The initial impetus was the influx of refugees from the Syrian war into Finland and the knowledge that those arriving from that region were not finding employment. The refugees were not a problem before, as there were few entrants. Now something new was needed, and the social impact bond (SIB) model was chosen. It enabled flexible service production that could adapt to needs, while at the same time shifting the risk of success away from the government.
Participants were randomly assigned to a SIB and control group. The outcome used was the total unemployment benefit expenditure and earned income tax accrual during the three years. The payment was 50% of the difference between the SIB and control groups.
SIB had several service providers and performed succesfully:
For the participants, the Koto-SIB significantly facilitated their entry into the labour market, increased the taxes they paid and reduced the income transfers they received. The earned income of immigrants drawn to the test group during the three years following randomisation was, on average, EUR 4500 (18 per cent) higher than in the control group. During the same period, the test group members paid an average of EUR 1330 more taxes and received EUR 1340 less income transfers than the control group members. Over a period of three years, the Koto-SIB programme saved for the public sector an average of EUR 2670 (12 per cent) per each immigrant that was picked to the experiment.
For the 2,636 participants drawn into the SIB-group, the net benefit would therefore be approximately EUR 6.8 million in total.
We were involved in the preparation of the SIB. It was already clear during the preparation phase that due to the tight schedule, the Finnish tax system, the available data and the distribution of benefits across several administrative sectors, the payment model was not perfect. Problematic points have been corrected in the Work SIB (link https://tyosib.fi/en/) that followed Koto-SIB.
One of the main points of the payment mechanism was to ensure that people end up in jobs that match their skill level. It is not efficient to employ people in jobs that are lower in demand than their capacity allows. This worked reasonably well, those in the SIB-group were clearly more likely to be in a professional occupation, compared to reference group. In interviews with representatives of TE offices, the fact that different customer groups were taken into account in customer guidance and service provision was highlighted as a positive aspect of Koto-SIB.
Evaluation (in Finnish)
Koto-SIB case study by the European Investment Advisory Hub’s Social Outcomes Contracting Advisory Platform
Koto SIB Finland - Sarkawt's Story
Petri Hilli, CEO, QSA,
+358 40 754 2090,
petri.hilli(@)qsa.fi
