An increasing number of households receiving basic social assistance have earned an income
Nearly one-in-ten households receiving basic social assistance have earned an income. This share has increased since 2017. Earning income is common, especially in households with two adults.
Due to the good employment situation, the number of recipients of social assistance will decrease. At the same time, the number of households that have been granted social assistance and also earn an income is increasing. In 2022, an average of 9 per cent of households receiving basic social assistance had earnings as part of their income, while in 2017 the share was 6 per cent.
In quantitative terms, this means that in 2017, an average of just under 9,000 households, and last year more than 11,000 households received both basic social assistance and earned income each month.
Based on statistics alone, it is not possible to conclude whether this is a question of an increasing number of people who have previously received basic social assistance also starting to receive earned income, or whether an increasing number of working people have begun to need basic social assistance. The fact that an increasing number of households receiving basic social assistance have earnings as part of their income may be due to both the improved employment situation and the increased cost of living.
The change between 2018 and 2019 is most likely due to the introduction of the Incomes Register. Thanks to the Incomes Register, previously unreported earnings or earnings reported at a later date are more easily accessible in real time to Kela when Kela makes decisions on social assistance.
The employment of recipients of basic social assistance is often considered economically unprofitable. In practice, being employed always increases the assistance recipient’s disposable income by a maximum of EUR 150, as any sum in excess of this reduces the amount of assistance paid in full. The incentive trap created by basic social assistance has been identified as one of the challenges in current social security.
Unemployment security and housing allowance are common among social assistance recipients – it is increasingly rare for other benefits to be received with social assistance
Unemployment benefit is a more common source of income for recipients of basic social assistance than earned income. About half of the households receiving basic social assistance receive unemployment benefits, although between 2021 and 2022 the share decreased to almost 45 per cent.
The share of households receiving basic social assistance and also receiving other primary benefits, such as sickness allowance, a pension or student financial aid, has been falling for a long time. The share of housing allowance recipients has remained more or less unchanged. More detailed information on the income sources of households receiving basic social assistance and the overlapping of different benefits can be found in the recent assessment report on the adequacy of basic social security for 2019–2023.
The third interesting group of recipients of basic social assistance consists of households that do not receive any primary benefits or earned income. In addition to basic social assistance, these households may only receive other tax-exempt support, such as housing allowance, child benefit or child maintenance allowance. Those in this group are often young people, and the reason for the lack of primary benefits may be, for example, stricter conditions for young people on unemployment security. Although the group’s share of households receiving basic social assistance has grown slightly, their number is still the same as in 2019, for example.
Earnings alongside social assistance is common, especially for two-adult families with children
Nearly one-in-four families with children and two adults who received basic social assistance in 2022 also had earnings. In previous years, the share has varied on either side of one-fifth.
In 2022, more than 15 per cent of households consisting of two adults and over 10 per cent of single-adult households with children also received earnings alongside basic social assistance. Similarly, among those living alone and other single-person households, the share of those receiving earnings among recipients of basic social assistance has grown slightly and was 6.5 per cent in 2022. Other single-person households include, for example, persons aged 18 or over living with flatmates, relatives or parents.
For families consisting of children and two adults, the higher share than for other household types is explained by the fact that these families simultaneously have two potential earners and the costs incurred by children.
Will the recipients of basic social assistance become differentiated?
As the above analysis shows, two different directions stand out when examining the income sources of households receiving basic social assistance.
A growing number of allowance recipients are in some way engaged in working life despite weak financial incentives. The best – or the worst scenario – is that they may also receive adjusted unemployment benefit and general housing allowance in addition to earned income and basic social assistance, but even that is not an obstacle to working. Although people who work generally need support for a shorter period of time, the need for support in families with children may be long-term even if one or both adults are working.
At the same time, the share of recipients of basic social assistance without primary benefits or earnings has grown and this number has remained level with previous years, especially among those living alone. Although social assistance recipients who also belong to this group usually only receive social assistance for a short time, the situation may also be prolonged for some of them.
The differentiation of income sources among recipients of basic social assistance can be considered a good indication that the role of basic social assistance is diverse in the current social security system. On the one hand, it seems to supplement income from work and other benefits, especially for low-income families with children. On the other hand, it is the main source of income for many young people and for those who are excluded from working life and possibly from society in general.
However, the largest group of recipients of basic social assistance is still those households whose unemployment security and general housing allowance are not sufficient to cover even reasonable expenses.
How the investigation was carried out
The statistical data used in the blog include information on the income taken into account in the monthly basic social assistance calculation for households receiving basic social assistance.
Earnings refer to wages, salaries, and corporate income. Unemployment security includes unemployment security paid by both Kela and unemployment funds. The housing allowance includes both general housing allowance and housing allowance for pensioners. Other primary benefits include pensions, student financial aid, sickness allowance, rehabilitation allowance, parental allowance and child home care allowance.
An average of the monthly number of recipients of each source of income has been calculated for the calendar year, as the monthly variation is large due to tax refunds, for example. The annual average number of recipients of each source of income is proportional to the annual average number of all households receiving support. For 2017, only data for April to December have been retrieved, because January to March was a transition period for basic social assistance from municipalities to Kela.
Author
Tuija Korpela
Researcher, Kela
tuija.korpela@kela.fi
Read more
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