A woman holding a queue number ticket at the service point of the Social Insurance Institution of Finland (Kela) in Itäkeskus, Helsinki. On Monday, a number of social security benefits were slashed as part of the government’s effort to balance public finances. (Emmi Korhonen – Lehtikuva)

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A NUMBER of social security benefits were slashed in Finland on Monday, 1 April.

The Finnish government carried out the cuts in an attempt to increase employment and prop up public finances, estimating that the cuts in general housing allowance will generate savings of around 300 million euros and those in unemployment benefits 800 million euros, as well as grow the ranks of the employed by 20,000.

The cuts in unemployment benefits came into effect immediately, whereas those in the housing allowance will be applied in conjunction with the next yearly review. Overall, they hit almost half a million people – especially low-income earners, students and the unemployed, according to reporting by Helsingin Sanomat.

Some 406,000 households, for example, received the general housing allowance in February.

The Ministry of Social Affairs and Health has estimated that the adjustments will have the greatest impact on 18–24-year-olds, 25–34-year-olds and 55–64-year-olds. Pensioners were excluded from the cuts.

On Monday, the general housing allowance was lowered from up to 80 to 70 per cent of applicable housing costs – that is, the difference between acceptable housing costs and the basic deductible. The basic deductible, an income-based variable that determines the share households themselves pay of their acceptable housing costs, was raised from 42 to 50 per cent.

The deductible does not apply to lowest-income households.

Also the 300-euro deduction for earned income was scrapped from the housing allowance scheme. The deduction had enabled allowance recipients to earn up to 300 euros a month without affecting their allowance.

Helsingin Sanomat on Monday wrote that the cuts will especially affect households that have received both the allowance and earned income, with over a third of such households becoming ineligible for the allowance. The allowance will decrease for households with earned income by an average of 133 euros a month.

Students will also be affected because the cuts are high relative to the typical student income.

The Social Insurance Institution of Finland (Kela) has estimated that the adjustments will decrease the income of students significantly when excluding the state guarantee for student loans. The Ministry of Social Affairs and Health has calculated that the housing allowance cuts will reduce the disposable income of students by more than 10 per cent.

On average, the allowance will decrease by 76 euros a month for student households.

Unemployment security benefits, in turn, decreased due to the abolition of the child increase and the monthly exemption for earned income. Whereas unemployment benefit recipients were previously able to earn up to 300 euros a month without affecting their benefits, as of this week every euro they earn will reduce their benefits by 50 cents.

A total of 75,000 unemployment benefit recipients also reported earned income in 2023.

Unemployment benefit recipients are no longer eligible for the child increase, which had been available to unemployed people who care for an under 18-year-old child. The 150–285-euro monthly increase had been paid to roughly 100,000 people.

The Federation of Unemployment Funds in Finland (TYJ) has calculated that the adjustments will slash the benefits of people who have children and are partly employed by up to roughly 390 euros.

The Federation of Mother and Child Homes and Shelters, in turn, has viewed that the amendments will affect the most vulnerable families with children, such as low-income single-parent families.

Its calculations suggest that the amendments shaved more than 300 euros off the monthly real income of the single parent of an under three-year-old child who receives the basic unemployment allowance, works on a part-time basis and lives in Helsinki; In Jyväskylä, such a person saw their real income fall by 275 euros.

Also one-person households feel the cuts.

The Association for People who Live Alone in Finland has pointed out that one-person households make up 70 per cent of general housing allowance recipients and 77 per cent of income assistance recipients. With 63 per cent of one-person households employed compared to 77 per cent of other households, one-person households are more likely to fall into one of the two lowest income brackets than two-parent families and families without children.

The Ministry of Social Affairs and Health has acknowledged that young one-person households are the family type that is clearly the most affected by the changes, with around 16 per cent of them seeing an over 10-per-cent drop in disposable income.

Helsingin Sanomat on Monday highlighted that employed women make up the majority of people who became ineligible for the general housing allowance for two reasons: many of the recipients are single parents, and the adjustments were targeted at low-income earners, many of whom work in female-dominated sectors.

Altogether some 20,000 employed women lost their eligibility for the housing allowance.

TYJ has estimated that women also feel the brunt of the amendments in unemployment security benefits given that they are more likely to work while unemployed and receive the child increase than men.

The Finnish government has also laid out other changes to both the general housing allowance and unemployment security benefits. The job alternation leave is to be eradicated in early August. The work requirement will be raised from 6 to 12 months a month later, along with the staggering of earnings-based unemployment benefits and removal of age-based exemptions.

Starting next year, the general housing allowance will not be paid for owner-occupied homes.

Aleksi Teivainen – HT

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