Minister of Social Security Sanni Grahn-Laasonen (NCP) was photographed during a plenary session in the Finnish Parliament on 24 April 2024. Grahn-Laasonen told Helsingin Sanomat on Friday that the government has begun work on what would be a historic overhaul of the social security system – the replacement of several benefits with a universal allowance. (Markku Ulander – Lehtikuva)

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THE GOVERNMENT of Prime Minister Petteri Orpo (NCP) has begun work on a major overhaul of the social security system in Finland.

Helsingin Sanomat on Friday reported that the reform is aimed at combining a number of social security benefits into what is provisionally called a universal allowance to establish a system that is clearer and offers better work incentives for recipients.

Minister of Social Security Sanni Grahn-Laasonen (NCP) said to the newspaper that the “historic” reform will be designed by a joint committee of parliamentary parties and carried out in phases.

“What’s on the drawing board in the first phase is combining the labour market subsidy and basic unemployment allowance into a universal allowance starting in 2026,” she commented. “Our intention in the first phase is to make sure you can apply for the universal allowance and housing allowance with the same application form.”

The basic unemployment allowance and labour market subsidy are mutually exclusive unemployment benefits with a gross monthly value of roughly 800 euros. The basic allowance is available to unemployed people whose employment history would qualify them for earnings-based unemployment security but who are not members of an unemployment fund. The subsidy, in turn, is available to unemployed people who are entitled to neither earnings-based unemployment security nor the daily allowance.

The benefits have only minor differences, highlighted Helsingin Sanomat. For example, the labour market subsidy can be reduced for recipients who live with their parents based on their parents’ income, unlike the basic allowance.

Liisa Siika-aho, the official in charge of the preparatory work at the Ministry of Social Affairs and Health, told the newspaper that the key difference between the benefits is the maximum eligibility period: the basic allowance can be received for 300–500 days, whereas the subsidy has no maximum eligibility period.

Many unemployed people therefore move from the basic allowance to the labour market subsidy after 300–500 days. Some have received the subsidy for as long as decades, according to Siika-aho.

“First we’ll have to determine whether the universal allowance should be limited in terms of duration. And if it should be, what does it mean,” she stated, reminding that the preparatory work has only begun and that it is possible that no maximum eligibility period is set for the allowance.

While Grahn-Laasonen said the government will carry out the reform step by step to prevent disruptions in payments and other hiccoughs, it has set its sights on a broader reform of the social security system. The aim of the subsequent phases is to integrate other basic benefits, as well as the income assistance and housing allowance, into the universal allowance.

The government is thereby seeking to create a social security system that is clear, that encourages people to work and where benefits decrease linearly as earned income increases.

“I do believe we have a chance to get pretty far [with the reform]. But I’m sure there’ll be things to do also in future electoral terms,” she remarked when asked about the likelihood that such a large-scale reform can be carried out by the end of the current electoral term.

Siika-aho similarly reminded that integrating the income assistance and housing allowance into the universal allowance is a tremendously complicated and painstaking process. The high level of ambition, she added, is nonetheless justified because a single-application system could be a significant improvement for social security recipients.

“The [application] form assesses applicants’ situation based on their responses and identifies if they also qualify for the housing allowance. That’s how you can apply for the housing allowance at the same time.”

The goal is thereby to make sure applicants are not required to have an in-depth understanding of the social security system to figure out what benefits they qualify for, outlined Siika-aho.

The National Coalition and Christian Democratic Party have both adopted the long-term goal of moving toward a social security system founded on a universal allowance in the vein of the UK’s Universal Credit, which began replacing six benefits in 2013. In the UK, though, the overhaul has cut the benefits of people in the weakest position, contributing to an increase in homelessness and child poverty, wrote Helsingin Sanomat.

The Universal Credit’s roll-out began in 2013 and is expected to be completed in 2024.

Aleksi Teivainen – HT

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