Long-range social protection reform by Finland’s centenary

23.12.2009 8.14
News item N5-53709
The mandate of the committee, known as the SATA committee, created in 2007 for reforming Finland's social protection arrangements sought to refashion the system so that accepting work is always worthwhile, poverty declines and a basic income is guaranteed in all life situations. The social protection system had also to be made simpler, and its costs not exceeding what the public economy could withstand.
"Parts of the mandate were partially in contradiction with one another, and the committee had to strike a balance between them", says Lauri Pelkonen the General Secretary of the SATA committee.

Key to implementing the aims of the SATA mandate was the improvement of living, or at least preventing its weakening. The Finnish population is getting older and there is less new labour coming onto the job market than in the past. The numbers of people in retirement and in need of care is increasing and the numbers of people paying are dropping. This poses problems for the social protection system and its sustainable financing.

For Lauri Pelkonen, the goals of the SATA committee can best be realized by lengthening working careers. People should enter working life earlier, retire later, fall ill and be unemployed as rarely as possible and people with partial working capacity should be employed.

"But we can have an impact on the function of social protection with these issues only partially. It would be of decisive importance that the social partners support these aims."

Gradual implementation

The first reform proposals of the SATA committee were made in autumn 2008. These contained a range of measures that would not entail new costs. They included easing the use of unemployment protection advance payments and part-time sickness benefit and promoting the employment of people on work disability pensions.

The SATA committee tabled its basic policy lines of the total reform of social protection in January 2009. The basic policy lines and new social income policy were put to parliament last spring and autumn.

Stimulating work attraction

The committee's proposals contain a range of measures designed to bolster employment. One innovative model is the ‘work bank'. This would see improvements to access to rehabilitation and the effectiveness of occupational health care to upgrade the preparedness of employees to rejoin the labour market.

The committee also suggested that means testing for labour market support be abolished. At present, the income of a spouse or parents living in the same household are taken into account in labour market support. It is not always worthwhile for one spouse to accept work because the other can lose his or her labour market support and so employment does not improve the household's income.

The committee has most recently been dealing with the issue of the simplification of the housing benefit system, linked to reforming basic security benefits and the reform of income support.

"The committee is unanimous that general housing benefit must be simplified. It needs to be made more workable and transparent than now", says Pelkonen.

Simpler housing benefit system

Housing costs are nowadays reimbursed from four support systems: the general one, one for people on pensions, for students and for conscripts. The general housing allowance system is being dealt with first. The new system would be based on the numbers of members of households and determined by the maximum housing costs according to residential district. Long-term recipients of housing benefit would be directed to publicly supported rental housing.

However, the SATA committee has yet to reach a unanimous decision on the administration of income support, and whether it should be handled by the Social Insurance Institution or by municipal social welfare.

The committee has also been working out how different measures could be used to reduce the need for income support. One way is by increasing basic security benefits.

"In increase is also in line with the committee's mandate to safeguard basic incomes inn all eventualities. On the other hand, adjusting the basic security benefit complicates incentives for getting work. Certainly, economic realities also play a part", says Pelkonen.

To improve basic security benefits, the committee concluded by proposing a support pension, the index linkage of basic security benefits and the adjustment of the activation support of unemployment benefit.  In addition, governments would regularly have to reassess the level of basic security benefits during each electoral term.

Retuning legislation

The SATA committee has also made proposals on combining the family care allowance and the care support paid by the Social Insurance Institution, and a common payment ceiling for health care client fees and medical costs. Other proposals include speeding up application processes by using electronic processing, and a handling guarantee for unemployment benefit applications of 30 days.

The committee proposes that the simplifying of the social protection system should start with compiling all relevant legislation into a coherent whole.

"Not all the reforms will be implemented during the present government term and this was not the intention. The SATA committee created a new long-term social protection for Finland for 2017, when Finland will be 100 years old", says Lauri Pelkonen

Merja Moilanen