio Ciampi, Andreatta mise fine alla possibilità del governo di finanziare monetariamente il disavanzo. https://scenarieconomici.it/banca-ditalia-tesoro-il-divorzio-piu-caro-della-storia-ditalia-di-ilaria-bifarini-e-palma/ Ciao A

Must be paid for by tax of some kind, the only magic money tree is fraud, gambling and inheritance.

Take the principle that the introduction of UBI should not affect an individual on the national average wage. The UBI payment directly offsets their tax free allowance. So we all start paying tax earlier, the thresholds at which we pay more tax are also lower. We still pay a form of sales tax, when we buy stuff.

UBI can be seen as an extension of child benifit, when a birth or naturalisation is certified the person gets a form of UBI in their name which may be administered by someone with power of attourney over their financial delaings. When they turn 16 the get PoA over their own UBI which they can use to live on whilst they study or learn a trade. When they start earning they start paying taxes. When they retire they can still suppement their UBI with a private annuity or other investment income.

UBI does not stop us needing to assess and help those who have the greatest need and lowest ability to be financially independent, so it does not do away with some form of social care funding.

Buongiorno Anonoman Il reddito base potrebbe sostituire e unificare tutte le forme di spesa per assistenze a diverso titolo. Come pagarlo e con quale costo finanziario, è una scelta di politica/economica. La tua battuta incipit iniziale mi fa capire il tuo orizzonte conoscitivo dei sistemi monetari. L’apertura ad un reddito di base a cittadini minorenni, potrebbe essere un buon avvio.

Thanks for the post, Andre Coelho. I agree wholeheartedly

About Andre Coelho Il mio cuore si è spinto oltre al pensiero di come sarebbe bello. Ha trovato e coordinato informazioni tali da formulare un progetto realizzabile, con la dovuta informazione e formazione nonché gradualità. Se riterrai opportuno potrai collaborare e sostenere il progetto. Ma forse ne hai anche tu ..uno. Ciao Carlo A.

Warren Tighe E’ certamente una scelta “politica” di organizzazione e gestione per un benessere non solo economico ma anche di salute psicosomatica. E potenzialmente liberatoria di creatività.

It is degrading to treat the poor like medical laboratory rats to see if they respond to a bit more cash with what the experimenters consider wise. Would you be surprised if someone addicted to tobacco and alcohol given more money uses it to drink a higher grade of cider or tailor-mades rather than roll-ups. The problem is not the money, it is the habit.

It is only by implementing UBI as it says on the tin, that is, “universally” over a very long period of time, and depending on the level of UBI set and its linked effect on redistribution of wealth, that any real answers will be found as to the effects of UBI and even then they will only answer the questions that are asked, and the conclusions will not be uncontroversial.

Let all types of social scientists accept the limits of their crafts.

Let’s get on with an introduction of UBI at the minimum meaningful level, I would say that of the nation state.

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Heikki Hiilamo: "Disappointing results from the Finnish basic income experiment"

The basic income experiment in Finland has gained unprecedented attention around the world. However, the preliminary results of the experiment are disappointing. The labour market effects, which were the focus of the experiment, seemed negligible. Survey results demonstrated that basic income recipients had better subjective well-being. However, these results can be called into question.

The concept of basic income gathered interest from legislators and governments in the United States and Canada in the 1970s resulting in local experiments, but the experiment in Finland was the first nation-wide randomized field experiment on the idea. From the 1970s onward, social policies on both sides of the Atlantic have been dominated by workfare where payment of benefits is made conditional on participation on job promoting activities such as training, rehabilitation and work experience or on unpaid or low-paid work. 

But while the number of people relying on these policies has grown, jobs have not, and these programs have not shifted their focus to allowing citizens to continue to receive unemployment benefits even when they take the only jobs they can find, often short-term and low paying ones that don’t cover basic standard of living needs. Moving to even to basic income system could help support those who fall within the short-term employment category.

560 euros per month for 2,000 unemployed Finns

The basic income experiment was one of the key projects formulated in the program of Finland's current government led by Prime Minister Juha Sipilä. Traditionally, the Left Alliance and the Greens have advocated for basic income, but surprisingly the 2017 experiment was implemented by a center-right bourgeois government. What was also surprising was that Finland, a country with a comprehensive welfare state system and excellent register data, would test an idea which has been proposed and experimented in countries with weak social protection or no social protection at all. That also garnered interest in the experiment.

In the Finnish experiment, a randomly selected group of 2,000 young unemployed and long-term unemployed Finns were paid  560 euros per month for a study period of two years regardless of employment status. The rest of the unemployed in Finland formed the control group.

Since the treatment group getting the ‘treatment’, i.e. the 560 euros a month net, is similar to the control group in all relevant background characteristics, the experiment mimics experiments in natural sciences and in medicine. If there will be differences after the experiment between the treatment group and the control group, we can establish a causal loop.

Targeted basic income instead of a universal one

The Finnish experiment was about partial basic income targeting able-bodied people without work, it was not about universal basic income. That has been a source of major confusion around the experiment and a source of critique of it. 

The experiment analyzed two different interlinked mechanisms in the Finnish public social services system.

Currently, those who have been classified as “long-term unemployed” are required to participate in active labour market programs. Those who refuse to participate, lose their unemployment benefit for two months and may also face a reduction in social assistance, the last-tier income support system in Finland.

However, in the experiment, the basic income recipients were not obliged to participate in such measures and faced no sanctions.

Secondly, as elsewhere, all Finnish minimum income benefits are means-tested, which means that extra income acquired from work is deducted from government-sponsored benefits.

Those who got basic income during the experiment were able to keep all the extra income from work without risking to lose one euro of the basic income amount. The recipients of basic income did not need to report their incomes to the unemployment office, which reduced bureaucracy and insecurity caused by fluctuating benefit levels.

Basic income did not create more work hours or higher incomes

The basic income experiment was more than anything else set out to study how the social security system could be reshaped in a way that promotes active participation and gives people a stronger incentive to work. That means employment outcomes were the focal point of the endeavour. In simple terms, the idea was to test if the carrot works better than the stick in encouraging the unemployed to accept new job offers and to seek income from entrepreneurial activities.

With that respect the results were disappointing. Basic income recipients did not have more work days or higher incomes than those in the control group. Despite the fact that basic income recipients had clearly better incentives to work, there were no statistically significant differences between the groups. The results show that among the young and the long-term unemployed other obstacles for work, such as outdated skills and health issues, are more important than financial incentives.

It is important to emphasize that results are based on a one-year follow-up. This is also something the research team emphasizes.

New activation policy contaminated the control group

However, the Finnish government introduced a new activation policy into the Finnish unemployment system at the beginning of 2018 – that is, during the second year of the experiment – which contaminated the control group. It is now no longer possible to see if the differences between the experiment and control groups are due to basic income or due to tougher conditionality faced by the control group.

It is also important to note that labour markets did not pick up before early 2018. That means there could be more visible effects in 2018, but if that is the case, we cannot really know if that was related to basic income.

Survey showing well-being is not reliable

The survey of the participants showed more positive results of the experiment. According to subjective evaluations, basic income recipients experienced significantly fewer problems relating to health and stress. They also had a more positive view of their future.

However, the results on this dimension are not as reliable as the register-based results on labour market effects. Firstly, the experiment did not include a baseline survey. We do not know if people’s subjective assessments changed after they started to receive basic income.

Positive effect could be due to attention created by the study itself

The positive evaluation may not relate to basic income as such but to public debate around basic income and to the fact that people were members of a selected group.

Secondly, the survey was carried out in late 2018 when the newly implemented and heavily criticized sanction scheme was implemented.

Finally, it also needs to be considered, that response rates in the survey were low (31% in the experiment group and 20% in the control group).

Despite shortcomings, the survey results are interesting enough to keep up interest in basic income, especially among those who see basic income more as a social justice issue than an instrument for activating the unemployed people.

For those who argue that basic income will activate people at the lower ranks of society to seek self-reliance, the preliminary results from Finnish experiment come as a slap in the face.

Read more:  Universal ba­sic in­come ex­per­i­ment in Finland: new research re­veals sig­ni­fic­ant di­versity in par­ti­cipants’ ex­per­i­ence

The ba­sic in­come ex­per­i­ment in Fin­land yields sur­pris­ing res­ults The Case for a Participation Income: Acknowledging and Valuing the Diversity of Social Participation Finland May Have Found The Answer To Increasing Global Unemployment

The Rise (and Fall) of the Basic Income Experiment in Finland

Finland shares unconditional money, but the public view remains polarised

Prime Minister Juha Sipilä's conservative Government (nominated May 28th, 2015) implemented a basic income experiment in Finland in 2017–2018. During the experiment, 2000 randomly selected unemployed persons received a basic income of EUR 560 per month regardless of their other income and, for example, whether they actively tried to find a job or not. The participants were selected among persons between 25 and 58 years of age who had in 2016 received basic unemployment allowance or labour market support from Kela, the Social Insurance Institution of Finland.

Social Insurance Institution of Finland, Kela:  Preliminary results of the basic income experiment

University of Helsinki experts on the basic income experiment:

Heikki Hiilamo   Professor of Social Policy  +35840 358 7203 [email protected] (Finnish, Swedish, English)

Johannes Kananen University Lecturer in Social Work   +35850 415 5381 [email protected] (Finnish, Swedish, English)

Ville-Veikko Pulkka Researcher in Social Policy   +35840 759 9330   [email protected] (Finnish, English)

Helena Blomberg-Kroll Professor of Social Work   +35850 448 4719  [email protected] (Swedish, English, Finnish) Co-writer of the report " The basic income experiment 2017–2018 in Finland. Preliminary results. "

Christian Kroll University Lecturer in Social Work  +35850 4484 718 [email protected]   (Swedish, English, Finnish) Co-writer of the report " The basic income experiment 2017–2018 in Finland. Preliminary results."

Finland Will End Its Experiment With Universal Basic Income After a Two-Year Trial

F inland has decided not to extend its trial in universal basic income, the first welfare experiment of its kind by a European government that gave citizens an unconditional monthly payment.

The government rejected a request from Kela, the country’s social security agency, for additional funding to expand the innovative two-year pilot program, meaning it will come to an end in January 2019, the Guardian reports.

The program, which Finland inaugurated in January 2017, saw 2,000 jobless people receive €560 ($685) per month without requiring them to work or seek employment. Recipients who found a job continued to receive the payments. In 2015, Finland’s unemployment rate had hit a 17-year high of 10%, prompting calls for welfare reform.

But in December 2017, the Finnish parliament introduced legislation requiring jobless people to work at least 18 hours every three months to qualify for unemployment benefits, signaling that the welfare regime could be shifting in the opposite direction.

Read more : Universal Basic Income: How It Works

Advocates of universal basic income (UBI) programs, which have become more popular in recent years, argue that guaranteeing a baseline pay for adult citizens can help alleviate social issues like crime, poverty and chronic unemployment. But critics contend that UBI programs are costly and ineffective. Other countries including Holland , Canada, and Kenya have also experimented with basic income schemes.

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Finland’s Basic Income Experiment 2017–2018

Finland launched a two-year basic income experiment in 2017. Basic income is one example in a long line of public policy pilot experiments that seek to produce information to support decision-making.

In Finland, income security is guaranteed to everyone. However, the basis of the current social security system was laid down in a different time. Experimentation with new ideas can lead to solutions that better fit present-day challenges.

WHY EXPERIMENT?

Atypical employment relationships are becoming increasingly common, and although Finland has an extensive social safety net, it doesn’t fully cater to the needs of modern working life.

The aim of the basic income experiment was to find out if the social security model could be simplified, explore more flexible ways of accepting employment, and to find out how financial incentives affect the acceptance of job offers. At present, finding a job doesn’t necessarily increase the income of an unemployed person, because earnings lower social benefits.

HOW IT WAS DONE

A total of 2,000 people were randomly selected for the basic income experiment. For a period of two years, the participants received a monthly basic income of 560 euros. The participants received this sum automatically every month, regardless of whether they had some other income or not, without any needs assessment, and with no conditions attached. Furthermore, they were not required to pay tax on basic income.

The recipients of a basic income were selected through random sampling among those who in November 2016 received an unemployment benefit. The control group consisted of those who in November 2016 received an unemployment benefit but were not selected for the experiment.

ANALYSING THE DATA

During the trial, data on the employment, market income, registration as a jobseeker, participation in employment promotion measures and social benefit take-up of the participants was gathered.

Analysis of the effects begun in January 2019 after the experiment had ended. The effect of basic income on the employment rate and wellbeing of the participants was evaluated.

THE RESULTS

The employment effects of the basic income experiment were measured for the period from November 2017 to October 2018. The employment rate for basic income recipients improved slightly more during this period than for the control group. During the reference period, the basic income increased the number of days of employment by 6 days and the basic income recipients were employed for 78 days on average. 

However, the interpretation of the employment effects of the experiment was complicated by the introduction of a new activation model in 2018.

The effects of the basic income experiment on wellbeing were studied through a phone survey. Survey respondents who received a basic income described their wellbeing more positively than respondents in the control group. They were more satisfied with their lives and experienced less mental strain, depression, sadness and loneliness. They also had a more positive perception of their cognitive abilities, i.e. memory, learning and ability to concentrate. In addition, they had a more positive perception of their income and economic wellbeing, and were more likely to find their financial situation more manageable than the control group.

EXCEPTIONAL EXPERIMENT

The basic income experiment was an exceptional social experiment both domestically in Finland and internationally in that it was set up as a nation-wide, randomised field experiment. Participation in the experiment was not voluntary, which means that it is possible to draw more reliable conclusions of the effects of the experiment than was the case in previous experiments which were based on voluntary participation.

Even though the basic income model developed for the experiment is not likely to be adopted as such for more extensive use, the data from the experiment can be used to reform the Finnish social security system. The lessons learned while planning and implementing the experiment provide a solid base for the planning of new ambitious social experiments.

More information

You can read more about the basic income experiment on the website of Kela , The Social Insurance Institution of Finland.

In 2017, Finland launched a two-year basic income experiment. The purpose of the trial was to see if a basic income can help to boost employment.

This presentation is made with the Finlandica font. You can easily download the font here. This will help you to view the presentation in its intended glory.

Edited: 26.1.2021

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One of the world's largest basic-income trials, a 2-year program in Finland, was a major flop. But experts say the test was flawed.

• In 2017, Finland became the first European country to test a government-backed unconditional basic income , which gave people a regular stipend with no strings attached.
• The trial ended in December 2018 and was widely considered a failure. 
• But many researchers argue that the experiment's structure was flawed.
• Visit Business Insider's homepage for more stories.

It wasn't the news that researchers wanted. Two years after Finland launched a basic-income trial in which nearly 2,000 unemployed residents were given a regular monthly stipend, many of the recipients remained jobless.

The people reported that they were happier and healthier overall than other unemployed residents, but the experiment was widely declared a failure. 

"It was discouraging to the basic income community," Michael Stynes, CEO of the nonprofit Jain Family Institute , told Business Insider. "But the survey results, as far as I can tell, are not really usable."

Indeed, many basic-income researchers have pointed out what they see as serious flaws in the study that skewed its conclusions. 

In an article for Jacobin, Jimmy O'Donnell, a senior research assistant at The Brookings Institution, identified a few major problems . The first, he said, was a change in social attitude in Finland wherein many politicians and their constituents began to view basic income as a way to encourage poor work ethic. This contributed to a second issue: The prime minister's office was only willing to offer a limited budget of 20 million euros (around $22 million) for the trial. Plus, it wanted the policy be implemented quickly, forcing researchers to rush the experiment's design.

The researchers behind the trial had originally planned for it to include 10,000 participants and were considering payments of around 1,000 euros ($1,100) per month. That wasn't feasible with a $22 million budget. The sharp timeline also forced the team to limit the participants to unemployed residents, since they already had administrative data for that group. 

"They're very serious researchers, but they were hamstrung," Stynes said.

Basic income was only a small part of the experiment 

Stynes also described another big flaw: Because of the fundamental design of the trial, basic income was only a smart part of the services given to the recipients, and they were required to forgo certain other benefits in order to receive the money.

When the trial launched in 2017, it made Finland the first European country to test a government-backed unconditional basic income , which essentially pays a person a regular stipend, no strings attached.

Stynes said 2,000 recipients — a cohort called the "treatment group" in this experiment — should have been enough to generate significant conclusions about basic income, even though some researchers  criticized Finland's experiment for being too small. However, the data is difficult to parse out.

In the end, the trial only involved people who were already receiving Finland's standard conditional benefits — things like unemployment benefits, housing allowances, social assistance, and illness compensation that are afforded to unemployed residents by law.

A control group of unemployed people (around 5,000 residents) continued to receive these services. The treatment group, meanwhile, received a portion (but not all) of the same conditional benefits they had been getting before, in addition to small basic-income payments of 560 euros ($640) per month.

In 2017, that resulted in the control group receiving 7,300 euros ($8,000) in unemployment benefits and 1,300 euros ($1,400) in social assistance. The treatment group, meanwhile, only received 5,800 euros ($6,400) in unemployment benefits and 940 euros ($1,000) in social assistance that year.

One participant, Sini Marttinen, told the New York Times that her income only rose by 50 euros ($55) per month during the experiment.

"They were interested in the question that basically boiled down to: If you replaced conditional unemployment benefits with unconditional unemployment benefits, do you get increased employment?" Stynes said. 

By the end of the experiment, the basic-income recipients were no more likely to get a job than those in the control group. But the fact that recipients were getting fewer conditional benefits than before make it difficult to draw conclusions about that result. 

Plus, many basic income proponents are critical of the idea that residents should have choose between a basic income and standard unemployment benefits.

Michael Tubbs, the mayor of Stockton, California, who is piloting a basic income experiment there, told Business Insider that he would "oppose any policy that will get rid of the existing safety net and replace it with a cash transfer."

Stockton's program distributes monthly payments of $500 to a group of 125 residents. 

Another issue with the Finland trial was that participants' response rate to a government survey was extremely low — around 25%, on average. That gives the experiment an unacceptable level of uncertainty, according to standards set by the US Department of Education . 

A national basic income policy would look different

The origin of basic income dates back to the 16th century , but the idea of universal basic income as a national policy has become more popular as of late, thanks in large part to Democratic presidential candidate Andrew Yang.

Yang has promised to deliver payments of $1,000 a month, or $12,000 a year, to all US citizens over 18.

Compared to a policy like that, Finland's trial was, of course, extremely small. It was even tiny compared to the negative-income tax experiments in the US from 1968 to 1982, which had around 9,000 participants. Those experiments allowed low-income citizens to receive payments from the government in lieu of paying taxes, but they were also considered too small to generate significant conclusions.

Stynes said he hopes other nations aren't dissuaded from pursuing a basic-income policy because of Finland's results.

"It's barely a test of basic income," he said. "At best, it is a test of a very limited basic income in an extremely specific context for an extremely specific population." 

Watch: Here's how the top 7 Democratic presidential candidates want to transform the US economy

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Need for Introducing Universal Basic Income in India

The idea of a universal basic income has gained traction since the International Labour Organization’s latest World Employment and Social Outlook report links job growth decline and rising inequality to increased automation and AI.

Major Reasons behind Universal Basic Income Gaining Popularity in India

• The massive impetus on c apex expenditure outlay of Rs 11.11 lakh crore shows government’s focus on boosting investment activity.
• Modern construction techniques reduce the number of jobs created compared to traditional methods.
• E-commerce Impact: E-commerce growth is displacing neighborhood stores , impacting employment in the trade sector.
• Job-Loss Growth: The shift from jobless growth to job-loss growth means displaced workers struggle to find new employment, leading to increased self-employment at low income levels.
• These programs are forms of semi-UBI rather than universal.

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About Universal Basic Income (UBI)

• Universal Basic Income (UBI): It is a socio-economic policy where all citizens receive a regular, unconditional sum of money from the government, regardless of their employment status or income. 
• Aim : To provide financial security and reduce poverty by ensuring a basic level of income for everyone.
• Unconditional: UBI is given to everyone without any conditions , such as employment status or wealth. 
• Universal: Every citizen is eligible, regardless of their financial background.
• Regular and Recurring: UBI is typically provided on a regular basis, such as monthly or annually.
• Cash Payments : It is paid in cash rather than in-kind benefits (like food or housing assistance), allowing people to decide how to spend the money.

India, with its vast population, income inequality, and large informal economy , could benefit from UBI in multiple ways. 

• ILO’s World Employment and Social Outlook study highlights that in 2024, almost a third of the world’s young women (28.2%) are not in employment, education or training, it estimates, which is double that of young men (13.1%).
• UBI can act as a safety net for workers in the informal economy, providing them with financial stability .
• Inefficient Welfare Programs : India has a complex and fragmented welfare system which often suffer from inefficiency, corruption, and poor targeting . 
• UBI would simplify the welfare system by providing direct cash transfers to all, eliminating the need for intermediaries and reducing leakage of funds.
• Entrepreneurship and Innovation: By providing a basic income, UBI could empower people to take risks, such as starting a business, pursuing education, or engaging in creative activities, without the fear of falling into poverty.
• Agrarian Distress : UBI could provide a financial buffer to farmers struggling due to low incomes, debt, and crop failures , helping them cope with uncertainties in farming.
• Supporting Women and Vulnerable Groups : UBI could provide women, particularly those in rural and low-income households, with direct cash transfers, helping improve their financial independence and decision-making power.
• Migration and Rural Poverty: UBI could address rural poverty and reduce distress migration from rural areas to urban centers, offering people a basic level of economic security in their home regions.

Implementing a Universal Basic Income (UBI) in India poses several challenges

• For Example: The Economic Survey of 2016-17 estimated that a UBI of Rs. 7,620 per year for every Indian would cost about 4.9% of GDP .
• Universal vs. Targeted: A universal approach could waste resources on those who don’t need it, while a targeted approach could bring back issues like exclusion errors seen in existing welfare schemes.
• This could negate the positive effects of UBI for the poor, who are most affected by price rises.
• Men might have more control over the financial resources , sidelining women in patriarchal households.
• Dependency Risk: There is concern that UBI could create a culture of dependency , where people might rely solely on basic income without striving to improve their economic situation through education or employment.
• Labour Market Distortion: Critics argue that a guaranteed income might reduce the incentive to work , which could affect labor-intensive sectors like agriculture and informal jobs, which make up a significant portion of India’s economy.

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Way Forward for Implementing Universal Basic Income in India

A cautious, phased, and well-planned approach is necessary for successful implementation. 

• Government should focus on collecting comprehensive data to assess UBI’s effects on poverty reduction, consumption patterns, inflation, and labor participation.
• This will reduce the fiscal burden while ensuring that those in dire need receive immediate support.
• Rationalize Existing Subsidies : Welfare programs that overlap or serve the same purpose could be streamlined to free up fiscal resources for UBI.
• Tax Reforms: The government could explore new sources of revenue , such as wealth taxes or carbon taxes, to sustainably fund UBI without worsening the fiscal deficit. 
• Phasing out the distribution of UBI funds over time, instead of large lump sums, could reduce the immediate risk of inflation, especially in essential goods and services.
• Aadhaar and Direct Benefit Transfers (DBT): India’s existing infrastructure, like Aadhaar and DBT systems , can be strengthened to ensure efficient, transparent, and direct cash transfers to beneficiaries, reducing corruption and leakages.
• Providing work is crucial to prevent alienation and negative labels for the unemployed.
• This will encourage individuals to use the financial security provided by UBI to pursue education, start businesses, and engage in productive activities.

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By learning from global experiences, leveraging technology, and addressing the unique challenges posed by India’s diverse socio-economic landscape, UBI can be introduced in a way that strengthens the country’s welfare architecture while minimizing risks.

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