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

Jon Pareliussen, Hyunjeong Hwang and Heikki Viitamäki

No 1464, OECD Economics Department Working Papers from OECD Publishing

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.

Keywords: basic income; Finland; inequality; universal credit; welfare reform; work incentives (search for similar items in EconPapers)
JEL-codes: D31 H53 H55 J38 (search for similar items in EconPapers)
Date: 2018-04-10
New Economics Papers: this item is included in nep-eur, nep-ias and nep-pbe
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Citations: View citations in EconPapers (1)

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