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.

Gregor Fischer/DPA/Getty ImagesJuha Jaervinen, a participant in Finland’s basic income experiment, rides on a rented bike in April 2018.

It wasn’t the news that researchers wanted. Two years after Finland launched a basic-income trial in which nearly 2,000 unemployed residents were given a regular monthly stipend, many of the recipients remained jobless.

The people reported that they were happier and healthier overall than other unemployed residents, but the experiment was widely declared a failure.

“It was discouraging to the basic income community,” Michael Stynes, CEO of the nonprofit Jain Family Institute, told Business Insider. “But the survey results, as far as I can tell, are not really usable.”

Indeed, many basic-income researchers have pointed out what they see as serious flaws in the study that skewed its conclusions.

In an article for Jacobin, Jimmy O’Donnell, a senior research assistant at The Brookings Institution, identified a few major problems. The first, he said, was a change in social attitude in Finland wherein many politicians and their constituents began to view basic income as a way to encourage poor work ethic. This contributed to a second issue: The prime minister’s office was only willing to offer a limited budget of 20 million euros (around $US22 million) for the trial. Plus, it wanted the policy be implemented quickly, forcing researchers to rush the experiment’s design.

The researchers behind the trial had originally planned for it to include 10,000 participants and were considering payments of around 1,000 euros ($US1,100) per month. That wasn’t feasible with a $US22 million budget. The sharp timeline also forced the team to limit the participants to unemployed residents, since they already had administrative data for that group.

“They’re very serious researchers, but they were hamstrung,” Stynes said.

Basic income was only a small part of the experiment

Stynes also described another big flaw: Because of the fundamental design of the trial, basic income was only a smart part of the services given to the recipients, and they were required to forgo certain other benefits in order to receive the money.

Finland basic income storeAlexander Demianchuk/TASS/Getty ImagesA customer leaving the Ruslania bookshop in Helsinki, Finland, on October 2, 2018.

When the trial launched in 2017, it made Finland the first European country to test a government-backed unconditional basic income, which essentially pays a person a regular stipend, no strings attached.

Stynes said 2,000 recipients – a cohort called the “treatment group” in this experiment – should have been enough to generate significant conclusions about basic income, even though some researchers criticised Finland’s experiment for being too small. However, the data is difficult to parse out.

In the end, the trial only involved people who were already receiving Finland’s standard conditional benefits – things like unemployment benefits, housing allowances, social assistance, and illness compensation that are afforded to unemployed residents by law.

A control group of unemployed people (around 5,000 residents) continued to receive these services. The treatment group, meanwhile, received a portion (but not all) of the same conditional benefits they had been getting before, in addition to small basic-income payments of 560 euros ($US640) per month.

In 2017, that resulted in the control group receiving 7,300 euros ($US8,000) in unemployment benefits and 1,300 euros ($US1,400) in social assistance. The treatment group, meanwhile, only received 5,800 euros ($US6,400) in unemployment benefits and 940 euros ($US1,000) in social assistance that year.

One participant, Sini Marttinen, told the New York Times that her income only rose by 50 euros ($US55) per month during the experiment.

“They were interested in the question that basically boiled down to: If you replaced conditional unemployment benefits with unconditional unemployment benefits, do you get increased employment?” Stynes said.

By the end of the experiment, the basic-income recipients were no more like to get a job than those in the control group. But the fact that recipients were getting fewer conditional benefits than before make it difficult to draw conclusions about that result.

Plus, many basic income proponents are critical of the idea that residents should have choose between a basic income and standard unemployment benefits.

Michael Tubbs, the mayor of Stockton, California, who is piloting a basic income experiment there, told Business Insider that he would “oppose any policy that will get rid of the existing safety net and replace it with a cash transfer.”

Stockton’s program distributes monthly payments of $US500 to a group of 125 residents.

Another issue with the Finland trial was that participants’ response rate to a government survey was extremely low – around 25%, on average. That gives the experiment an unacceptable level of uncertainty, according to standards set by the US Department of Education.

A national basic income policy would look different

The origin of basic income dates back to the 16th century, but the idea of universal basic income as a national policy has become more popular as of late, thanks in large part to Democratic presidential candidate Andrew Yang.

Yang has promised to deliver payments of $US1,000 a month, or $US12,000 a year, to all US citizens over 18.

Compared to a policy like that, Finland’s trial was, of course, extremely small. It was even tiny compared to the negative-income tax experiments in the US from 1968 to 1982, which had around 9,000 participants. Those experiments allowed low-income citizens to receive payments from the government in lieu of paying taxes, but they were also considered too small to generate significant conclusions.

Stynes said he hopes other nations aren’t dissuaded from pursuing a basic-income policy because of Finland’s results.

“It’s barely a test of basic income,” he said. “At best, it is a test of a very limited basic income in an extremely specific context for an extremely specific population.”

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