Finland will reform its social security system
The “Social Security 2030” reform offers policy-makers a comprehensive overview of the reform needs in and different alternatives for the Finnish system of social security and basic security. The aim is to seek new kinds of solutions to social security of the future for the use of future governments.
The reform aims to define guidelines for an overhaul of the Finnish social security system in ways that will safeguard that everyone can trust the system to respond efficiently and fairly to changes in their life situation. It is essential that accepting work will always be more profitable than passing it by.
The tool used in the reform work will be a map of alternatives titled “Social Security 2030”, which is being prepared by the Toimi project of the Prime Minister’s Office. Top experts in the field and parliamentary decision-makers are involved in the work. All parliamentary parties contribute to the project that draws on a people-centred approach to find answers to the complex and horizontal issue of the future social security.
The first version of the map of alternatives was published in May 2018, and it will be developed further through open discussions, production of facts and sharing of ideas. The Toimi project will deliver the map of alternatives to the Government in February 2019.
The map of alternatives in a nutshell:
1 Family and work. Emphasis on the role of family and work in securing the basic means of subsistence. The aim is to simplify and clarify the ways the basic security system responds to different kinds of life situations. Another aim is to safeguard people the basic means of subsistence in case they lack the right to earnings-related or insurance-based benefits.
2 Work and skills. Encouraging people to work and develop their skills. A key issue is a comprehensive reform of the system of social security and services for people of working age. Work and better skills will reduce the risk of exclusion and unemployment in the transformation of work.
3 Participation and individuals’ own choices. An alternative that encourages to participation and gives individuals the freedom of choice. Everyone will be guaranteed a clear basic safety net that will give security in the transformation of the forms and meanings of work.
Read more about the map of alternatives (in Finnish)
The Toimi project will also produce other material on social security and basic security. The information will be presented in concise and visual ways to support decision-making and stimulate public debate.
Read more about the available materials (in Finnish)
History of our disconnected social security system
The Finnish social security system is the result of a number of social innovations. New elements have been added on top of existing ones, and in essentials all these different elements are still in their original forms. The result is a complex system of social security where there is little integration or coherence between elements.
The origins of the Finnish social security system are in charities, parish relief and the municipal poor relief system created in the latter half of the 19th century. Labour protection, state pension and child welfare were among the first steps on the ladder of Finnish social security during the 1930s depression. After the Second World War, the emphasis was on joint responsibility, fairness and social protection. The first steps were maternity care and child benefit and the care of disabled war veterans, and the modern social security system started to take shape with the introduction of employee pension and health insurance.
New services were introduced to the welfare state in the 1970s. There were increases in municipal social services and unemployment security and other income transfers, until the 1990s depression put a stop to them and a period of retrenchments began.
Why do we need to reform our social security now?
We have already witnessed changes in our working life. Work is becoming more fluctuating and less permanent, and new forms of working will be emerging at a growing pace in the future. The current social security system was designed more permanent life situations in mind. Accepting short-term work, for example, should always be more attractive than staying at home, but that is not always the case. The demographic change will also change the age dependency ratio, and the need for services will grow significantly in the near future. An efficient social security system should reflect all this.
A comprehensive reform is realistically possible now when technological progress opens new possibilities to use data and make the system more flexible. An example is the National Incomes Register that will be introduced gradually as of 2019. It will give up-to-date information on the wages and benefits paid out.
Read more about the National Incomes Register (in Finnish)
Social security in today’s Finland
Finland has a population of 5.5 million. Finland’s social protection expenditure amounted to EUR 69.1 billion in 2016, which is around 32% in relation to GDP and slightly above the EU average.
Social protection expenditure includes pensions, health insurance, unemployment security and public health and social services, among other expenditure. Some 1.5 million people receive pension in Finland. Nearly EUR 4 billion is paid out under the health insurance scheme, reimbursements for medicines accounting for about 40% of the sum. Every year, around 280,000 people receive sickness allowance and around 150,000 fathers and mothers receive parental allowance. The unemployment security expenditure is about EUR 5 billion a year.