Information package: unemployment benefits
Kela is responsible for the securing of subsistence for unemployed persons through basic unemployment allowance and labour market subsidy. The following is a brief overview of the current state of Kela’s unemployment benefits and of recent developments. At the end, you will find links to more material on this topic from Kela, including statistics and studies on unemployment benefits.
The number of recipients of unemployment benefits has decreased and is now below the level preceding COVID-19
The COVID-19 pandemic rapidly increased the need for unemployment benefits in spring 2020. In 2020, a total of 412,000 persons received unemployment benefits from Kela, and 44,000 of them received labour market subsidy for self-employed persons paid to them on exceptional grounds. Including the labour market subsidy for self-employed persons, the number of recipients of unemployment benefits from Kela increased by 24 per cent from 2019 to 2020.
The number of recipients of unemployment benefits from Kela decreased from spring 2021 to the end of 2021, after which the decrease on a monthly basis has no longer been as even. In 2021, unemployment benefits were paid to a total of about 356,000 persons, and 32,000 of them received labour market subsidy for self-employed persons. From 2020 to 2021 the number of recipients of unemployment benefits decreased by 14 per cent, that is, to the same level as before COVID-19.
From 2021 to 2022 the number of recipients of unemployment benefits from Kela decreased by a further 11 per cent. In 2022, a total of about 315,000 persons received unemployment benefits. The entitlement to labour market subsidy for self-employed persons ended in February 2022. The labour market subsidy for self-employed persons was paid on exceptional grounds during the COVID-19 pandemic.
Kela’s annual expenditure on unemployment benefits comes to about EUR 2 billion
In 2022, Kela granted 1,844 million euros in unemployment benefits. The amount decreased slightly from the preceding year. In 2021, Kela granted 2,308 million euros in unemployment benefits (at 2022 prices).
The number of unemployed persons and the expenditure on unemployment benefits increased in the early 2010s. The expenditure on earnings-related unemployment benefits started decreasing in 2016, but the expenditure on basic unemployment benefits not until a year later, in 2017. The expenditure on earnings-related unemployment benefits was affected by positive developments in the economy and in employment rates, which brought down unemployment rates. The effect could be seen in basic unemployment benefits with a delay.
In 2018, a significant change occurred in the expenditure on unemployment benefits: For the first time, Kela paid more in basic unemployment benefits than the unemployment funds paid in earnings-related unemployment benefits. In that year, the expenditure on basic unemployment benefits was about 2% higher than the expenditure on earnings-related unemployment benefits. In 2010 more than twice the amount was paid out in earnings-related unemployment benefits than in basic unemployment benefits.
Expenditure on unemployment benefits decreased in 2018 and 2019, until unemployment rates starting rising rapidly due to COVID-19 in spring 2020. In 2020 and 2021, the expenditure on earnings-related unemployment benefits was again higher than the expenditure on basic unemployment benefits. However, the labour market recovered quickly from the COVID-19 pandemic. In 2022, the expenditure on basic unemployment benefits and on earnings-related unemployment benefits were on the same level.
Services used by the unemployed are directed differently at different socioeconomic groups - employment most likely for persons who participate in labour market training
There are many types of services available to the unemployed to promote employment. According to a study, outpatient healthcare services (47%), services related to mental health and substance abuse (14%) as well as labour market training (11%) were the most frequently used services by unemployed persons in the first six months of the unemployment period in Oulu in 2016. A total of 38% of the target group had not used any services.
In a two-year follow-up period, the highest number of employed persons was to be found for those who had participated in labour market training or who had used none of the services included in the study.
Previously there has been only little research data available on the use of services as a whole. The register study looked at the use of social, health and employment services of persons who had become unemployed in Oulu in 2016 and been unemployed for at least six months by combining data from several different sources. How well these unemployed persons had later become established in the labour market was also studied during a two-year follow-up period.
Unemployment benefits secure subsistence for most households
By stress-testing the social security system we investigated whether the social security system protects wage-earner households from poverty in case of unemployment. For most households, the social security system secures the ability to pay housing expenses and necessary consumption, and the household is not at risk of poverty in case of unemployment.
Of all wage-earner households, 11% are at risk of poverty if the person in the household who earns the most becomes unemployed. The risk of poverty is different for different types of households. According to the measure of poverty, about 24% of those living alone and 10% of single parents would not be able to pay for necessary expenses in case of unemployment.
The risk of poverty was measured with a measure of minimum budget, which looked at whether the household’s incomes are sufficient to pay for necessary expenses.
Obligation to seek education a precondition for unemployment benefits to young persons
Young persons under 25 years of age who do not have an education that provides vocational skills are obligated to seek education in order to be eligible for unemployment benefits in case of unemployment. As education that provides vocational skills are considered in practice vocational qualifications and higher education degrees. However, young persons can get unemployment benefits during participation in employment promotion services.
According to a register study covering the years 2014-2019, young persons without an education received unemployment benefits more seldom than young persons with an education up to the age of 24 years. The obligation to seek education ends at the age of 25, at which age the receipt of unemployment benefits becomes significantly more frequent.
Participation in employment promotion services is clearly more frequent among young persons without an education than among young persons with an education. Persons aged 19-22 who do not have an education are the most frequent participants in work or training try-outs.
The lack of unemployment benefits is compensated for through basic social assistance. Receipt of basic social assistance is clearly more frequent among young persons without an education.
The activity requirement reduced the amount of the unemployment benefit for some people
The activity requirement implemented in 2018-2019 resulted in smaller unemployment benefits for those unemployed persons who did not meet the requirement.
According to Kela’s registers, 40% of the recipients of labour market subsidy whose first reference period started in 2018 met the activity requirement and 36% did not meet the requirement. Thus 36% received a reduced labour market subsidy in the following reference period.
27% of the recipients of basic unemployment allowance whose first reference period started in 2018 met the activity requirement and 30% did not meet the requirement. Men and older unemployed persons were most likely to see a decreased benefit.
Kela pays basic unemployment benefits to unemployed persons
Unemployed persons are in Finland eligible for financial assistance in the form of unemployment benefits. Unemployment funds pay out earnings-related benefits to fund members, while Kela provides basic unemployment allowances and labour market subsidies to other unemployed persons. Unemployment benefits also include a commuting and relocation allowance and a job alternation compensation. The unemployment benefits also include a child increase to the guardians of under 18-year-old children and a supplementary amount paid during participation in employment promotion services.
The unemployment benefit can also be adjusted when paid concurrently with part-time or incidental work.
Labour market subsidy is paid to unemployed persons who do not have a sufficiently extensive work history or who have received earnings-related unemployment allowance for the maximum period of time.