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Experimenting Basic
Income (BI) in Finland
3. May 2016 Paris,
Maison des Sciences ėconomiques
Olli Kangas (olli.kangas@kel...
The preliminary report delivered
thge 30 March 2016
• Which models are the most suitable for the
experiment
• What is the ...
The working group evaluates the models,
research setting and samples to be
experimented
• The task for the working group i...
Models explored and developed
• Full basic income (BI)
• The level of BI is high enough to replace almost all insurance-ba...
What next?
• Writing the law on the experiment (before summer 2016)
• Hearing of interest organisations
• Parliamentary di...
Experimental settings
(an example of an optimal research setting, nothing selected yet)
6
• To get scientifically reliable...
Experimental setting
Model BI € Tax rate
A0 590 PRESENT
A1 590 40%
A2 590 45%
B1 690 45%
B2 690 50%
7
Sample size
Signific...
Effective marginal tax rates in the present
system and in the €750 BI world (Flat rate tax = 52%;
single mother, 2 childre...
Effective marginal tax rates in the present
system and in the €550 BI world (single person,
lives outside capital area, re...
BI may solve other problems and create a
number of new ones…
The model Flat rate
tax
Gini Poverty
(60%)
Winners
(000)
Lose...
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Olli Kangas: Basic Income Experiment in Finland

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Kangas, Olli. Basic Income Experiment in Finland. Presentation 3.5.2016.

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Olli Kangas: Basic Income Experiment in Finland

  1. 1. Experimenting Basic Income (BI) in Finland 3. May 2016 Paris, Maison des Sciences ėconomiques Olli Kangas (olli.kangas@kela.fi) Professor, Research Director Kela, Social Insurance Institution of Finland
  2. 2. The preliminary report delivered thge 30 March 2016 • Which models are the most suitable for the experiment • What is the level of the monthly payment • How to combine BI with income-related benefits and other basic benefits • Tax treatment of different models • What are the strengths and weaknesses of different models in the context of the EU and the Finnish Constitution • Recommendation: what is / what are the model/models to be further explored2
  3. 3. The working group evaluates the models, research setting and samples to be experimented • The task for the working group is to make a plan for the experiment • After the first report (due to 30 March 2016) the Government decides which models should be further developed • Later in the year 2016 the Government will decide which model/s will be experimented, what is the target population and what is the experimental setting • That is under preparation 3
  4. 4. Models explored and developed • 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’ income4
  5. 5. What next? • Writing the law on the experiment (before summer 2016) • Hearing of interest organisations • Parliamentary discussion − Constitutional committee • Specifying the model (before summer 2016) • Levels (net) single +2 children sngl parent+2 chld • Basic unenmpl. €589 €724 €724 • Social assistance €486 €1069 €1190 • What is the right level of benefit. Not too costly but eliminates the need for social assistance? • How to take into consideration specific needs of single parents? 5
  6. 6. Experimental settings (an example of an optimal research setting, nothing selected yet) 6 • To get scientifically reliable results and evidence for policy making the experimental setting must • Include a sufficient number of households • rather than individuals • Be nationally representative • A nation level randomization • local experiments in order to capture networking, institutional and interaction effects and various externalities • e.g. local municipalities with 10%, 30% random sampling. • To increase the sample size: • Kela benefits will be used as a source of extra funding (sample 7,000)
  7. 7. Experimental setting Model BI € Tax rate A0 590 PRESENT A1 590 40% A2 590 45% B1 690 45% B2 690 50% 7 Sample size Significant effect
  8. 8. Effective marginal tax rates in the present system and in the €750 BI world (Flat rate tax = 52%; single mother, 2 children live in Helsinki, rent €750) 8 • Effective marginal tax rates remain high also in the BI model • The main problems are linked to housing allowances and ’adjusted’ unemployment compensation • BI as such is not a solution • Taxes in the BI model ’behave’ more logically • BI may solve bureaucratic traps and waiting periods when moving from a status to another one
  9. 9. Effective marginal tax rates in the present system and in the €550 BI world (single person, lives outside capital area, rent €570, present taxation). 9 • If the BI is financed through the present tax system, effective, marginal tax rates are much lower than in the present social policy system. • The main problems are now linked to social assistance and housing allowance • Both problems are smaller in the BI model • In 0 –income group there still is a need for social assistance • Problem: the model is not cost-neutral • Extra resources are needed Social assistance Housing allowance Tax Work income
  10. 10. BI may solve other problems and create a number of new ones… The model Flat rate tax Gini Poverty (60%) Winners (000) Losers (000) Present system -- 26.9 15.6 -- -- BI 500€ 41.5 26.4 15.3 1,849 774 BI 550€ 43.5 26.0 14.8 1,807 816 BI 600€ 45.0 25.7 14.3 1,826 796 BI 650€ 46.5 25.4 13.9 1,832 791 BI 700€ 49.0 25.0 13.5 1,770 853 BI 750€ 50.5 24.6 13.1 1,786 836 BI 800€ 52.5 24.2 12.6 1,752 87110

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