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Solace blog

1st April 2016

Experimental government: Evaluating Finland’s basic income experiment

In December last year, the Finnish government announced plans to carry out a national basic income scheme experiment. The project, part of the Finnish government’s analysis, assessment and research plan for 2015, is led by the Finnish Social Insurance Institution (KELA), the government agency in charge of welfare benefits. Unsurprisingly, the story went viral and made the headlines around the world, as Finland would be the first country to experiment with basic income on such a large scale.

This experiment is part of a wider experimental governance programme which Finland is introducing on both national and local level, moving towards becoming the first truly experimental nation in the world. As one of the initial steps, the Prime Minister’s Office in Finland has set up an Experimentation Office to oversee the experiments and scaling, and they are currently investigating how to transform funding so that it can better support different experiments. Moreover, Finland is now creating new platforms for communicating the outcomes of experiments through sharing
information, know-how and related practices. The aim is to utilise new methods and learnings from experiments as a core part of the government’s activities and assess the impacts of various policies.

Undoubtedly, integrating experiments into policy-making represents a significant shift that marks a new era in the history of governance and policymaking in Finland, aiming to make national governance more agile and evidence-informed. Finland has explored different ways of how to reform some of its policy-making functions, aiming to move from hypothetical to evidence-based and experimental over the past year.

Experimental governance is not a new concept and more and more countries around the world have considered integrating experimental methods into policy making to achieve more evidence-informed decisions. However, there is still uncertainty about which methods are best to use in particular scenarios. Nevertheless, in order to achieve better and more effective public services, there is a need for governments to systematically test out policies, measure them and produce evidence of what works and what does not. Considering the already tight budgets and further spending
cuts expected to come, it has never been more important to establish what works to ensure that spending decisions are informed by demonstrable results achieved by more efficient and targeted governance tools.

Last year, Nesta published an insightful paper, Better Public Services through Experimental Government, making the case for this approach. The paper evaluates how experimental methods are being used, and how they could be used in practice. It concludes that a lack of evidence and testing to find out what works means that social policies are being blindly rolled out by governments and that adopting an experimental ethos would allow governments to take a systematic approach to trying things out and see what works before rolling policies out more widely. The paper argues
that testing things out doesn’t mean the abandonment of values and beliefs; rather, it supports the efficient use of public funds and the maximising of public good.

To provide some context for Finland’s experiment, the significant impacts of an economic downturn over the last three years and a subsequent increase in unemployment, with almost 10 per cent of Finland’s workforce currently unemployed and with youth unemployment rates rising up to 24 percent, these issues, joined by the pressures of a fast-ageing population, increased demand on services and pressures on public spending, have all led the Finnish finance minister to label the country the new “sick man of Europe”.

The purpose of the experiment has been to find ways to reshape and simplify Finland’s social security system and respond to changes in the Country’s labour market, thus making the system more effective in providing incentives for work. It also aims to reduce bureaucracy and streamline the complicated welfare benefit system. Through this experiment, the government aims to gather evidence that could help diminish income traps which might weaken employment incentives and to address the difficulties stemming from combining social benefits and short-term employment.

So how would this work in practice? There are currently ongoing discussions of what model to implement and KELA is testing out different approaches. The experiment will see up to 150,000 citizens chosen through a lottery to receive a basic income, with the pilot phase planned to be launched in 2017 and tested over a two-year period nation-wide. If the national basic income was to be implemented by the government, all adult Finnish citizens would be paid a taxfree payment by the government, €800 euros a month in the final version, €550 euros monthly in the experiment’s pilot phase. It would replace all other benefit payments and would be paid to all adults regardless of whether or not they receive any other income, costing Finland around €46.7 billion per year if fully implemented.

There is widespread and popular support in Finland for the idea of a basic income. In Autumn 2015, KELA conducted a survey in which 69% of the respondents were in favour of the idea, indicating that €1,000 per month would be a suitable amount for a basic income.

However, there are some complex design issues related to accountability, the conditions for retaining the basic income, level of monthly payment, and tax treatment of different models, as well as evaluating strengths and weaknesses of each model in the context of the European Union and the Finnish Constitution. Furthermore, as the preliminary plan calls for the scrapping of all existing benefits, this policy could have considerable negative impact on certain groups of the population, such as single mothers, the disabled, or those receiving housing benefits, who would very likely end up being worse off under the new system.

Nevertheless, similar experiments carried out in other countries have seen some positive results. Having a basic income would allow people to take up lower-paid jobs whilst being able to retain the benefits, and therefore reducing unemployment rates. Moreover, considering the large-scale technological changes that we are currently experiencing, and which are expected in the years to come, it is important that citizens keep up-to-speed with new developments and having a basic income could provide a safety net needed by those who are wishing to retrain, further their
education, and build up their skills portfolio. It could also reduce the burden of professional care, and enable citizens to make greater voluntary contributions to their communities, whilst also strengthening the relations within communities.

In order to transform public services and to drive innovation, governments need to adopt more evidence-led approaches, making steps towards more evidence-informed policy making and experimental governance, and testing out what works and developing better policies before their national roll-out. In doing so, perhaps Finland is now setting a good example for other countries to follow.

If you are interested to find out more about the Finnish experiment, you can visit the KELA’s website and read about the project here. Nesta has recently delivered an event on this topic – you can access the presentations from the day here.

By Martina Cicakova, Policy Officer, Solace