A new approach to economic policy is needed in order to accelerate Finland's stunted economic growth, according to the Research Institute of the Finnish Economy (Etla).
Ahead of the government's mid-term review, a two-day round of talks assessing the government's actions so far and its plans for the future, Etla is recommending, among other things, more incentives for investment, as well as reforming social security in order to make it more appealing to work.
"Finland has fallen into the so-called growth trap. Slow growth prospects are not an incentive to investments, which means that growth will continue to be slow. In addition, Finland is weighed down by a zero-interest liquidity trap, where monetary policy makes it difficult to revive the economy," said Etla Managing Director Aki Kangasharju in a press release.
According to the think tank, the development of new ideas and investment came to a halt in Finland during the global financial crisis and the collapse of Nokia cluster. The state became indebted and the situation was exacerbated by an ageing population. Recovery has been further slowed down by the eurozone crisis of 2009 and by the current interest rate crisis.
Etla has suggested that higher education institutions should be given the opportunity to charge tuition fees, because the transition from higher education to the workforce is happening too late.
Work-based migration should be promoted by abandoning needs assessment and speeding up work permit processes. In addition, experts from abroad should be attracted with tax incentives, said the institute's press release.
In addition, Etla highlighted that social and unemployment security should be made more work-friendly. The duration of earnings-related schemes should be shortened, and the amount of support should be staggered. Receiving low-wage and part-time work should be made profitable, together with a comprehensive social security reform. The lowest wages would be offset by income transfers.
The price of housing should be lowered, especially in the capital region, where high housing costs are a problem for those in the lowest-paid jobs.