A consistently high need for unemployment benefits

Unemployed persons are in Finland eligible for financial assistance in the form of unemployment benefits. Unemployment funds pay out earnings-related benefits to fund members, while Kela provides basic unemployment allowances and labour market subsidies to other unemployed persons. Unemployment benefits also include a commuting and relocation allowance and a job alternation compensation. 

The number of unemployed persons and the benefit expenditure have stabilised at a high level compared to that seen prior to the economic depression of the early 1990s. After 2000, the rate of unemployment has varied between 5 and 12 percent.

In 2017, the expenditure on unemployment benefits decreased by 10 percent. The unemployment funds and Kela paid a total of EUR 4.5 billion in unemployment benefits in 2017, which was nearly EUR 500 million less than in 2016. The largest decrease was seen in earnings-related unemployment benefits. 

The decline is explained by the rise in the rate of employment seen during 2017.

Still, Kela’s unemployment benefit expenditure in 2017 was nearly twice that before the recession beginning in 2008 and more than nine times that seen before 1990.

A total 299,900 persons were paid earnings-related unemployment allowance in 2017. Basic unemployment allowance was paid by Kela to a total 72,700 persons and labour market subsidy to 86,000 persons. The number of recipients of earnings-related and basic unemployment allowances decreased 11% from the previous year, while the number of recipients of labour market subsidies increased by one percent.
 
The average rate of earnings-related unemployment allowance in 2017 was EUR 63.77 per day (EUR 1,371 per month). The average rates of the basic unemployment allowance and labour market subsidy were EUR 32.01 per day (EUR 688 per month) and EUR 35.35 per day (EUR 760 per month) respectively. 

The activity requirement reduced unemployment benefits for one half of all unemployed persons

The adoption of the activity requirement at the beginning of 2018 results in smaller unemployment benefits for those unemployed persons who do not meet the requirement. 

Among recipients of Kela unemployment benefits whose activity status was checked by Kela, 52% met the activity requirement between 1 January and 1 April 2018. The activity requirement reduced the unemployment benefit for about one half of all recipients of a Kela unemployment benefit who come within the scope of the requirement. 

Men and older unemployed persons were most likely to see a decreased benefit.

Finns have an expected cumulative lifetime unemployment of five years

Finns’ total work life expectancy declined significantly during the economic depression of the 1990s, dropping from 32 years to 26 years. Finns born in 2016 can expect to spend 31 years of their lives working and 4.9 years unemployed. 

The calculations suggest that women born in the 2010s will have careers that are nearly two years longer than those of men.

Building in greater incentives into the system?

The Finnish system of unemployment protection is based on the two assumptions that the rate of employment is high and periods of unemployment short. However, in many cases this no longer matches reality. The unemployment protection system also does not always offer financial incentives to seek gainful employment: unemployed persons may not necessarily see an increase in income even if they find work, because their benefits may be cut.

Therefore, there have been calls to reform the system by building in greater incentives. Along with the introduction of the activity requirement in 2018, a basic income experiment is underway which will produce information to guide the reform. Analysis of the effects of the experiment on employment will begin after the experiment concludes at the end of 2018.

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  • Viveka Tschamurov, Researcher, tel. +358 20 634 1905
  • Sami Tuori, Statistics Coordinator, tel. +358 20 634 1887 
  • Heidi Kemppinen, Lead Coordinator, tel. +358 20 634 1307

email: firstname.lastname@kela.fi

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