Finland’s Universal Basic Income Experiment – A small increase in employment, a huge boost to well-being

As income inequality and economic upheaval take center stage, is a guaranteed minimum income worth considering? Results from a two-year experiment in Finland offer clues.

A small increase in employment

In the design of the Finnish experiment, the main research question, agreed to by parliament in the enabling legislation, was the impact of a basic income on employment. Many policy makers assume that an entirely unconditional guaranteed income would reduce incentives to work. After all, the argument goes, why bother with a job if you can have a decent life without one? This assumption has led many countries to deploy active labor-market policies that require people on unemployment benefits to prove their eligibility continually and, often, to participate in some kind of training or to accept jobs offered to them.

Interestingly, the final results of Finland’s program, released this spring, found that a basic income actually had a positive impact on employment. People on the basic income were more likely to be employed than those in the control group, and the differences were statistically significant, albeit small. Concurrent changes in other unemployment policies make it difficult to ascertain, from this study, whether the basic income, the other changes, or both were responsible for the higher employment levels. However, something about the modest level of the basic income and the lack of conditions attached to receiving it seems to have motivated recipients to seek and accept work they otherwise might not have.5

A critical lesson of the Finnish experiment is the complexity of implementing a basic income. Policy makers need to decide how it should interact with a large number of other policies, such as child benefits, housing benefits, pensions, health insurance, and taxation; for example, in the Finnish experiment, basic-income recipients were eligible for housing allowances but not for basic social-assistance payments. Unless such linkages are streamlined, they could detract from a basic-income system’s potentially considerable savings in administrative costs.

Such interactions emphasize the importance of running further experiments and tracking outcomes across a wide range of well-being factors, including not only employment and financial security but also health and happiness. Of course, the effects will vary from one group to another.

A huge boost to well-being

However you read the findings on employment, other effects were clear: people on the basic income reported significantly better well-being on multiple dimensions. Average life satisfaction among the treatment group was 7.3 out of 10, compared with 6.8 in the control group—a very large increase. To experience a similar lift in life satisfaction, we estimate that a person’s income would need to go up by as much as €800 to €2,500 per month—60 to 170 percent of the average per-capita household income in the European Union. Indeed, the difference was big enough to erase the gap in life satisfaction between unemployed and employed people.

These significant positive findings on well-being are no mystery: the basic income seems to have improved all the major components of life satisfaction. People receiving the basic income reported better health and lower levels of stress, depression, sadness, and loneliness—all major determinants of happiness—than people in the control group. Recipients of the basic income also demonstrated more confidence in their cognitive skills, assessing their ability to remember, learn, and concentrate at higher levels than the control group did. And the basic income enabled people to perceive their financial situation as more secure and manageable, even though their incomes were no higher than those of people in the control group. Finally, basic-income recipients expressed higher levels of trust in their own future, their fellow citizens, and public institutions.

Chosen excerpts by Job Market Monitor. Read the whole story @ An experiment to inform universal basic income | McKinsey

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