Minister of Social Security Sanni Grahn-Laasonen (NCP) talked to reporters as she arrived for the government’s budget session at the Ministry of Agriculture and Forestry in Helsinki on 19 September 2023. Grahn-Laasonen has defended the targeting of the government’s much discussed cuts in social security, saying students and recipients of earnings-based unemployment allowance are in the best possible to find employment. (Heikki Saukkomaa – Lehtikuva)

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THE SPENDING CUTS outlined by the government will have the greatest relative impact on students and recipients of earnings-based unemployment benefits, reveals a report published on Monday by the Ministry of Social Affairs and Health.

Pensioners, by contrast, will be largely shielded against the spending cuts.

The government has agreed on measures such as forgoing the annual cost of living-based increases in several social security benefits, removing the exempt amount and child increase of unemployment security, staggering earnings-based unemployment benefits and slashing the general housing allowance in order to both promote employment and create cost savings.

The biggest losers of the measures will be young single-person households, 16 per cent of whom will see an over 10-per-cent drop in disposable income, according to the Ministry of Social Affairs and Health.

The relative loss of income is lower for families with children despite the removal of the child increase because, on average, unemployment security accounts for a smaller share of income for families with children than for working-age households without children.

“The share of losers is high also among single-parent families, but a decline of over 10 per cent in disposable income is rarer [for them] than for working-age single-person households,” it said.

The report lays out a couple of examples of the effects:

The single parent of two children who receives unemployment security and has some earned income will see their monthly disposable income drop by 150–300 euros depending on the amount of earned income. A Helsinki-based student who lives alone and pays 694 euros a month in rent will lose roughly 100 euros due to the housing allowance cut, with the loss increasing to over 200 euros if they also have earned income.

A person living alone who has received earnings-based unemployment allowance for over 180 days will lose about 200 euros, assuming a rent of 400 euros and a pre-unemployment monthly pay of 2,700 euros. The loss could increase by roughly 100 euros if the person also has earned income.

Minister of Social Security Sanni Grahn-Laasonen (NCP) defended the targeting of the cuts on Monday, arguing that students and recipients of earnings-based unemployment allowance are generally in a better position to find employment and lift themselves from the lowest income brackets.

“They aren’t in the weakest position,” she stated by phone to STT from Luxembourg.

She underscored that the reforms are being carried out to grow the ranks of the employed by 100,000 by the end of the electoral term. The latest impact assessments, she added, show that proposals that were unveiled this year and are scheduled to come into effect next year alone will have an employment impact of 60–65,000.

Grahn-Laasonen also pointed out that the effects of the cuts on income inequality and low-income earners would be noticeably smaller if the assessments also took into account the impact of finding employment on household income.

“Many people and families will lose something due to these cuts. On the other hand, it’s important to take note that these numbers, which aren’t static, haven’t taken into account the effects on employment and thereby to rising income,” she stated to YLE.

The Ministry of Finance on Monday confirmed that the tax revisions forwarded by the government will widen income inequalities moderately in Finland.

Its assessment indicates that disposable income will increase across income brackets due to the changes in fuel and income tax rates. The absolute impact, though, will be the greatest in the highest income decile and the relative impact the greatest in the sixth to ninth income deciles.

Altogether the adjustments to income tax rates will increase disposable income by an average of 0.39 per cent, with the increase standing at 0.06 per cent in the lowest income decile and 0.43 per cent in the highest decile.

Aleksi Teivainen – HT

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