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5 questions about Finland's welfare reform: "It's like slicing up an elephant kilo-by-kilo"

The Finnish government wants to simplify the country's welfare system.

Finland wants to simplify its welfare system. Image: Ismo Pekkarinen / AOP

The project is set to take at least eight years, or two electoral terms, and was set in motion on Friday as Minister for Social Affairs and Health Aino-Kaisa Pekonen announced the creation of a new committee to drive the reform forward.

It’s a demanding task. In 2007 the government established a different committee to look at the issue, but that attempt failed. One reason was a lack of money, as the 2008 financial crisis squeezed state finances.

Above all that, the project broke down because parties were divided over what they should ask of claimants.

The question was simple and is repeated around the world: Should the unemployed be required to perform some type of service or undertake training in return for their benefits?

Juho Saari of Tampere University said resolving these conflicts is a big task. He led the Juha Sipilä government’s report into inequality.

"It’s like slicing up an elephant kilo-by-kilo," said Saari.

Social security takes up a big chunk of the state budget. For example, housing benefit spending is around 1.5 billion euros, income support 700 million euros and different forms of child allowance total 1.4 billion euros annually.

Yle asked three experts in the field to open up the reform: Juho Saari from Tampere University, Pasi Moisio from the Institute for Health and Welfare (THL), and Liisa Siika-aho of the Social Affairs and Health Ministry.

1. Why does Finland need social security reform?

The Finnish welfare state has developed piecemeal over the last 20-30 years. Lots of small changes have been made. For example a single parent supplement has been added to the monthly child allowance, and employers now get a one-off 2,500-euro payment when a woman goes on maternity leave.

The end result is a mish-mash.

Citizens don't always know what kind of benefits they are due. Balancing wages and benefits is difficult, especially for those with low incomes.

Income support, which benefits agency Kela calls a 'last-resort form of financial assistance' has become a long-term benefit, even though it was intended to be temporary. Too many residents are stuck living on income support. It is difficult to get off income support and return to the workforce or school.

The housing benefit will cost taxpayers 1.5 billion euros this year, but the basic question remains unresolved: Does it support people’s living costs or the construction of housing?

Overall, moving from one benefit to another is difficult, and application processes have become bureaucratic. Society and working life have changed over the past decades, but social security has not evolved to keep pace.

2. What's the most difficult issue?

Parties have very different views on whether support should be paid as a basic income to which everyone is entitled or whether it should require some action from the claimant. The Green Party and the Left Alliance support a basic income model, but other parties are demanding some kind of activity towards employment or education from applicants.

If one party refuses to compromise at the start and demands their model is implemented in full, it will be difficult to move forward.

The committee must also decide whether benefits are personal or family-based. At present income support and housing benefits are paid to households, whereas unemployment benefits are personal.

As Finland’s population ages, the state must also determine whether elderly residents should be required to liquidate assets to finance their care. People living on income support, or social assistance, are already expected to sell off any assets.

Some benefits in Finland are just that, money. Residents receiving unemployment are not directly encouraged to retrain for a new profession or try out a work placement. This is something many want to change.

3. How will welfare reform happen?

A committee, led by THL research professor Pasi Moisio, has two electoral terms, or eight years, to revamp Finland’s welfare system. The working group includes parliamentarians representing all parties in Parliament. Various external experts as well as representatives of labour market and business lobbies will also participate in the committee’s work.

By including MPs from all parties, the committee aims to prevent the winners of the following general election from potentially wiping out work done during the previous administration's term in office.

4. Who will benefit from the reform?

Those who have fallen through the safety net. The current system is not agile enough to support people who don't clearly fall in a 'sick' or 'healthy' category, such as individuals undergoing rehabilitation. That said, the current system can also be rigid when it comes to people working part-time on sickness disability.

The average resident will also benefit from the system becoming simpler. The committee's job is to uncover and fix pitfalls in Finland’s welfare system. For inspiration, the committee may turn to successful welfare models in place in other Nordic countries.

5. Will reforms harm anyone?

The architects of the Finnish welfare system did not intend for it to become complicated. The current scheme evolved over time with Kela adapting to take a multitude of life situations into account. That said. someone always stands to lose when benefits are streamlined.