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Finnish firms pass up 150m euros in wage subsidies aimed at hiring unemployed

One of the government’s employment-boosting measures involves paying half of a firm’s payroll expenses – if it hires an unemployed person.

Viidenkymmenen euron seteleitä.
Image: Henrietta Hassinen / Yle

Many private sector employers in Finland appear to have opted not to take advantage of a government programme that would pay half of their payroll expenses – if they hire unemployed persons.

Recent data suggest that employment rates in Finland are rising, but employers are still reporting difficulty filling vacant positions.

According to data from the Ministry for Employment and the Economy TEM, roughly 150 million euros intended for the employment-boosting wage subsidy has still not been spent and will likely be transferred to the government’s budget for next year.

Ministry officials speculated that firms have not felt the need to turn to the government for financial support to hire new employees.

“The labour market is pretty active and perhaps [companies] are hiring without the need for support,” said ministerial counsellor Tiina Korhonen.

Many companies have found that applying for wage subsidies is laborious compared to the related benefit. The programme requires a firm to go through a local employment office to hire an unemployed person. Once that stage has been settled, the employment office pays the subsidy through the development and administrative centre (Keha-keskus).

This year however, KEHA has referred some 9,500 cases where employers agreed to hire unemployed persons back to employment offices for re-assessment.

“Employers believe that applying for the subsidy is incredibly difficult and bureaucratic. This could be because the subsidy [programme] has many different rules and conditions,” Korhonen said.

The subsidy is apparently one of the topics that three ministerial heads pondered when they were preparing measures to boost employment as part of the government’s budget discussions due to take place next week.

Potential to distort markets

Meanwhile although it does mean an indirect financial injection for firms, business lobby groups say they are not terribly excited about the wage subsidy system.

Vesa Rantahalvari, a labour market specialist with the country’s main private sector business lobby group EK, said that the wage subsidy constitutes a form of corporate funding.

“It is corporate support and all forms of subsidies distort the market.”

He noted that because there isn’t enough for everyone, recipients are selected and that puts companies on an unequal footing. He added that the impact is also reflected in the labour market.

“It is not healthy for a firm to use the subsidy to hire someone named Virtanen, but not someone called Nieminen,” Rantahalvari remarked.

EK: Questionable impact

As far as the EK is concerned the effectiveness of the measure is also questionable. Employees hired with the help of the subsidy will not necessarily hold on to their jobs once the money runs out. The analyst noted that workers hired by municipalities, the government and NGOs in particular often find themselves jobless when the subsidy ends after six or 12 months.

“It should be used in instances where it can be effective, in other words it should be handed over to municipalities and state organisations.”

However Korhonen said that the ministry has no intention of excluding the public and NGO sector from the wage subsidy programme. She said that she believes that companies would use the measure more, if awareness efforts were to increase among the business sector and the unemployed.

Although applications for the subsidy have increased in recent years, funds earmarked for it and other employment services remain unused, she noted.

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