Evaluation Report on the Adequacy of Basic Social Security 2019–2023
Abstract
According to the Act on the national pension index, the adequacy of basic social security must be assessed every four years. The Finnish Institute for Health and Welfare was commissioned by the Ministry of Social Affairs and Health to convene an assessment group in May 2022 to carry out the fourth assessment of the adequacy of Finland’s basic social security.
Basic social security refers to the minimum level benefits that a person receives when unemployed, ill or disabled, during old age and parental leave as well as in connection with the loss of a guardian. Minimum social security level refers to the minimum subsistence level in a situation where a person is unable to earn the income required for a decent life. Social assistance is the prime instrument used to guarantee minimum income in such situations.
The adequate level of social security is to a large extent a political value judgement. Adequacy can be
assessed from different perspectives and on the basis of different methods. As a rough indicator, we have primarily used reference budgets describing the consumption level required for a decent life. The basic social security of the unemployed, ill and persons on a parental leave is inadequate to cover the consumption of reference budgets but the pensioners’ basic social security is high enough to cover them. The social security of students is only enough to cover the reference budget expenses when supplemented with student loans.
In international comparisons, the level of basic and minimum social security in Finland is either very high or at least above average, depending on the family type and the life situation of the recipient. It should also be noted that basic social security benefits are not found in any other country as extensively as in Finland.
During the terms of the Governments of Prime Minister Antti Rinne and Sanna Marin (2019–2023), the level of basic social security has increased in relation to general price and earnings levels. The Government carried out the statutory index adjustments and raised the level of basic social security in 2020 (for children, the same increases were also introduced in 2023 on a temporary basis). Rising prices have also boosted housing allowances; rents have increased at a fairly moderate rate but the maximum rents used as a basis for housing allowances have been raised in accordance with general price trends, which has increased the rates of housing allowances.
A large proportion of basic social security recipients are also eligible for social assistance. In the case of
basic social security recipients receiving social assistance, a higher level of basic security does not mean higher overall income because when basic social security benefits are increased, social assistance is reduced by the same amount. At the same time, however, the level of social assistance for families with children and especially the social assistance for single parents has been raised during the current government term.
Low-income benefit recipients in particular have benefited from index increases linked to general price trends as price increases have mostly affected commodities that account for a smaller than average share of consumption among low-income individuals. Housing energy and transport fuels are the most important of these commodities.
The focus in the assessment is on the average situation of households receiving basic social security benefits, taking into account some variation arising from family type, residential area and life situation. The assumption is that the recipients live in apartments with reasonable rental levels. Thus, the analysis does not comprehensively describe the economic distress caused by the rising energy prices in different types of housing.
Authors
Fourth evaluation group on the adequacy of basic social security
Additional Information
- Peer-Reviewed: no.
- Open Access: yes.
- Cite as: Perusturvan riittävyyden IV arviointiryhmä. (2023). Perusturvan riittävyyden arviointiraportti 2019-2023. Terveyden ja hyvinvoinnin laitos. https://urn.fi/URN:ISBN:978-952-408-037-8
