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Basic income or a single tapering rule? Incentives, inclusiveness and affordability compared for the case of Finland

Author

Listed:
  • Jon Pareliussen
  • Hyunjeong Hwang
  • Heikki Viitamäki

Abstract

The combination of different working-age benefits, childcare costs and income taxation creates complexity, reduces work incentives and holds back employment. This paper compares Finland’s benefit system with two benefit reform scenarios: a uniform benefit for all (“basic income”) and a universal tapering rule (“universal credit”). The scenarios are modelled in the OECD TaxBen model and the TUJA microsimulation model. We find that replacing current benefits with a basic income would improve incentives for many, but with a drastic redistribution of income and likely increasing poverty as a result. Merging working-age benefits with similar aims and coordinating their tapering against earnings would on the other hand consistently improve work incentives and transparency, while preserving or improving social protection.

Suggested Citation

  • Jon Pareliussen & Hyunjeong Hwang & Heikki Viitamäki, 2018. "Basic income or a single tapering rule? Incentives, inclusiveness and affordability compared for the case of Finland," OECD Economics Department Working Papers 1464, OECD Publishing.
    • Handle: RePEc:oec:ecoaaa:1464-en
    DOI: 10.1787/d8c0fbc4-en
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    Cited by:

    1. Zoltan Csefalvay, 2019. "What are the policy options? A systematic review of policy responses to the impacts of robotisation and automation on the labour market," JRC Working Papers on Corporate R&D and Innovation 2019-02, Joint Research Centre.

    More about this item

    Keywords

    basic income; Finland; inequality; universal credit; welfare reform; work incentives;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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