Finland's next right-leaning government is looking to get 100,000 more people into jobs. One way of achieving this is dismantling incentive traps that can make it less advantageous to work.
To make paid work more lucrative, current government formation talks are looking at phasing and shortening income-related unemployment benefits. Negotiating parties are also exploring cuts to Kela's housing allowance.
What are the main disincentives to work? Yle talked to social security and labour market experts to find out.
Last year business-backed think-tank Etla studied how many Finns could be classified as living in welfare traps, meaning their income would not significantly rise if they went to work.
"Being in a welfare trap means that becoming employed would increase income no more than 20-25 percent," said Päivi Puonti, head of forecasting at Etla.
Between 50,000 to 100,000 unemployed people—as many as 20 percent—over the past year fall into this group, according to the think-tank.
1. No benefit moving from part-time to full-time
Heikki Hiilamo, a research professor at the Finnish institute for health and welfare (THL), said he believes the worst trap is when people get stuck in part-time work because they simultaneously receive unemployment benefits.
This means it's not beneficial for a person who is working part-time and receiving adjusted unemployment benefits to transition to full-time employment, according to Hiilamo.
People qualifying for adjusted unemployment benefits get partial unemployment benefits from Kela in addition to earnings from work.
"We have sectors with severe labour shortages, and at the same time there's many people getting adjusted unemployment benefits. It's a bit puzzling why this is the case," said Hiilamo, who's also on a committee tasked with overhauling Finland's social welfare system.
"Last month there were some 50,000 people receiving adjusted unemployment benefits. Quite a few of them work in the service sector. Maybe there's an established pattern where people prefer part-time hours, even when full-time work is available."
Hiilamo also suggested that partial unemployment benefits may be supplementing low wages, thus providing savings for the employer.
2. Expensive housing and kids in daycare
Welfare traps occur when work is low-paid, housing expenses are high and children are in daycare, according to the Confederation of Finnish Industries (EK).
Housing allowances for high rents and income-dependent daycare fees form an equation that, according to the EK, does not incentivise unemployed parents to work.
The business lobby said this is a typical situation in the capital region and other urban centres.
"This is not the fault of these individuals, but rather a fault of our political system. It's created a tax and benefits system where work doesn't always pay," said Ilkka Oksala, a director at the EK.
Reducing earnings-related unemployment benefits and raising the bar for Kela's housing allowance and social assistance could lead to 25,000 new jobs, saving almost a billion euros in state expenditure, according to the organisation.
3. Confusing bureaucracy
Soste, an umbrella organisation for 200 social affairs and health NGOs, emphasised that welfare traps don't always arise out of financial concerns. It pointed out that bureaucracy traps can also hinder employment.
"We hear a lot about traps pertaining to the complexity and opacity of the system. There's bureaucracy preventing people from flexibly taking on gigs when they're receiving some form of benefits," said Anna Järvinen, a specialist at Soste.
People drawing benefits also have trouble anticipating how taking a job will affect their net income, according to Järvinen.
The fear of benefit payment interruptions alone can deter people from accepting temporary jobs, even if the work would be lucrative.
"People fear that their finances will get turned upside down if they don't know when money is coming in next," she added.
According to Hiilamo, the only way of eradicating incentive traps is abandoning the social safety net altogether.
"This is something we certainly don't want to do," Hiilamo said, adding that the majority of people caught in the definition of an incentive trap are actually employed.
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