"The focus in reforming social security should be on securing social justice and on protecting income security for people who are faced with social risks"

3.6.2 Reforming social security

Social security is an investment for the future. It allows people to lead fuller lives and brings freedom and inclusion in ways that also benefit the whole of society. The focus in reforming social security should be on securing social justice and on protecting income security for people who are faced with social risks. Essentially, we need to make the system more reliable, comprehensive and easier to understand.

There are many reasons why our social security system needs reforming.

  • The ongoing transformation of work challenges the functioning of the existing system and its concepts and definitions.
  • Over the years, services and benefits have been developed separately and at different speeds. They must be made more interoperable so that people’s needs in today’s society can be met.
  • At the moment, people do not always get support when they need it the most, or they do not always have access to the services or benefits they need. At worst, they do not receive any support at all.
  • Since the level of basic social security is low and the benefit system is very complex, the role of social assistance has grown. Originally, social assistance was designed as a last-resort, short-term benefit, but it has evolved into a long-term supplement to basic social security.
  • Our present social security system is complicated and hard to understand. When people who undergo life changes and experience a range of life situations and when sector borders are crossed, the fragmented nature and unpredictability of the system is highlighted.
  • We need a high rate of employment to secure a sustainable welfare state.

The Government will launch a reform of the social security system, which will build on the work carried out in connection with the Toimi project. A parliamentary committee will be set up to prepare the reform based on research information. Preparations will be carried out horizontally on a broad basis, drawing on expertise from various sectors.

The committee will address questions related to basic social security, earnings-based benefits and social assistance. The committee will also examine the financing and connections between these forms of support. Attention will also be given to ways to better integrate services with benefits. The work must focus in particular on special groups that currently fall between the systems. The committee will not discuss old-age pensions. The committee’s work aims to achieve a long-term perspective in developing the structure and operation of social security. To this end, a roadmap extending over the next two parliamentary periods will be drafted, with milestones to which the present Government can react.

The reform aims at a clearer and more streamlined system, where people can balance work and social security in changing life situations. Social security must respond to people’s need for a meaningful life and sense of inclusion and help create opportunities for employment, entrepreneurship, active individual initiative, participation and lifelong learning in all situations. The aim is to make work pay and to ensure that people can clearly anticipate their take-home pay. Social security must guarantee people dependable security in different life stages and life situations without unnecessary breaks and administrative obstacles.

The committee will examine and prepare the necessary measures to harmonise legislation on basic social security benefits that are hierarchically equal. In the same connection, the reform will also examine benefits relating to studying, for example. Provisions on the basis of which earnings-based benefits are granted will be harmonised. The reform will ensure that the benefits and services covered by social security (employment, education and health services, rehabilitation, debt counselling and social work) are better integrated with flexible and timely links to the other forms of social security. Access to the right services must be available irrespective of benefits. The reform will support the balance between the rights and obligations of individuals in a way that is also compatible with general government finances and measures to improve employment. Discretionary benefits will be needed in addition to basic social security.

Social security must respond to the constitutional obligation of providing essential  income support and assistance. We will carry out the reform without jeopardising the level of basic social security and we aim to diminish the need for long-term social assistance. Digitalisation will help make social security simpler and easier to understand. Linguistic rights and accessibility will also be ensured.

General housing allowances will be developed so that they better respond to the specific needs of individual people, and the knock-on effects of the allowances on other benefits will be taken into account. As part of the basic social security, general housing allowances should make it possible for everyone to find reasonably good accommodation at a moderate price. We need to remodel the support in a way that brings better incentives for work. The committee will explore how general housing allowances should be revamped independent of other benefits. It is worth bearing in mind that assistance for housing is strongly linked to housing policy.

Objective 1

Protecting income security and reducing poverty among older people

Measures

We will use EUR 183 million to increase the smallest pensions by around EUR 50 a month in net terms. According to our assessment, the increase would be targeted at those whose pension is less than EUR 1,000 a month. The increase will be implemented through the national pension and guarantee pension systems.

We will start a tripartite review on how to improve the status of pensioners with the lowest earnings-based pensions within the employment pension system. The review will also examine ways to introduce a net increase of EUR 100 to pensions that are less than EUR 1,400 a month without increasing the level of pension insurance contributions.

The Government will prepare a merger of municipal and private sector pension systems based on the proposal put forward by the working group on separate pension systems.

The number of pensions available for artists and athletes will be increased.

The Government will examine the situation of people whose total pension is below the level of guarantee pensions.

The main objectives of employment pension policy are sustainable economic dependency ratio, sufficient level of pensions, sustainable financing, and just division of resources between generations. The Government will prepare amendments to the employee pension legislation on a tripartite basis.

Objective 2

Improving the position of families with children

The income security of single parents and families with many children.

Measures

The status of alternate parenting families will be enhanced with regard to general housing allowance and other forms of social security.

The Government will improve the income security of low-income families with children. It will monitor trends in the financial resources of families with children and take consistent action to reduce poverty among families with children throughout the government term. It will use child impact assessment in all decision-making.

The Government will increase the single-parent increment linked to child benefits so that families who live on social assistance will also benefit from the increase. Child benefits for the fourth and fifth child will be increased. We will also increase child maintenance allowances and the family provider increment linked to study grants.

Objective 3

Reducing inequalities

Measures

Reducing poverty and inequalities will be a central objective guiding all decision-making in the Government. We will increase basic social security. Study grants will be tied to the cost-of-living index in 2020, first partially and later fully. In every government budget session the Government will review the possibilities, within the spending limits, of increasing funding to reduce poverty and inequalities.

Coordinating earned income and social security

We will make it easier to coordinate income from paid work, self-employment and other sources within the social security framework, particularly with regard to unemployment benefits.

Adjusted unemployment benefits will be reformed so that people whose working hours are not monitored are not excluded from the system, and so that people with different monthly working rhythms are treated equally. The aim is to compensate financial losses caused by unemployment, as the purpose is not to safeguard an earnings level.

We will continue the development work on combined unemployment insurance in the context of reforming social security.

Different models for improving the social security and pension security of entrepreneurs and the self-employed will be reviewed.

We will continue to develop the time-at-work requirement, which is a condition for receiving daily unemployment allowance, with the objective of better acknowledging labour market changes and the opportunities provided by digitalisation.

There will be a feasibility study to review the possibilities of extending the general earnings-based unemployment security system to all unemployed jobseekers who meet the time-at-work requirement.

Clarifying the social security system

Since the level of basic social security is low and the benefit system is very complex, the role of social assistance has grown. The complexity of the benefit system often relates to different benefits and/or other forms of income being combined or to transitions between them. Basic social security must be developed without jeopardising its level. The restructuring must also ensure the protection of personal data.

The Government will clarify the system by implementing a comprehensive social assistance reform to guarantee sufficient last-resort financial assistance and timely services for people in need of social support.

We will examine the reasons for having to depend on social assistance, especially among young people, and find ways to address the issue.

The buffer system in social assistance will be clarified and obstacles to work will be removed.

Legislation will be amended to promote the use of digitalisation and artificial intelligence when applying, handling and making decisions on social security benefits.

We will harmonise terminology and payment periods (for example, conditions for the applications process, terms relating to income and families, payment dates and times including public holidays). Discussions on earnings-based benefits as a whole require tripartite cooperation. We will ensure consistency in the concepts used between the systems of earnings-based security and basic social security.

Clients will be provided a system that is easier to understand and possibilities to apply for several benefits using a single application while improving the system’s transparency.

The use of the National Incomes Register will be promoted in social security, particularly with regard to atypical employment relationships.

The information content of the National Incomes Register will be broadened, especially in view of the changing world of work (for example, more flexible payment of unemployment benefits). This requires a separate project to be financed through investments in the future.

The current unemployment benefit system includes people who are not capable of work. We will specify in more detail the conditions for qualifying for benefits to ensure that people receive the benefits they need. Attention will focus on sickness allowances, rehabilitation support and unemployment allowances. Consideration will also be given to the possibility of linking benefits to functional capacity instead of diagnoses.

We will address the situation in regard to people are suffering from illnesses due to poor indoor air quality to ensure that those among them who are incapable of working or unable to work in the workplace premises due to poor indoor air quality are not left without income security.

Problems relating to the housing allowance for students and the way cohabitation is interpreted will be addressed and solved.

Coordination of benefits and services will be improved as follows:

  • Improving the timeliness of services. Implementing the proper targeting of services and resources as part of an effective restructuring of the social security system.
  • Amending legislation and practices to improve cooperation between the Social Insurance Institution of Finland and local authorities so as to recognise the needs of social work and to provide customer guidance and personal services for those in the most vulnerable position.
  • Developing the inclusive and preventive dimensions of services related to social income transfers. We will draw on multi-actor work practices, outreach work and cooperation. We will overhaul management and collaborative structures. We will boost the use of preventive social assistance as a tool in systematic social work, and especially in child protection, by creating national criteria for granting the benefit.
  • Harnessing significantly the use of digitalisation in early support services and in supporting the effective caring of clients who use multiple services. Linguistic rights and accessibility will also be ensured.

Using trials and smaller experiments to restructure basic social security:

  • We will ensure the scientific sustainability of the trials.
  • We will pilot projects related to bureaucracy and information, for example
    (Government’s analysis, assessment and research activities)

Index adjustments will be implemented in line with the National Pension Index and the consumer price index (as of the beginning of 2020).

There will be a trial on basic income, drawing on the outcomes of the basic income experiment of the previous government term.