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

2018; Linguagem: Inglês

10.1787/d8c0fbc4-en

1815-1973

Jon Pareliussen, Hyunjeong Hwang, Heikki Viitamäki, Álvaro Pereira,

Gender, Labor, and Family Dynamics

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.