The first major effort at citizen’s income has some surprises

24 Apr 2019 Ryan Miller    Last updated: 24 Apr 2019

Preliminary results are in from Finland’s experiment with a Universal Basic Income. The findings are mixed, interesting, and should arouse everyone’s curiosity.

Wages in the UK are stagnant.

The average weekly pay packet, adjusted for CPIH inflations (the consumer price index, also factoring in the costs of home ownership), is lower now than it was in 2008 - £520 compared with £540.

The worst earnings damage was between 2008 and 2014, when the real-terms weekly wage dropped to almost £490. There was then a rise until 2016 and, since then, growth remained fairly flat.

Full Fact is a UK-based independent fact-checking charity and their work is very good. For a more detailed breakdown about the subtleties of wage stagnation (and how it doesn’t apply to some people, and hits others much harder) take a look at their breakdown of the issue from last November, which covers the period since 2017.

This stagnation is a major problem. While comprehensive wage growth remains a pressing aim for our economy, other ideas have to be investigated to help tackle some of the terrible symptoms of this stagnation – such as the massive increase of in-work poverty in the UK.

Despite the latter half of the past decade being better than the former, these are not hugely optimistic times. For one thing, that doesn’t say much. Moreover, the global economy is creaky, humankind faces a number of huge challenges that go deeper than material or financial prosperity, and the Fourth Industrial Revolution, as it continues, could place significant downward pressure on wages, especially at the lower end of earnings. Therefore, the medium- and long-term picture calls for change.

Universal Basic Income (UBI) – or citizen’s income, or whatever you want to call it - is an idea that has now moved into the mainstream of political discussion, if not action.

Broadly speaking, a UBI system involves every adult in a country receiving a flat-rate income from the state.

It might be monthly, or weekly, can be subject to some qualification, of course, and may or may not be tax free – so there are several levers for creating very different types of UBI. The biggest lever is simply the amount received per citizen.

The amount of talk about UBI has rocketed in the past few years, but it remains largely untested. The biggest pilot scheme to date recently finished in Finland, and the preliminary results are in.

Finland

Kela, Finland’s Social Insurance Institution, carried out a pilot basic income scheme over two years. A total of 2,000 participants between the ages of 25 and 58, and selected at random, were each paid €560 every month from January 2017 until December 2018. This income was tax free and not means tested. However, it was not simply in addition to any existing received benefits, it was deducted from after-tax amounts of various existing social security measures.

So, give or take, the basic income was in addition to any wages received but was subtracted from benefits.

To analyse the initiative, outcomes for the participants was compared with a control group. Kela has said it will release findings in batches ahead of a complete final report next year. So far, two batches of analysis have been released – one in February and another earlier this month.

The results are mixed.

Per Kela: “The basic income experiment did not increase the employment level of the participants in the first year of the experiment. On the basis of an analysis of register data on an annual level, 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. The register data are available with a one year delay, which means that the results for the second year of the experiment will be published in the first few months of 2020.

“According to a survey, at the end of the experiment the recipients of a basic income perceived their wellbeing as being better than did those in the control group. 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.

“Survey respondents who received a basic income described their financial situation more positively than respondents in the control group. They also experienced less stress and fewer financial worries than the control group. Even recipients who had difficulty making ends meet experienced less stress than respondents in the control group.”

What now?

The main point to remember is that this labour market information only relates to the first year of the pilot scheme. There might be some movement (good or bad) in the second twelve months of the scheme.

However, there will be some disappointment that there were not relatively positive outcomes for participants compared with the general population, given the rationale for investigating UBI:

“Everyone living in Finland has the right to an adequate material existence. The current social security system, which has been gradually built up over many decades, was created under very different circumstances. Atypical work arrangements are now more common, and our social security system no longer meets modern requirements. For this reason, Finland is taking steps to test a new model of social provision.

“A guaranteed basic income could create more flexibility in allowing people to accept a job without losing their benefits. It could also simplify and streamline the social security system and get rid of problematic disincentives.”

Nonetheless, the effects on report wellbeing should not be ignored: 55% of the recipients of a basic income and 46% of the control group perceived their state of health as good or very good. 17% of the recipients of a basic income and 25% of the control group experienced quite a high degree or a very high degree of stress.

Recipients of the basic income also reported better perceptions of their financial situation than the control group: 12% said they were living comfortably (7% in the control group); 49% said they were coping (44% in control); 26% were finding it difficult (32% control); and 13% finding it very difficult (17% control).

Levels of stress were lower for those receiving the basic income, even among people who said they were not coping financially.

Moreover, those in receipt of basic income had more favourable views about the level of bureaucracy involved in social security (perhaps unsurprisingly), and also more positive opinions about social institutions, politicians and other people in general.

“The respondents reported their trust on a scale of 0 to 10 (0 = do not trust at all, 10 = trust completely). The average score for trust in other people was 6.8 among basic income recipients and 6.3 in the control group. As for trust in politicians and political parties, the average score among basic income recipients was 4.5 compared to 4.0 among members of the control group. The average scores for trust in courts and the police were 7.2 and 6.9 respectively among basic income recipients and the control group members.

“Recipients of a basic income also expressed greater confidence in their ability to have influence over their own lives, in their personal finances and in their prospects of finding employment (3.2) than members of the control group (2.9, scale of 1 to 5, 1 = bad confidence; 5 = good confidence). These differences persisted even when various background factors, such as age, gender, educational attainment, health and place of residence, were controlled for.”

These results give an indication that a citizen’s income might strengthen the social contract in various, maybe even surprising, ways. The importance of this should not be underestimated.

There are many possibilities for UBI and, while the findings from the Finnish experiment are not universally positive, we should all be curious to find out more.

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