In November 1996, the Finnish Minister of Labour,Liisa Jaakonsaari, appointed a senior government advisory group to advise on the reform of employment policy. At a time of very high unemployment, this policy has mainly focused on the passive maintenance of income for unemployed people. The report of the advisory group, published in June 1997, has recommended a change towards a policy of promoting more active measures. Many of the report's proposals are to be implemented in the 1998 state Budget. We review the main proposals and the responses of the social partners.
The Finnish labour market has undergone significant change in a very short period of time. In the early 1990s, Finland experienced a very deep recession and underwent a transition from near full employment to one of the highest levels of unemployment of all the OECD countries. The problem was not just a mismatch between the supply and the demand for labour, but also a mismatch of skills as the economy as a whole underwent a rapid transformation. Regardless of economic fluctuations, the rising level of skills and knowledge required in the economy has weakened the situation of unemployed people with a low level of knowledge or outdated vocational skills. A significant group of unemployed people does not benefit from active measures with concrete targets (such as training for a new occupation), aimed at improving their labour market status. A hard structural core of unemployment has developed which is not affected by increases in demand for labour. On the other hand, the development of the economy has meant that the nature of unemployment and employment has changed - for example: "atypical" employment, such as fixed-term and part-time work, is more common; while there is a tendency for workers to alternate periods of employment and unemployment.
The main methods used to combat the exclusion of unemployed people have been a passive employment policy and training schemes - which often only result in preventing the economic exclusion of those concerned .
It was against this background that in November 1996, the Minister of Labour,Liisa Jaakonsaari, appointed a senior government advisory group to advise on the reform of employment policy. The advisory group issued its report in June 1997, which concludes that there is now a real need to move to a more active labour market policy which is specifically targeted at those who are excluded from the world of work.
According to the advisory group, the most difficult problems which have to be addressed by future labour market policy are as follows:
- The problems related to finding qualified labour in particular sectors and companies.
- The changes in working communities as a result of the ageing of the labour force.
- Widespread long-term unemployment and the "dependency culture" associated with it.
- The fact that the international division of labour, resulting from increasing economic "globalisation", has created a pool of unemployment in Europe, which affects Finland particularly severely.
- The weak nature of the traditions of entrepreneurship and "risk-taking" in Finland.
New employment measures to focus on the hard core of unemployment
In line with the recommendations of the advisory group, the 1998 state Budget, presented in September 1997, provides more funds to address these problems. The system of unemployment benefits will also be reformed. In order to combat long-term unemployment and exclusion, new measures have been put forward which include the "activation" of labour market support, a new scheme providing a period of activity for those who have been unemployed for a considerable time, and making job-seeking more effective. The main aim of the reform is to move away from collective measures to measures which are more individually-oriented. A sum of around FIM 900 million has been allocated to put this reform into effect. The full details of the measures will be worked out in the parliamentary proceedings, due to be completed in December 1997, but below we outline some of the main points.
More employment opportunities are now emerging in the Finnish labour market, both in companies and in the not-for-profit sector. The demand for labour has already increased and this reform will hopefully add momentum to this trend. A feature of the reform is a new "combined" subsidy, bringing together the labour market support benefit paid to unemployed people and an employment subsidy paid to employers. The new subsidy - amounting to FIM 5,000 per person - is paid to employers which take on long-term unemployed people, and it is hoped that about 10,000 such people will benefit. This policy is expected to go some way towards alleviating the problems of exclusion and create more employment opportunities in the not-for-profit sector.
The employment offices in the largest cities will employ 150 experts whose task will be to assist in the implementation of the new employment policy system. Regular individual interviews, the mapping of individuals' skills, individual job-seeking records and a personal job-seeking plan are all examples of the new forms of services which are to be offered.
More resources are to be put into training, with the state paying more to institutions providing courses. The aim is not only to improve the quality of training, but also to focus the training so that it is more geared to the needs of the recruitment problems faced by small and medium-sized enterprises and to overcome possible vocational bottlenecks.
Benefit scroungers
Recently, Finnish newspapers have carried a number of stories about so-called "benefit scroungers", who are portrayed as people who believe that they have a right to "sponge" off the state by taking advantage of social security benefits and not contributing to society, and there has been a degree of public outrage about these stories. The new employment policy will begin to address the perceived problem of those who are apparently content simply to enjoy the benefits of social security payments by placing their name on the unemployment register.
The Minister of Labour has stated in a newspaper interview that those unemployed people who are actively seeking employment and are anxious to improve their labour market skills will be supported by all possible means available within the unemployment insurance system. Those who are ill, about to retire or who are genuinely interested in training will continue to be covered by the social security system. However, she has little sympathy for those who have no interest in finding work.
Opinions of unions and employers
The Central Organisation of Finnish Trade Unions (SAK) has taken a positive view of both the new activating policy and of the budget proposals, but it does not approve of the "carrot and stick" approach inherent in the new policy.
SAK welcomes the fact that, in its view, the Government has at last understood the seriousness of the problem of the long-term unemployed and the associated problems of exclusion. The labour administration will finally be allocated resources it has so far lacked to provide the necessary services required by long-term unemployed people. However, SAK believes that the Government has conflicting views in its budget proposals concerning the status of unemployed persons and unemployment. On the one hand it will increase the basic daily unemployment and sickness allowances, but on the other hand it will cut the earnings-related unemployment and sickness allowances. SAK wants these cuts in benefits to be reversed during the parliamentary proceedings of the budget.
SAK also states that reductions in benefits can act as a disincentive for those who are genuinely seeking to improve their skills and job opportunities.
The Confederation of Finnish Industry and Employers (TT) has welcomed the Government's new policy and believes that it is a step in the right direction. TT has also stated that it supports further reductions in state-subsidised employment and training schemes and that the quality of these measures should be improved in such a way that "real jobs" are promoted, rather than "artificial" ones. The policy should also improve vocational skills to meet the real recruitment needs of employers.
However, TT argues that the implementation of the targets set out in the report will require adjustments in the budget proposal and in the labour administration's objectives, and that an evaluation of the new measures should be undertaken as soon as possible on a tripartite basis.
Commentary
Finnish employment policy is about to change radically. Essential information about the present state of the labour force will be gathered from interviews which are currently being conducted among unemployed people by the employment offices. These interviews are beginning to identify those unemployed people who are actively seeking employment and those who are simply content to draw benefits without making any attempt to obtain employment.
Unemployed people will be obliged actively to seek work on a full-time basis. The aim of the reform to identify their needs for education and training in a more individually-oriented way than hitherto. The policy aims to encourage unemployed people to enter into a "contract" with the state whereby, in exchange for support in job-seeking and training, individuals agree to devote all their time to seeking employment actively. The increases in the daily unemployment allowance without any consequent adjustments in the earnings-related allowance have aroused indignation amongst employees. The "activation policy" as such has not met with any opposition. The employers believe that the new policy is heading in the right direction but claim that the measures are insufficient. Support measures should aim at improving skills, while heavily subsidised employment should be ended.
It remains to be seen what the reactions of unemployed people and the trade unions will be in the future when the new employment policy begins to bite. It may be that the problems of the long-term unemployed turn out to be more complex than is currently envisaged and further, more individually oriented, measures might well have to be introduced. (Juha Hietanen, Ministry of Labour)