Basic Income BI in Finland 9 June 2016 Kela Olli Kangas ollikangaskelafi Professor Research Director Kela Social Insurance Institution of Finland The preliminary report ID: 539601
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Slide1
E
xperimenting
Basic Income (BI) in Finland
9 June 2016
Kela
Olli Kangas (olli.kangas@kela.fi)
Professor, Research Director
Kela
, Social Insurance Institution of FinlandSlide2
The
preliminary report delivered thge 30 March 2016
Which models are the most suitable for the experimentWhat is the level of the monthly paymentHow to combine BI with income-related benefits and other basic benefitsTax treatment of different modelsWhat are the strengths and weaknesses of different models in the context of the EU and the Finnish Constitution Recommendation: what is / what are the model/models to be further explored
2Slide3
The working group evaluates the models, research setting and samples to be experimented
The task for the working group is to make a plan for the experimentAfter the first report (due to 30 March 2016) the Government decides which models should be further developedLater in the year 2016 the Government will decide which model/s will be experimented, what is the target population and what is the experimental setting
That is under preparation3Slide4
Models explored and developed
Full basic income (BI)The level of BI is high enough to replace almost all insurance-based benefits Must be rather a high monthly sum, e.g.1 000€-1 500€. Realistic? Partial basic incomeReplaces all ’basic’ benefits but almost all insurance-based benefits left intact
Minimum level should not be lower than the present day minimum level of basic benefits (€ 550 - € 600 a month)Plus income-related benefits and housing & child allowance Negative income taxIncome transfers via taxation systemOther modelsPerhaps low BI plus ’participation’ income
4Slide5
What
next?Writing the law on the experiment
(before summer 2016)Hearing of interest organisationsParliamentary discussion Constitutional committee
Specifying
the
model
(
before
summer 2016)
Levels
(net) single +2
children sngl parent+2 chldBasic unenmpl
. €589 €724 €724Social assistance €486 €1069 €1190What
is the
right
level of benefit. Not too costly but eliminates the need for social assistance?How to take into consideration specific needs of single parents?
5Slide6
Experimental settings
(an example of an optimal research setting, nothing selected yet)6
To get scientifically reliable results and evidence for policy making the experimental setting mustInclude a sufficient number of householdsrather than individualsBe nationally representativeA nation level randomization local experiments in order to capture networking, institutional and interaction effects and various externalitiese.g. local municipalities with 10%, 30% random sampling. To increase the sample size: Kela
benefits will be used as a source of extra funding (sample 7,000) Slide7
Experimental
setting
ModelBI €Tax rateA0590PRESENT
A1
590
40%
A2
590
45%
B1
690
45%
B2690
50%
7
Sample
size
Significant
effectSlide8
Effective marginal tax rates in the present system and in the €750 BI world
(Flat rate tax = 52%; single mother, 2 children live in Helsinki, rent €750)8
Effective marginal tax rates remain high also in the BI modelThe main problems are linked to housing allowances and ’adjusted’ unemployment compensationBI as such is not a solutionTaxes in the BI model ’behave’ more logicallyBI may solve bureaucratic traps and waiting periods when moving from a status to another oneSlide9
Effective marginal tax rates in the present system and in the €550 BI world
(single person, lives outside capital area, rent €570, present taxation).9
If the BI is financed through the present tax system, effective, marginal tax rates are much lower than in the present social policy system. The main problems are now linked to social assistance and housing allowanceBoth problems are smaller in the BI modelIn 0 –income group there still is a need for social assistance Problem: the model is not cost-neutralExtra resources are needed
Social
assistance
Housing
allowance
Tax
Work
incomeSlide10
BI may solve other
problems and create a number of new ones…
The modelFlat rate taxGiniPoverty (60%)
Winners
(000)
Losers
(000)
Present
system
--
26.9
15.6----
BI 500€
41.5
26.415.31,849774BI 550€43.526.014.81,807816BI 600€
45.0
25.7
14.3
1,826
796
BI 650€
46.5
25.4
13.9
1,832
791
BI 700€
49.0
25.0
13.5
1,770
853
BI 750€
50.5
24.6
13.1
1,786
836
BI 800€
52.5
24.2
12.61,752871
10