Finland’s basic income experiment: no effects on employment

Finland’s much-discussed basic income trial appears to have had neither a positive nor a negative impact on the employment of the participants, according to the Ministry of Social Affairs and Health and the Social Insurance Institution of Finland (Kela).

Preliminary results from the first year of the two-year trial that seized the attention of governments, social scientists and media outlets around the world were published in Helsinki on Friday.

“We can say that during the first year of the experiment the recipients of a basic income were no better or worse than the control group at finding employment in the open labour market” says Ohto Kanninen, Research Director the Labour Institute for Economic Research.

The data shows that the people who were selected to participate in the trial worked on average only a half-a-day more than people in the control group. The share of people who reported earned or entrepreneurial income was similarly only one percentage point higher among the participants than the control group – 43.70 per cent compared to 42.85 per cent.

The amount of earned and entrepreneurial income was an average of 21 euros lower among the participants.

It appears, however, that the trial had a positive impact on the well-being of its participants, according to Kela and the Ministry of Social Affairs and Health. Over a half (55%) of the trial participants said they felt that they are in good or very good health, compared to 46 per cent in the control group.

The participants also reported lower stress levels than people in the control group, with 17 per cent of them and 25 per cent of the control group saying they are rather or very stressed out.

“The recipients of a basic income had less stress symptoms as well as less difficulties to concentrate and less health problems than the control group. They were also more confident in their future and in their ability to influence societal issues” says Minna Ylikännö, Lead Researcher at the Finnish social security agency Kela.

The recipients of basic income were also more confident in their possibilities of finding employment, although that feeling is not backed up with facts of any more actual employment than the control group and only a quarter of people receiving the basic income money even responded to the survey questions.

The effects of basic income on the well-being of its recipients were assessed with a phone survey conducted just before the trial ended.

A total of 2,000 unemployed people were selected to participate in the two-year trial and received a monthly tax-exempt basic income of 560 regardless of whether or how much they reported in earned or entrepreneurial income. The trial was launched on 1 January 2017 and ended on 31 December 2018.

Despite solid economic growth and falling unemployment, Finland suffers from an aging population. The country is seen as a trend-setter when it comes to social policy, with its education system and baby boxes admired around the world.

With its road-testing of a basic income, the government wanted to find out whether a basic income could simplify the social security system, eliminate excessive bureaucracy and remove incentive traps. Researchers at Kela also wanted to measure its impact on the participants’ physical and psychological well-being.

Olli Karkkainen, an economist at Nordea Bank Abp, found the results surprising.

“I had expected the basic income experiment to have a greater positive impact on employment because incentives for work were boosted so significantly,” he said in an interview.

This week the Finnish Greens announced their own plan to roll out universal basic income over the lifetime of two parliaments.

The Greens’ scheme would give everyone €600 per month, as part of their overall plans to reform Finland’s social security safety net.