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Economist: Controversial jobless activation model could lead to "fake employment" figures

While the government's hotly-debated activation model for the unemployed is expected to improve employment figures, there are also concerns that it could add to the register of "fake employed" persons.

Mies jonottaa työvoimatoimistossa Helsingissä.
Image: Heikki Saukkomaa / Lehtikuva

In a freshly-released economic outlook released on Friday, Finland’s largest mortgage lender Hypo praised the government for new measures introduced to activate the unemployed to find work.

According to the so-called "active model", unemployed persons run the risk of having their benefit payments cut by 4.65 percent if they fail to satisfy employment officials that they have either worked for 18 hours, participated in training or pursued entrepreneurship in a 65-day period.

Critics of the approach have said that the new rules punish the unemployed who fail to show results, even if they have been actively seeking work.

According to Juhana Brotherus, Hypo chief economist, while the new model will assist the employment market, it could add to fake employment that distorts the actual situation.

“Just one hour of work a week would be enough to classify a former jobless person as employed. The number of “fake employed” created this way could quickly multiply and significantly reduce unemployment figures,” Brotherus pointed out in a release.

The economic outlook said that even if the model were to reduce real and reported unemployment, the real problem of structural unemployment would not be eliminated, even during the current economic upswing.

Peak of economic upswing over

The mortgage lender said that the Finnish economy has emerged from a ten-year economic downturn, but noted that the peak of the recovery, which occurred last year, is now over.

The organisation said that exports have recovered and that domestic consumption and investments are still supporting the economic upswing. It added that along with the tourism sector, the forestry and metallic industries are also performing well.

The outlook said that current economic growth deviates from previous gains in that construction and consumption were the first areas to lead the recovery, while exports only picked up after some delay. Hypo attributed this situation to the troubled Russian economy, the structure of Finnish exports and weakened price competitiveness.

The lender said that economic growth in 20018 would be reflected in households as salaries improve, employment increases, unemployment falls and purchasing power grows.

At the same time, Hypo predicted a record number of new housing construction and speculated that the economy would inspire investors as well as new first-time buyers.

In addition the lender said that the government’s current account will strengthen and while it forecast that the government might even be able to correct the debt ratio, it warned that of the need for budget discipline as well as the need to guard against ebbing enthusiasm for reform.

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