The Feasibility of Basic Income in Europe.

Antti Halmetoja, Pertti Koistinen, Jani-Petri Laamanen, Bettina Leibetseder, Olivia Maury & Johanna Perkiö

Abstract

The study will analyze basic income (BI) as a social policy reform in European context. The approach is policy-oriented, paying attention to the institutional and political conditions for implementing a BI system in Europe, as well as its behavioral effects on individuals and organizations (particularly in the labour market). The project is organized into five independent work-packages and it will be conducted in an open network of researchers from 5 European countries. The work-packages address issues of justice in the European context, new forms of labour and lifestyles, institutional and political feasibility, and labour market effects of BI. Besides analytical and empirical research, the project attempts to create a political discourse on pros and cons of BI in collaboration with European NGO's.

Introduction

In recent years, basic income (BI) received increasing interest among policymakers, experts of social policy and citizens. There are several reasons for this actuality. Perhaps the most important one is the failure of prevailing social security systems to prevent working age population from poverty and safeguard the basic social rights for all citizens. The increase of academic interest towards new generation of social security reforms has led to a discourse on the importance of fundamental social rights, universalism in the welfare services and methods to tackle the new social risks of the modern society. The prevailing welfare systems haven’t managed to develop in phase with the changes in labour markets. Therefore institutional, economic and labour market aspects are important in discussing BI. From the changes in labour markets arises the question of possible behavioral effects of the BI and new ways of constructing working and human relations and furthermore new forms of power structures.

Good examples of the increasing interest of BI are the fresh discourse on universal basic income and social security reforms in academic circles like Berkeley journal Basic Income Studies, as well as a growing number of published books. Moreover, there are interesting new initiatives in Europe and elsewhere proposing a universal or nearly universal basic income.  (Howard & Widerquist 2011; Werner 2007; A basic universal pension for all European’s; Austrian initiative; Green Party Initiative in Finland 2009; Left Alliance Initiative in Finland 2011; Students Basic Income Initiative in Tampere 2011).

Hereby we understand the basic income as a regular income paid by a political community to all its members. Its payment does not depend on incomes or property of a person and it forms a basis to which all other incomes can be combined. (Van Parijs 1995, 30-35.) Some ideas and models, such as minimum income guarantee, negative income tax, citizen's stake or participatory income come close to the concept of the BI but most of them are often targeted to some groups or situations instead being universal (de Wispelaere & Stirton 2004; Colombino et al. 2010; Levine et al. 2005). The distinguishing feature of this project is that the BI is unconditional, regular and universally granted. There are also different conceptions of the BI itself; some see it purely as a social policy reform which would streamline and improve the existing welfare systems, while others find rather philosophical aspects relating to a more profound new understanding of ways of living and arranging social relations.

All around Europe, a number of BI initiatives have emerged but the state of the art is diverse. In some countries, the BI-discourse has already entered into mainstream political arenas, while in others it remains in the margins. Despite the urgent need for social policy reforms and the increasing number of the proposals and studies, the BI-discourse seems to have one fundamental weakness. None of the proposals earned enough credibility and political advocacy in order to become real innovation or to be a major topic in political discussions. We can find similar unsuccessful stories in different socioeconomic contexts; in many European countries like Austria, Finland, Germany and France, but also elsewhere for example in Canada and in developing countries.

The main idea of this research project is to 1) evaluate the basic income models analytically and in the context of prevailing social policy regimes 2) contribute to a political and academic discourse on social rights, institutional dynamics and behavioral effects of the BI in the economy and on the labour market, 3) evaluate social innovation processes in order to understand the preconditions for political breakthrough of the BI. Besides the analytical and empirical research, the project attempts to create a political discourse on pros and cons of the basic income as a European social policy reform.

According to our hypotheses, a universal basic income could a) create a more comprehensive and pro-active social security system for the whole working age population b) increase labour market mobility and performance of employment systems and c) extend the social protection system from its national limits towards a global responsibility.

Timetable

The research project is planned for three years beginning in 2012 and ending at the end of 2014, depending on the financing of the project. During the first half of the year 2012 we will organize the research teams, create websites and blogs for the project, organize a kick of seminar and agree on detailed tasks and division of labour. During the second year and first half of third year we conduct empirical research and bring the analytical work to a conclusion. The third year will be used also for editing a book and developing a global initiative of a Universal Basic Income in cooperation with relevant political and non-governmental actors.

The organization of the Project

The research project will be organized as an open network around five thematic work packages plus an open forum for social dialogue (Figure 1). The first work package focuses on issues of justice and social rights in relation to BI, the second on new forms of work and employment, the third on institutional challenges of welfare production and pre-conditions for the BI in various welfare regimes, the fourth on political feasibility and implementation strategies of the BI and the fifth on economic and behavioral effects of BI.

The project will be conducted in an open network of researchers from five European countries. Each work-package will have its own independent organization: academic coordinator, researchers and internal thematic sessions. The management team of 3-5 persons will coordinate the project as a whole.

Figure 1. Schematic description of the organization

The research project and its concept can be understood as open and integrative in double meaning. Firstly, the concept is “common good” for all researchers and initiatives, which may concern to join the project. The basic ideas of the project are open for wider development like open source technologies, wiki-pages, common goods or intertextual publications. Secondly, we would like to see that new research initiatives emerge all the time and in various socio-economic settings. This project will even encourage this kind of initiatives and contributions.

In addition to the academic research, the project will facilitate and support an adequate social dialogue on the principles of universal social rights and the implementation and dissemination of a global social innovation in the global social policies. This calls for an active social dialogue with relevant partners. The political think tanks (such as The Green Cultural and Educational Centre ViSiO in Finland, Rosa Luxemburg Foundation in Germany, Nicos Poulanzas Institute in Greece and Transform! Europe in European level) and NGO's operating in the field of social policy (such as European Anti-Poverty Network, national BIEN networks and other NGO's) will be invited to join the project. The idea of incorporating think tanks and civil society is that they will join the common platform of the discussion, promote social dialogue on basic income in their own networks and share their own expertise with the project. The role of the researchers is to facilitate this dialogue with adequate research. The political think tank Left Forum will operate as a link between academic and civil society actors. A coordinator of the research project, who will also be a member of the management team and mediator of the collaboration between different academic and civil society actors, will be hired at the Left Forum. 

Work-packages

1. Theories of Justice in European Context

The debates around basic income and the welfare state verify well that the questions of justice need to be addressed when researching basic income as an alternative for prevailing welfare state mechanisms. Some theories and approaches on basic income and justice are presented here as possible starting points for the project. The eventual theoretical framework will be clarified during the actual research.

In philosophically oriented literature, one can find at least two different streams of arguments for basic income as a means to promote social justice. The first of them focuses on individual freedom provided to all as the highest principle of a just society. This argument was central in the classic texts of Philippe Van Parijs (1995 & 2000) leaning on Rawlsian tradition. The arguments for individual freedom and equality of opportunities can also be found in Milton Friedman’s (1962 & 1980) approach on a state and society and in the context of negative income tax. The second stream of arguments stands on another theoretical tradition, the one that derives from theorists such as Karl Marx and Michel Foucault. It focuses, rather than individuals, on structural power relations, Marx on the one hand on social classes and Foucault on the other, on the modern state and the regulation of its subjects. Erik Olin Wright’s article ‘Basic income as a socialist project’ (2005), can be seen as a contribution to Marxian tradition. It discusses basic income as a mean of strengthening the power of labour and civil society relative to capital and decommodifying labour power. The reasoning of Van Parijs offers means to see BI’s effects on justice between individuals in terms of material subsistence and personal autonomy and Wright’s arguments link it to the collective issues of societal power relations.

Theories of Amartya Sen, John Rawls and Ronald Dworkin have often been present in the BI discourse, despite the fact that none of the authors openly supports the idea of the BI. In spite of many similarities, those theories can be placed to some extent in different traditions. Amartya Sen contributes this idea in his book Idea of Justice (2009, 6-9), in which he divides theories of justice into two categories called realization-focused comparison and transcendental institutionalism. He places himself, as well as theorists such as Karl Marx and Adam Smith into the first mentioned category and Rawls’ and Dworkin’s theories into the second one. Realization-focused theories concentrate on the real existing societies and mechanisms that produce injustice and inequality in those societies. The tradition focuses on real social relations, institutions and behaviour trying to find alternatives to expand justice in a given society. Transcendental institutionalism, instead, attempts to identify the nature of the idealistic and abstract “just”, and illustrate a hypothetical just society. However, arguing for or against basic income on the grounds Rawls, Dworkin or Sen is nevertheless problematic. It does not fit unambiguously to Rawls highly ideal principles of justice, nor to the Sen’s theory that avoids discussing money or material resources. Those problematic aspects in contemporary theories of justice need to be overcome, when using them as tools for researching basic income.

Thus, the idea of BI in the framework of theories of justice has many aspects both in individual and structural level: 1) it is about redistribution of concrete material resources 2) it has rather abstract aspects of individual freedom, emancipation or, in Sen’s (2009, 253-268) terms capabilities 3) there are issues related to power resources and power relations of different social groups and 4) it would set a questions of reciprocity and citizen's rights and duties in a new way. The power relations and societal institutions can be seen as mediating factors between ideal and real freedom. From the questions of justice, derive also a question of how BI would initiate new ways of understanding human values, responsibility, democracy and governing.

This working package will bring the theories of justice in the contexts of particular European countries by asking how basic income could mitigate the deficiencies of fundamental social rights and other problems of realisation of social justice in the country at present i.e. what value add basic income would have for countries’ institutions, social security and labour regulation systems in the light of the criteria set by the theories of justice. The questions of justice will be addressed in terms of material distribution, power relations and individual autonomy. This part will also examine what objectives could be set for a BI-system.

Research questions: How well are the fundamental social rights for all groups and individuals materialized in Europe at present and what value add would basic income have in order to prevent injustice and enhance the basic social rights?

Methods & Data: review of relevant literature and policy documents, surveys of European values

The group:  Members (Antti Halmetoja, Reima Launonen, call for contributors.), research facilities and scientific director (Jan Otto Andersson?)

2. New Forms of Work and Employment

Authors like Giddens (1991), Beck (1992), Esping-Andersen (1999) and Taylor-Goodby (2004) were among the firsts raising the question of old and new risks of social protection. The basic argument of that time was that the individualisation and de-standardisation of social risks requested re-evaluation of the traditional welfare policies and institutions (Harrits 2004; Armingoen 2004). New social risks were seen frequent among female and youth – in and outside the labour market – while old risks were more frequent among male and pensioners (Esping-Andersen 1999; Harrits 2004). The debate on old and new social risks led to a discourse of distributional and political conflicts, and more precisely of structural and contractual changes in the labour markets (Armingoen 2004; Schmid & Grazier 2002; Schmid 2009). A concept of transitional labour markets (TLM) was developed in order to better understand the risks of employment over the life course (Schmid 2009; Brzinsky-Fay 2011). That led to a wider discourse on the functioning of the labour markets, role of institutional regulations and social security systems needed.

The main deficits of the prevailing models of labour regulation and social security can be located into three categories: 1) the narrow definition of the concept of work, 2) the problems related to unemployment and 3) the dominance of one form of employment. (Sen 2000; Offe 2008.) The current understanding of 'work' restricted only to market-based activities excludes much socially necessary labour conducted in households and civil society and prevailing models of active labour market policies have failed to improve the situation of the most vulnerable groups. (Cantillon 2010; Levitas 2001, 450-451; Standing 2009, 257; Koistinen 2009 & 2010; O'Reilly & Spee 1997.) The traditional employment law and regulations based on supposition of permanent full-time work do not cover employees with so-called untypical labour contracts (Fachinger 2009). Taken these, there are good reasons to argue that in the processes of social and societal change an increasing share of the population is outside the social protection. The deficits of the social protection are obvious in case of unemployment, labour market transitions, in jobs that lie outside the standard employment contract and when the incomes are low and instable (O'Reilly & Spee 1997; Schmid 2009). In general, social distances, divisions, insecurity of life and social marginalization have increased continuously in industrial countries within past 20 years. (Offe 2008, 7; Cantillon 2010; Levitas 2001, 458; Standing 2011.)

Many scholars have called for a new social contract in the spheres of labour market and social protection (eg. O'Reilly & Spee 1997, 25; Sen 2000; Calleman 2007, 2009; for problems of using the contract theories in the context of BI see White 2000). Besides structural changes, the individualisation and de-standardisation of life course are leading to divergent values and lifestyles that might be incompatible with the traditional models of employment and social security systems. According to European value surveys, the middle class is beginning to favour immaterial values and richness in time over material goods (Forma 2009). Scholars have seen the BI as a means to overcome the deficits in the current social protection and recognise the de-standardisation of work contracts and divergent lifestyles and actions taking place in the non-market sphere. It has been argued, that a decent BI would provide each individual with a freedom to combine forms of market and non-market activities according to their own needs and preferences. (Van Parijs 1995; Standing 2009.)

This working package will analyse the changes in labour market and lifestyles in European societies, paying attention to deficits in social protection in those areas, which are not adequately covered by legal rights.

Research questions: What kind of a new social contract – in terms of labour regulation and social security - would be obtained through the BI? How the BI could facilitate a better functioning of the labour markets and integration of formal and informal work over the life course?

Methods & Data: Social and labour force surveys, qualitative analysis of employment protection systems,

The group:  Members (open call of contributors), research facilities and scientific director (Pertti Koistinen)

3. Institutional Approach to Basic Income

There are various research traditions in looking at institutions, their extent, function and efficiency. One common approach to dynamic change in comparative social policy studies is historical institutionalism. It entails an argument that welfare state systems that have been reached during the nation’s history are not easy to change or modify because of certain self-reinforcing mechanisms. Path dependence, as stated by James Mahoney (2000) ‘characterizes specifically those historic sequences in which contingent events set into motion institutional patterns or event chains that have deterministic properties.’ Path dependence focuses, therefore, on those contingencies, which might allow for a certain path. Generally, three aspects are of interest in such research for Mahoney: 

The first stages of a process are of specific significance: certain early contingencies might have started the path and allow for a specific arrangement in future. Two assumptions are relevant. Pierson (2000, 2004) argues that within path dependency even small events and the order of events matter and can influence the outcome significantly over time. Thus, time and the sequencing of certain events are important aspects of analysis; earlier events are of greater influence, whereas the same event might have no influence in a later stage. Specific aspects, called contingencies, determine the path dependency. Those cannot be expected or explained by any conditions beforehand and genuinely cannot be predicted before they occur and allow for certain development (Mahoney 2000). Finally, path dependence refers to the manner in which preceding stages may radically narrow the range of possible outcomes. Previous events in a sequence influence outcomes and trajectories. The established “path” matters, but not necessarily by inducing further movement in the same direction. It might also provoke a reaction in some other direction. Dynamics of increasing returns could be seen as a particular kind of path dependence. They are “positive feedback” processes, in which preceding steps in a particular direction induce further movement in the same direction called inertia (Pierson 1997, 3-4; Room 2008, 347; Mahoney 2000; Pierson 2004). Esping-Andersen has set a classic argument for institutionalism from the perspective of regimes. He claims that the welfare state regimes tend to reproduce themselves once they have become regimes. He (1990, 221) writes about a regime: “with its institutionalization, it becomes a powerful societal mechanism which decisively shapes the future”.

The welfare state institutions could be seen as change-resistant at least to some extent. For Pierson (2004) certain factors allow for a locked-in situation: coordination problems enforce a distinct reliance on an existing institution, as any change might enforce a serious of coordination efforts upon the actors. Institutional veto points, like constitution, local governments, provinces and national states, can slow down and even bring to a halt structural or policy changes. Institutions themselves are more change resistant, the longer they are in place. Thus, explanatory variables of institutional change also have to take into account the characteristics of the political contexts and of the institution combined with the agents of change. The stronger the veto points and the lower the discretional element of the institutions are, reduce the chances for development. Despite change agents pushing for a transformation might have an impact and form a group of actors working within the structure (Mahoney and Thelen 2010).

Nevertheless, specific forms of change can occur regularly. Streeck and Thelen (2005) strongly argue for the discussion of incremental changes in institutional historicism, they establish a theoretical argument against sudden path departures due to exogenous shocks and provide for a model. Recently, Mahoney and Thelen (2010) elaborate the model of gradual institutional change further one (see also Pierson 2004 for his critique on Thelen’s original types of change). The model, that they now develop, takes into account four ways of change: Displacement introduces new regulations and banishes the existing. A drift allows for a change, as the existing institutions cannot cover certain risks, as overall transformation in society increasingly accounts for new risks, which are not covered by the unreformed institution. Thus, the outcome of the programme is less effective as it used to be. A further type of incremental change occurs due to conversion. Existing institutions are altered to serve for new aims that can result from a power shift, an exogenous pressure. Finally, layering enforces as change, as new institutional arrangements are introduced beside existing ones. The first ones do not replace latter ones.

In general, those approaches do not conceal the aspect of ‘social ideas’. However, Daniel Béland (2005) identifies a close connection of historical institutionalism and social ideas for agenda setting and argues for bringing in social ideas as independent variable in the discussion of change. Social ideas define any form of principles and beliefs (like neoliberalism or socialism) and policy alternatives (like the unconditional basic income). One has to look at ideas and institutions to understand a reform process and altered social policies. Thus, one has to first define a specific programme and allow for awareness and debate in the field of policy experts. In case of constrained circumstances, political alternatives are best presented by taking account of a coherent idea contrasting the existing social policy programme. Those social ideas are to be presented as a real alternative in a fully elaborated framework to allow for an impact in the process of reform. However, those alternative ideas build on existing institutions and policies. Basic income’s impact as a social idea (De Wispelaere and Fitzpatrick 2011) might be taken into consideration in case of institutional changes.

However, one has to phase a distinct development diametrically opposed to the idea of an unconditional basic income. Over the past decades, welfare states are transformed from a caring and passive one into an activating one, by emphasizing employment for all as the best form of welfare (Giddens 1998; Gilbert 2004; Jessop 2002). Claus Offe and Johannes Berger (1982) identify a ‘twofold problem of allocation’ forcing the welfare state to de-commodify and re-commodify in an on-going process. Firstly, society has to allocate tasks and production processes to the individual working capacity. Secondly, it has to distribute the revenue from the work between the gainful employed and non-gainful employed via private households and the public. In this never-ending balancing act, the welfare state manages the supply on the labour market via sanctions and incentives on structural and individual level. Thus, incremental changes allowed for a shift towards conditionality for the recipients, enforcing institutional, and policy change since the 1970's. Those incremental transformation allowed for the implementation of a new aim in many social assistance policies – and now such ‘workfare’ or activation programmes are an integral part of all modernised social assistance policies  (Bergmark and Minas 2010; Lødemel and Trickey 2000; Van Berkel, de Graaf, and Sirovátka 2011). On institutional level, income support and job search either merged or are closer tied together. In certain cases, the entitlement conditions to social insurance benefits are more restricted and more people have to rely on means-tested benefits. In addition, certain in-work benefits are now in place to allow for a top up payment via taxes or social security institution for people with low-wage income. Such shifts allow for a specific rhetorical change: rights and responsibilities are leading to the introduction of a job-seeker’s allowance for previous recipients of income support and social assistance merging job-centres and social assistance offices. Thus, scrutinising the rhetoric announcements and the institutional implementation might give us some insight in the recent transformations as a starting point for the research.

Taking into account the social risks and their coverage as a starting point, different schemes providing a minimum income will be compared. In general, minimum income allows for a certain threshold beyond one cannot live a decent life, which can be a top up payment to other benefits or income, even an unconditional categorical benefit. Common for most of the minimum income schemes is a heavy reliance on means-testing (Standing 2003). Means-tested benefits are categorized as restricted to individuals with an income or means below a certain threshold. Within the means-tested benefits one can distinguish a ‘general means or income-testing’ restricting the access for persons with an income that is considerably above a poverty threshold and ‘poverty testing’ taking into account a political minimum income threshold (Gough, Bradshaw, Ditch, Eardley, and Whiteford 1997). Nevertheless, one cannot look upon the benefit of last resort, but one has to scrutinize the linkages to the other systems as well. Thus, the linkages to other systems of support and their ability to cover for certain risks have to be regarded too (Frazer and Marlier 2009). Categorical or universal aid assists specific groups in certain situations like child benefits paid to a family on the condition of an eligible child. Additionally, social insurance benefits are tied to a contribution (mainly related to the income acquired in employment) and to a certain condition like unemployment, invalidity, illness or old age. The contributions partially reflect the level of benefit but the social redistribution limits the actuarial principle (Atkinson and Hills 1998; Millar 2003) .

Basic income might have different roles in different regimes of social policy, and the initiative of “BI for all Europe” must be discussed in the contexts of welfare regimes. This work-package will ask how BI could be accommodated to the existing institutions of European welfare regimes and what institutional shifts and challenges could be expected. The work-package will be three-fold: The first project is a comparative review of European welfare institutions and their development over time. In this context, the questions of national social policy models and traditions of universalism and means-testing will be tackled. Consequently, the first step is to develop an analytical grid for existing minimum income schemes regarding input (budget and institution), production (implementation, eligibility and conditionality), output (the level of benefit and the take up rate) and outcome (reduction of poverty, gendered aspect, aspect of autonomy and paternalism) (Fitzpatrick 2011; Kuivalainen 2005). The second question will target the major actors and institutions in the field of minimum income schemes. The third question covers the social idea of ‘Basic Income’ and its potential for a change.

Research questions:

Analysis of existing minimum income schemes and their transformation regarding the twofold problem of allocation within the last decades. What are the relevant institutions and actors in the debate of social policy transformation in this field in the past? What potential for change does the social idea of ‘Basic Income’ have?

Methods and Data:

1st step: desktop research – descriptive account of European welfare states and their existing minimum income schemes

2nd step: Qualitative Comparative Analysis (QCA) of existing minimum income schemes concerning de-commodification and re-commodification within and between countries

3rd step: In-depth study of selected cases providing for existing institutions and their potential to shift towards a more unconditional basic income scheme

The Group: Members (Bettina Leibetseder, Johanna Perkiö, call for members), research facilities and scientific director (Bettina Leibetseder & Susan Kuivalainen?)

4. Political Feasibility of Basic Income

The questions of political feasibility come close to the institutional approach. The political actors operate in particular institutional settings. Since the 1970’s, various models and proposals for BI have been presented across Europe. For some reasons, none of the proposals have received enough political support among the policy makers and society in large. In literature, one can find various explanations for successes and failures of policy reform programs starting from structural explanations (structures of population, labour force or economy), power relations (proponents and opponents of social innovations, power balance theories, etc.), institutional explanations (institutional dependences, organisational learning, etc.) and explanations based on values and cultural models.

Not only the structural factors, but also existing ideologies shape the society. According to Gramsci, the social reality is maintained through a hegemonic culture in which the values of the ruling class become ‘common sense’. The hegemony is spread all over society and is simultaneously ethico  -political and economic. Changes in production and labour develop a need for a new way of life and new ethics. (Gramsci 1992 & 1996; Forgas 1988.)

During the development process of the modern welfare states, the social political systems often came into being as a result of a political compromise, after a long debate and power struggle between various interest groups (O'Reilly & Spee 1997, 5; Paavonen & Kangas 2006). They would never have come true without strong visions, mass mobilisation and wide political coalitions.

Implementations of the welfare state reforms have never been easy processes and the innovations have been shaped and modified during their life cycle according to respective social conditions and political atmosphere. The most influential forces behind the existing welfare states tend to be the greatest opponents of any structural change in them. (Vanderborght 2006, Offe 2008, Standing 2010.) In order to understand the political dynamics preventing the progression of the BI-initiatives – or, in some conditions enabling it – one should look back to the history. How were the ideas of welfare state reforms born, how convenient was the time and political atmosphere and by which actors were the proposals carried through? On the other hand one should take into account also hegemonic values and discourses in the Gramscian sense.

This work-package will conduct comparative case studies in the field of social policy reforms in order to understand the political processes that have led to implementation of some reforms and a failure of the others. The work-package analyzes the political challenges and possibilities for the BI proposals in the European societies by reflecting BI discourse to successes and failures of relevant social innovations in the past.

Research questions: What are the preconditions and responsible actors of social innovations and successful implementation of the BI? What’s the feasibility of a universal European basic income?

Methods &Data: Policy histories, documents and policy analyses, institutional analysis

The group:  Members (call of contributors), technical facilities and scientific director (Jurgen de Wispelaere?, Jouko Kajanoja?, Olli Kangas?)

5. Economic and Labour Market Effects of Basic Income

In Europe and elsewhere we find several initiatives of the basic income but since BI has never been widely implemented and tested anywhere, there remain open questions about the expected and unexpected effects and outcomes of it. Regarding feasibility, the behavioural effects of basic income is essential topic.

In terms of economic effects at least three questions should be tackled: What are 1) the direct and indirect costs and benefits of the BI for relevant actors and institutions (taxpayers, employers, social security institutions, different kinds of households etc.) 2) behavioural effects in the labour market (labour supply, job search behaviour, recruitment process, collective bargaining, stratification and segmentation of the labour markets) and 3) substitution effects in terms of replacement of other social security systems (substitution between social security systems, new kind of poverty traps, etc.). These effects are often difficult to identify for several reasons; e.g. lack of relevant data from suitable experimental or field settings, presence of so-called “general-equilibrium” effects in the labour market and difficulties to control all the relevant factors. In theoretical and empirical studies there are some tentative attempts to identify the possible effects by means of simulation and experiments (Honkanen 2011; Kreimer 19++). Recent developments in statistical evaluation methods of policy programs facilitate tackling aforementioned identification problems (for a recent survey, see Imbens and Wooldridge, 2009). Interest is increasing in general equilibrium models, “spillover effects” and “demand effects” of labour market policies and social security that are highly relevant to basic income research (see e.g. Abbring and Heckman, 2007, Blundell, Costa Dias, Meghir and van Reenen, 2004, Laamanen, 2010 and Widerquist, 2005). Further, micro-simulation models are currently being developed (in Finland and other countries) to include dynamic features that capture behavioural effects of policy reforms.

In this work-package, recent empirical policy evaluation methods and micro-simulation models will be used in order to understand the economic and labour market effects of a BI reform. Using recent methods, we are able to evaluate the potential labour market effects of a large-scale reform that affects the general equilibrium of the labour market. Simulations allow us to achieve close to concrete material on its potential direct and indirect influences on welfare of different groups and on public finance. A certain criticality towards the results is though essential, since the simulation methods always require presumptions about the case that is being simulated and the existing data cannot perfectly represent the potential consequences of a fresh reform such as BI. However, by using simulation models and experiments it is possible to achieve scientifically valid material about problems of the BI. The most frequent target of criticism is the possible behavioural effects that involve free-riding and increasing apathy in society. Another important question is, whether a BI would nurture low-paid work and divided labour markets and which BI models would be the most appropriate to antagonize such possible negative effects.

Research questions: What are the costs and economic effect of BI and how the BI may effect the economic and labour market behavior of individuals and households.

Methods &Data: Simulations with adequate representative data, case study simulation

The group:  (Jani-Petri Laamanen, Margit Kreimer, Pertti Honkanen? call for members), technical facilities and scientific director (?)

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