Finland Times

The Prime Minister's Office has published a report commissioned for the purposes of the Economic Council on the preconditions for low-wage work in Finland with the recommendations of developing incentives, changes in the social security and taxation and increase of employment opportunity.

The complete report consists of two independent reports, the contents of which complement each other, said a government press release on Friday.

The report  entitled demand and supply of low-skilled labour in Finland, prepared by Ohto Kanninen and Petri Böckerman  analyzed the effects of tax and benefit reforms carried out in recent years to support the demand for low-skilled labor.

 It also looked into the development of incentives for accepting work. Based on the existing evaluation studies, the researchers discovered that the positive employment impact of the fixed-term reforms instituted to promote demand for low wage jobs was almost on edge.

The incentives to move into work have, in the light of the research, developed positively in Finland from the mid-1990s thanked to changes made in social security and taxation. 

The calculations, however, showed that participation tax rates among special groups may still be very high and reach up to 80-100 percent for low-skilled unemployed persons with families and for single parents - which indicates that their incentives are weak. 

This means that, in consequence of reduced allowances and higher taxes, there is little or no financial reward from entering the labour market.

The report entitled more jobs for the low-skilled by Osmo Soininvaara and Juhana Vartiainen provides a survey into the low-wage labour market in Finland and discussed means to raise the low employment rate among those who are in a difficult labour market position due to lack of vocational education or other reasons. 

The report come to the conclusion that low employment rates can be primarily explained by problems in the supply of labour. The supply problems escalate especially in growth centres with high housing costs. In regions of net emigration, inadequate demand can also constitute a problem. 

Groups that are considered especially vulnerable include single parents, young people, older people and people with lowered working capacity.

Soininvaara and Vartiainen presented  a number of concrete proposals to increase employment among those who are in a difficult labor market position.

 Some measures aimed at improving the incentives for labour supply by changing the conditions for allowances such as the housing allowance, social assistance and labor market support. 

Other measures proposed seek to promote demand for low-productivity jobs by sharing the employer's financial risk relating to maternity, disabilities and aged workers. 

The proposals also include a call for a more active labor market policy measures and a recommendation for labor market organizations on introducing an unemployment target to be used as a guideline in wage negotiations. 

The report, however, did not include specific estimates on the costs and effectiveness of the proposals.