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ESPN Thematic Report on Minimum Income: Finland

Julkaistu 1.10.2015


The Finnish income transfer system consists of three different parts: income-related social insurance, flat-rate basic security benefits administered by the Social Insurance Institution Kela, and last-resort minimum income protection (social assistance) that at present is administered by 317 municipalities. Social assistance consists of three parts that have different criteria. The basic part is more or less automatically paid to those clients who fulfil the formal criteria. The additional part covers special additional costs, and preventive aid is paid after careful means testing. 

The problem in Finland is that in the longer run all the basic security benefits have lost their value in relation to the 60% poverty threshold. Poverty rates have sky-rocketed and the reduction impact has diminished since the early 1990s. However, when it comes to the development in the 2010s, the verdict is more positive: with the exception of study and child allowances, slight improvements have taken place – most notably so in basic unemployment benefits and basic pensions. Nevertheless, the improvements are so marginal that the additional part of social assistance must be 
paid out on top of the Kela-related basic benefits. Additionally, the value of basic benefits can be related to the minimum living costs determined by reference budget calculations for typical cases. In 2014, only the level of Guarantee Pensions (GPs) was at the reference budget line. The value of the full GP was 102% of the line, whereas the percentage for the other benefits hovered around 70%. When the general public was asked what the proper level of social assistance should be, the mean values given by respondents were about 30% higher than the actual level of assistance. Against this background, one could recommend that the Finnish government increase the level of basic security benefits; but given the current gloomy economic prospects and the deficits in the public budget, these improvements are not likely to take place.

To combat budget deficits, the Sipilä government has suggested cuts in benefits and the freezing of indexation, which would yield substantial savings in public spending. The freezing of the indexation of all basic benefits (except social assistance) would increase the gap between the poverty threshold and the level of Kela benefits. Would social assistance compensate for the inadequate level of other basic benefits? Gradually this trend would change the whole characteristic of the Finnish welfare system: there could be a gradual shift towards a more selective welfare state.

However, there may be other scenarios as well. The Finnish basic benefit system is scattered across many parallel and overlapping schemes. Consequently, many clients receive a number of benefits that aim at guaranteeing basic livelihood. When Kela begins to pay out social assistance (from the beginning of 2017) it may be possible to at least streamline the basic benefit systems. The government’s idea to start experiments (2017–2018) on basic income may offer a fruitful platform for that.

Lue koko julkaisu (


Olli Kangas, Laura Kalliomaa-Puha

Lisätietoja julkaisusta

  • Vertaisarvioitu: ei.
  • Avoin saatavuus: kyllä.
  • Koko viite: Kangas, O., & Kalliomaa-Puha, L. (2015). ESPN Thematic Report on Minimum Income Schemes: Finland. European Commission.

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