The Sufficiency of Basic Social Security in Finland? Analyzing changes and reforms

Susanna Mukkila & Paula Saikkonen Social Policy Research Unit

The National Institute for Health and Welfare (THL)

Outline

• Background • Assignment of evaluation• Implementation• Results• Discussion

Regular evaluation of sufficiency

• The evaluation of the sufficiency of basic social security has been mandatory since 2010.

• Ministry of Social Affairs & Health to commission an evaluation every 4th year.

• It supports the decision-making processes of basic social protection and follows up on the government programme’s consequences.

Assignment of evaluation

• The analysis carried by an independent evaluation group should include:1. Development of benefit levels 2. Opinion poll of the sufficiency of benefit levels3. Development of work incentives4. Income distribution and poverty statistics on households depending

basic social security.5. International comparison on benefit levels.

• The National Institute for Health and Welfare (THL) coordinated the evaluations in 2011 and 2015, and the evaluation has been carried out by experts from several institutions (e.g. Social Insurance Institution of Finland, Statistics Finland, Consumer Society Research Centre).

Implementation

• Basic social security – what does it mean?• Legislation of social security benefits, big reforms and

minor alterations • Relative development of social security benefits

– to consumer prices, – to average earnings and – to decent minimum consumption

• Example calculations and income distribution effects of legislative reforms (SISU model)

• Statistical analyses

Results from evaluations in 2011 and 2015

• In the past 25 years, the relative level of basic social security compared to wages has declined substantially.

• However in 2011-2015, basic social security improved in real terms and relatively compared to the wages

• ..but the level is still not sufficient to cover reasonable minimum costs as determined in reference budgets.

• Policy reforms 2011-2015 lowered income inequality and poverty risk, but weakened work incentives.

• Roughly half of the population sees the level of basic benefits to be insufficient.

Development of disposable income after housing costs in relation to average earner’s income in 2011-2015

2011 2012 2013 2014 2015 20160

10

20

30

40

50

60

70

80

90

100

Average earning workerLow paid workerPensioner, earnings related se-curityPensioner, basic securityUnemployed, earnings related securityUnemployed (basic sec.), min sickness allowance rec.,student

%

Assumptions: single-dweller, medium-sized city, rental appartmentSources: Adequacy of basic social security in Finland 2011–2015, Kela, 2015; Vuoden 2016 talousarvion muutosten vaikutukset parusturvaan, THL, 2016

Increase of means-tested social assistance

2011 2012 2013 2014 2015 20160

20

40

60

80

100

120

140

160

180

Min sickness allowance recipientStudentUnemployed, basic securityStudent, started after 8/2014

€/month

Assumptions: single-dweller, medium-sized city, rental appartmentSources: Adequacy of basic social security in Finland 2011–2015, Kela, 2015; Vuoden 2016 talousarvion muutosten vaikutukset parusturvaan, THL, 2016

Discussion I

• Changing socio-economic circumstances can cause significant change in the effect of policies without any legislative reforms. (policy drift)

• Evaluation 2019: taking into account also the changes in economic situation in addition to legislative reforms – Current government has introduced several reforms, joint

effect is unclear. – The impact of reforms will be evaluated in the third

evaluation.

Discussion II• Freezing the level of benefits decreases their impact

on the poverty reduction, especially in the long run.• Should the level of benefits follow the long-term

increase in earnings or increase of prices? – How about the housing policy?

• The level of primary social security benefits has been decreased. – The level of means-tested social assistance in the

future?• Is this an intentional step towards the basic

income?

More information, see:The second expert group for evaluation of the adequacy of basic social security (2015). Adequacy of basic social security in Finland 2011–2015. Helsinki: Kela, Working papers 80, 2015.http://hdl.handle.net/10138/156544

Thank you!

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