Parliamentary elections | “It sounds brutal” – Researchers evaluate the social security cuts presented by the coalition

Policy|Election of the parliament

The coalition the proposed cuts, especially to housing allowance, sound “drastic”, assesses the research manager of THL of the Institute of Health and Welfare Jussi Tervola. He considers it unlikely that any government would make such large austerity measures in one government term.

Coalition has presented savings measures totaling at least one billion euros for housing support, unemployment insurance and livelihood support. In addition to direct savings, the coalition aims to improve work incentives and increase the number of employed people.

By reforming the housing allowance, the coalition plans to reduce benefit expenses by half a billion euros. The amount corresponds to almost a third of the general housing allowance expenses.

“Approximately 60 percent of rental apartments receive housing allowance. In the opinion of the coalition, housing benefit reforms should be implemented, which will allocate the support to those who need it the most”, the party in the economic program it is said.

The coalition has not disclosed the details of its proposal.

THL’s Tervola states that housing allowance is paid especially to the lowest-income Finns, such as the unemployed. The average housing allowance for a household living in a rented apartment was around 330 euros per month in 2021.

“For those receiving basic security, housing allowance can make up up to a third of their income,” says Tervola.

Cutting the housing allowance would probably increase the use of the last resort subsistence allowance, Tervola estimates. On the other hand, the coalition also proposes the return of partial responsibility for living expenses for living expenses.

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“The cuts could increase payment difficulties, especially in cities.”

Coalition believes that part of the housing allowances and subsistence allowances, so to speak, flows into the landlords’ pockets in the form of higher rents.

Tervola says that research does not support this view. According to him, a cut from the subsidies would be a cut from the recipients of the subsidies.

“If implemented, these cuts could increase payment difficulties, especially in cities, and guide people’s housing choices.”

Guidance on housing choices is also one of the goals of the coalition. Chairman of the party’s parliamentary group Kai Mykkänen has said that the unemployed, especially in the capital region, could move to cheaper apartments.

“Should it also be reasonable that if you have to finance your living expenses long-term on subsidies, then consider a wider working area? In that case, the maximum subsidy should be based on the price at which you can live in the working area, which extends quite far along the tracks. It’s a well-intentioned but impossible equation if you can live on the Helsinki peninsula year after year with income support,” Mykkänen said in 2021.

Also the pressures on earnings-related unemployment security presented by the coalition are “significant”, says research professor Vatti of the State Economic Research Center who has studied the topic Tomi Kyrä.

The coalition would, among other things, halve the typical maximum duration of earnings-related leave to 200 days. The party would also stagger the level of support so that it would initially be higher than it is now and then decrease.

“Earnings-related is a better option than basic insurance if you need to save on unemployment insurance. The proposed significant shortening of the duration, also based on studies, would probably have a positive effect on employment.”

The flip side of improving the incentives for employment is that the livelihood would decrease for those who become unemployed, whose chances of getting a new job are lower than average.

Kyyrä states that, based on research, it is not possible to conclude an “optimal” duration for a merit-based employee. According to him, a shorter than current earnings security could be suitable for upswings, during which there are many jobs available. In recessions, a long income security can soften the blow in a necessary way.

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“Meaning-related is a better option than basic insurance.”

As a counterweight for extortion, the coalition proposes extending earnings security to those not covered by unemployment funds. Kyyrä considers this proposal to be appropriate, because membership fees of unemployment funds only finance a very small part of earnings security expenses.

“There are many young people outside the funds who would need better support, but have not joined the unemployment fund, for example due to a lack of information. The only reason for maintaining the current system seems to be to support the level of organization,” says Kyyrä.

He suspects that many join a trade union because they think it is a condition for receiving income security. In reality, you can join any unemployment fund, even if you don’t belong to a union.

The trade union movement wants to stick to the fact that earnings security is not extended to people outside the unemployment funds. The left-wing parties have traditionally supported the demands of the trade unions.

Since it would cost money to extend earnings security to people outside of the coffers, the coalition does not propose net cuts to earnings security as large as to housing allowance.

Coalition also puts an index brake on public spending, which would reduce the annual increases to different spending items due to the rise in the general price level by a total of one billion euros. It is unclear to what extent the index brake would target social security.

The chairman of the coalition Petteri Orpon according to, cutting index increases does not mean cutting livelihoods, as the level of support does not decrease. THL’s Tervola disagrees.

“From the perspective of the beneficiary, the index freeze is a cut, because it reduces the purchasing power of social security,” says Tervola.