Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1694261676192.pdf (Liberia)
The UBI Finnish experiment and why it won’t work Chief economist Ilkka Kaukoranta The Finnish basic income experiment What is it and what can we learn from it?

Description of the experiment • 2000 people selected at random.

– Ages 25-58.

– Received basic level unemployment benefits in November 2016.

– Mandatory participation.

• Recieve 560 euro/month basic income.

– The amount is subtracted from other social benefits.

– Can be augmented with other social benefits.


– Taxes do not change, so a big windfall for those who find work.

• Effect of UBI: differences in outcomes between the UBI recepients and others who where unemployed in November 2016 18.4.2018 3 The experiment doesn’t reveal the full effect of universal basic income • Differentiating the effect of removing conditionality from the improvements in financial incentives.
– Because taxation is not part of the experiment, UBI is a windfall for those who find work  incentives to work improve dramatically.

• The experiment only applies to prime working age people.

– The (negative?)

effects on youths and nearing retirement are not seen.

• Only applies to those who were unemployed – Possible shifts from employment to unemployment are not studied.

• Limited length of the study – How many would choose living solely on UBI as a longterm plan?
• However, this is still the best experiment in social policy Finland has conducted.

Randomization is rare and important!

18.4.2018 4 How to make a better experiment?

• A ”revenue neutral” UBI model would focus on UBI rather than financial incentives.

– Difficult because it would require changes to taxation as well and it would probably reduce the benefits of some participants.

Testing various different UBI levels would be useful.
• • Rather than test full UBI, experiment could focus on conditionality (eg.

changing sanctions, availability criteria, job search requirements).

Longer study and expanding to all age groups.

• – Obviously costs more.

Focus on a smaller homogenous group can make sense if resources are limited.

18.4.2018 5 Why UBI is not the answer.

Or what is the question it is trying to answer?

What UBI does and doesn’t do?


What it doesn’t do • Improve incentives to work • Solve the problem of ”end of work” What it does but could be done otherwise • Cut bureaucracy • Support starting a new business What it does (but we don’t want) • Liberate people from paid unemployment • Support unproductive entrepreunership 18.4.2018 7 The trilemma of improving incentives Incentives • • Improving incentives is not easy.

Two methods: – tax cuts or more benefits to those working  public finances worsen.
– Cuts to the benefits of the unemployed  inequality increases.

• UBI is not a silver bullet solution.

Inequality Public finances 18.4.2018 8 Conditionality is the answer to the trilemma • Conditionality pushes people towards work even if the economic incentives are poor.

– Social benefits conditional on looking for work, education or training.

• UBI removes this tool by making benefits unconditional.

• Without conditionality employment could decrease: – Longer home-care of children?
Reduced job search intensity?

Higher reservation wage for taking up work?

Early retirement?

More NEETs (youths not in employment, education or training)?

Slower integration of immigrants?

• Maintaining conditionality remains important.

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