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Recent debates of Basic Income proposals shine a useful spotlight on the challenges that traditional forms of income support are increasingly facing, and highlight gaps in social provisions that largely depend on income or employment status. Reforms towards more universal income support would need to be introduced in stages, requiring a parallel debate on how to finance a more equal sharing of the benefits of economic growth.
Finland has taken the decision to test a basic income for unemployed job seekers from the beginning of 2017. The trial will run for two years. The main goal behind the experiment is to see if the mechanism of a basic income (unconditional financial support paid regularly to customers) will increase the incentive for recipients to take up and stay in employment.
Job displacement (involuntary job loss due to firm closure or downsizing) affects many workers over their lifetime. Displaced workers may face long periods of unemployment and, even when they find new jobs, tend to be paid less and have fewer benefits than in their prior jobs. Helping them get back into good jobs quickly should be a key goal of labour market policy. This report is part of a series of nine reports looking at how this challenge is being tackled in a number of OECD countries. It shows that Finland has a higher rate of job displacement than most OECD countries but that most of these workers find a new job again relatively quickly. However, those who do not face a considerable risk of long-term unemployment; with older displaced workers and those with a low level of education facing the highest risk. While labour market institutions in Finland serve most displaced jobseekers well, there is room to improve policies for those at risk of long-term unemployment or inactivity who would benefit from earlier identification of their problems and early, effective and well-targeted counselling and intervention.
Macro-simulations benchmarking employment in Finland to the Nordic average show that closing the large gaps in labour participation vis-à-vis the other Nordics across genders and age groups would boost employment significantly.
Policies to speed up tertiary graduation, improve work incentives and activation of the unemployed and postpone labour market exit are necessary to bring the employment rate closer to the level of other Nordics
Finland’s population is set to age rapidly in the coming decades. This will put pressure on public finances, while shrinking labour resources. Nonetheless, solutions exist to alleviate those pressures. Adjusting the pension age in line with the rise in life expectancy would reduce pension costs and increase older workers’ employment, provided it is accompanied by the removal of the pathways to early retirement.
Country Notes from OECD Economic Policy Reforms: Going for growth 2011 presenting OECD recommendations for structural reform priorities for individual countries.
At this roundtable, M. Gurría concluded that the topic of fairness and intergenerational solidarity is an essential part of our responsibility today and will be essential for the creation of a stronger, cleaner, fairer world economy tomorrow.
Maintaining high participation and employment in the face of the recent recession and a rapidly ageing population are major challenges for policy makers in Finland.
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This note is taken from Chapter 3 of Economic Policy Reforms: Going for Growth 2010.