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Report: Difficult to distinguish activation model effect from economic upswing

The benefit cuts particularly affected elderly job seekers, a report published on Friday revealed.

Aktiivimalli-mielenilmaus Senaatintorilla.
Finland saw protests against the so-called 'activation model' last year. Image: Martti Kainulainen / Lehtikuva

The so-called activation model has not increased the employment rate of those receiving labour market benefits, according to a team of researchers who presented their final report to Employment Minister Timo Harakka on Friday.

According to the report, the employment rate of those receiving earnings-related daily allowances, however, has increased.

Overall, the effects of the activation model remain quite unclear, the team said in their report.

"It is difficult to distinguish the employment effects of an active model from the effects of a good business cycle," the team stated.

In the report, the research team did not comment on whether the activation model is beneficial or not for the unemployed or society. Neither did they make recommendations on whether or not the active model and the associated benefit cuts should be discontinued.

Prime Mister Anti Rinne has pledged to dismantle the wildly criticised employment measure in 2020. The unpopular scheme introduced by the previous Juha Sipilä-led government that essentially penalises unemployed jobseekers for being unable to find work.

"The idea that the active model did not affect anything is wrong," said Roope Uusitalo, professor at the University of Helsinki and the VATT Institute for Economic Research.

According to the study, the introduction of the active model increased the participation of the unemployed in employment promotion services such as courses.

At the beginning of 2018, the Ministry of Finance estimated that the active model would increase employment by about 5,000 to 12,000 people.

Benefit cuts most affected older jobseekers

The activation model particularly affected the oldest among the unemployed, the report revealed. For those over 55 years old, the daily allowance decreased by about half.

Data from Finland’s benefits agency Kela had indicated that roughly half of people receiving unemployment benefits had their payments cut at the end of the first three-month evaluation period in April 2018.

Unemployment benefit is reduced by less than 5 percent if the job seeker does not work for 18 hours during a three-month period, study for five days in an employment course, or work as an entrepreneur with an income of less than 250 euros.

Harakka has promised government decisions that will especially help the elderly unemployed land jobs.

The government is reportedly preparing a job search requirement for the unemployed, based on an individualised employment plan. A bill on the new model will be completed next fall.

The labour minister, however, didn’t give a direct answer about how the current government plans to replace the activation model.

"When there are no exact numbers, we are bound by the 30,000 figure," Timo Harakka said referring to the government's goal of making decisions in the autumn budget round that result result in 30,000 more people being in work.

The government programme states that the cut-backs and clauses of the activation model will be rolled back once measures with an equivalent impact on employment have been adopted.

The Rinne-led government's target is to create 60,000 additional jobs by the end of the term in 2023.

Social Affairs minister: No replacement model needed

Based on the findings of the final report, the Minister for Social Affairs and Health Aino-Kaisa Pekonen interpreted the effects of the activation model as unclear.

"In practice, this means that no separate action to compensate for the impact of the active model is needed, but the government will continue to come up with employment measures to meet the 75% employment rate target," Pekonen wrote in a Facebook post.

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