Labor market Etla’s calculation: There are 150,000 unemployed in Finland who should not take a job

Finns The growth of SMEs is particularly hampered by staff shortages, says the director of the Labore Research Institute Mika Maliranta.

The solution to this problem is the CEO of the Business Research Institute (Etla) Aki Kangasharju provides an increase in foreign labor and the removal of incentive traps.

Maliranta and Kangasharju spoke on Monday about the Financial Sector during the discussion, in which they explained how to secure Finland’s attractiveness as an investment and investment destination. At the end of the event, they also discussed Finland’s incentive traps and their impact on Finland’s competitiveness.

Etla has calculated how many people in Finland are in the incentive trap. According to the research institute, there are 150,000 unemployed in Finland in the unemployment trap. The calculations are based on the fact that when they go to work, there is so little money left in the wallets of these people compared to the subsidies that it would not be worth taking the job.

Thus, according to Etla, there are 150,000 unemployed in Finland who, if they got a job, would be in a situation where at least 75 per cent of their new income would be lost with taxation.

However, Kangasharju notes that people behave differently and the same amounts of money do not apply to everyone.

“Going to work for a part can be pushed if society takes half of the new salary and for someone the share can be 90 per cent. We will never have full control over how many people actually fail to go to work for these reasons, ”Kangasharju says.

Mika Maliranta considers Sweden and Denmark to be role models in how well things can go in the Finnish economy. He points out that in Sweden and Denmark, which are more productive, the incentive traps are even deeper than in Finland.

“If incentive traps are so important, one might wonder how tremendous developments Denmark and Sweden would make if they could remove these even worse incentive traps,” Maliranta says.

According to Kangasharju, the problem in Finland is that although the incentive traps may not be as hard as in Sweden and Denmark, more people are stuck in them. According to Etla ‘s analysis, work incentives have improved slightly in Finland since 2015.

“There are a lot of people in Finland in these traps – maybe not in the same high traps, but still. We have so many welfare benefits distributed to those who are well-off, ”Kangasharju said.

Kangasharju, for example, raises a situation where day care fees could cause a family unemployed person not to take a job.

“The tax on attending work is close to a hundred and it is not worth getting a job,” Kangasharju says.

According to Kangasharju, Finland must follow the Swedish path in taxation if more impetus is needed for economic growth. Sweden has reduced taxation on middle- and high-income earners.

“15 per cent of Finns are in a situation where society values ​​them negatively. So our taxation is already so tight that reducing the tax would increase our tax revenue, ”says Kangasharju.

According to Kangasharju, tight taxation reduces the desire to move forward and leads to a situation where income is transferred abroad. According to Etla’s calculations, there are already 900,000 people in the income trap in Finland. That means that as incomes rise, tax will take 55 percent of new incomes for 300,000 people and half for new incomes for 600,000 people.

Social- and the Ministry of Health is preparing a policy on incentive traps. The guidelines are due to be finalized in the autumn.

“There are always incentive traps in social security if the starting point is social security that gets along. Of course, they can be reduced and their location affected, ”says a leading specialist from the Ministry of Finance in the Social Security Committee preparing the guidelines. Olli Kärkkäinen said in March the ministry in the bulletin.

According to Kärkkäinen, incentives for employment have improved significantly since the 1990s, but there are still traps, especially in situations where a citizen or household receives several overlapping subsidies.