The results are in! Let the headlines tell the story:
“Universal basic income seems to improve employment and well-being” by Donna Lu/ New Scientist, May 6, 2020
“Results of Finland's basic income experiment: small employment effects, better perceived economic security and mental wellbeing”/ Kela May 6, 2020
“One of the world's largest basic-income trials, a 2-year program in Finland, was a major flop. But experts say the test was flawed” Aria Bendix/Business Insider, December 8, 2019
“Why Basic Income Failed in Finland” by Jimmy O'Donnell/Jacobin Magazine, December 1, 2019
Wait…what exactly is the story here? Was Finland’s UBI experiment a success or not? That question can’t be answered without defining success. My definition of success stems from the main concern of UBI doubters: that a UBI would reduce labor market participation and thereby undermine economic growth and reduce tax receipts. Success would thus be determined by data on the labor market participation of UBI recipients during the course of the study. How much did they work and was it more, less, or about the same as the control group?
Here’s what Finland’s UBI researchers say:
“In accordance with the preliminary plan for the evaluation, the employment effects of the basic income experiment were measured for the period from November 2017 to October 2018. The employment rate for basic income recipients improved slightly more during this period than for the control group. During the reference period, the basic income increased the number of days of employment by 6 days and the basic income recipients were employed for 78 days on average.”
Six days over a year amounts to one extra day worked every two months. A total of 78 days worked in a year amounts to about 16 weeks of employment in that year (for a 5-day work week). The researchers don’t tell us whether the difference in days worked between the UBI group and the control group is statistically significant. But one thing is certain: the fact that UBI recipients did not work eight months out of the year is, well, rather discouraging. Given that Finland’s unemployment rate had been steadily declining for years at the time of the study, they can’t blame the economy for not working more.
That the UBI recipients worked at least a little more than the control group is even less impressive when we learn that the control group participants were receiving means-tested unemployment benefits, which would have been jeopardized if they returned to work. The UBI recipients also received some means-tested government benefits, but the UBI itself - about $635 every month - was not means-tested and thus would not be reduced if they got a job. UBI advocates often argue that means-tested benefits discourage work and since the UBI is not means-tested, the UBI would actually remove a barrier to employment. In a nutshell:
“A UBI would, by definition, actually remove one of the major existing incentives for not working: unemployment benefits … Insofar as it would be paid unconditionally, there would be no extra subsidizing incentive to opt for unemployment over work.” - The Wisdom of a Universal Basic Income by Johnny Hugill and Matija Franklin/Behavioral Scientist October 19, 2017
Nice theory, but apparently wrong.