A pedestrian carried a shopping bag in downtown Helsinki no 8 July 2022. (Mikko Stig – Lehtikuva)

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THE DURATION of earnings-related unemployment allowance should be halved, proposes Etla Economic Research.

Etla on Tuesday published a report stating that slashing unemployment benefits for unemployed job seekers with the best opportunities to find employment would be a means to tackle various labour-market problems in Finland.

Finns currently must work for around six months to become eligible for 18 months of the earnings-related unemployment allowance.

“If the earnings-related security was halved to nine months or capped at one year, employment would increase by 30,000–40,000 people and the employment rate by around one percentage point,” commented Aki Kangasharju, the chief executive at Etla.

Päivi Puonti, the researcher who co-authored the report with Kangasharju, highlighted that the proposal would crucially encourage job-seeking especially among job seekers with the best opportunities to find employment.

“It is important that the system encourages people to find work as soon as possible before their unemployment prolongs and finding work becomes harder,” she said.

The co-authors acknowledged that reforming the unemployment security system has proved difficult due to, for example, concerns that slashing the eligibility period for unemployment security could contribute to the exacerbation of income differences. The proposal, they argued, would not have such an impact because it would encourage more job seekers to find employment quicker and prevent periods of unemployment from prolonging.

Kangasharju calculated that halving the earnings-related allowance would free up some 400–600 million euros in public funds, a resource he believes should be invested in supporting people struggling to find work. The funds should be invested in developing adult education, mental health services and part-time work, in tackling unemployment-related problems, and in promoting labour mobility.

Etla said the proposal would eradicate incentive traps.

The Helsinki-based research institute estimated earlier this year that over 136,000 people in the country have no financial incentive to accept a job offer, as doing so would increase their net income by no more than 20 per cent.

Aleksi Teivainen – HT

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