Social welfare expenditure was rather modest in Finland until the mid-seventies, but the development of pension schemes and improvements in health care and social welfare services brought Finland close to the West European average in this respect by 1990 [51].
The system has managed to make the well-being of people largely independent of family structures and prevailing market conditions. It has also been relatively successful in reducing income inequalities [52].
As in the other Scandinavian countries it is characteristic that social protection extends to all citizens as of right and everyone is entitled to the same basic amount, with those in paid employment receiving additional earnings-related benefits, and where only unemployment insurance is separate from the state-run integrated system and voluntary rather than compulsory [53].
Total social protection expenditure relative to GDP is considerably higher in Finland than the average of the EU of 12 Member States.
Division of social protection expenditure by function, 1993
| % total social expenditure | % GDP | |||
| Finland | Eur 12 | Finland | Eur 12 | |
| Old-age + survivors | 32.1 | 42.3 | 11.4 | 11.9 |
| Sickness | 21.0 | 23.3 | 7.4 | 6.5 |
| Invalidity, disability + occupational accidents and diseases | 15.2 | 10.4 | 5.4 | 2.4 |
| Unemployment | 9.4 | 6.9 | 3.3 | 1.9 |
| Placement, vocational guidance, resettlement | 4.0 | 1.6 | 1.4 | 0.3 |
| Housing | 1.1 | 1.9 | 0.4 | 0.5 |
| Family | 10.0 | 6.5 | 3.5 | 1.8 |
| Maternity | 2.4 | 0.9 | 0.8 | 0.3 |
| Other | 2.0 | 1.7 | 0.7 | 1.1 |
| Administration | 2.9 | 4.5 | 1.0 | 1.3 |
| TOTAL | 100.0 | 100.0 | 35.4 | 28.5 |
Source: Eurostat, ESSPROS database - In: Social Protection in Europe 1995, European Commission, COM(95)0457.
In Finland about 50% of financing of social security expenditure comes from public authorities, whereas the employer's contribution amounts to 38% and the insured person's to 11%:
Financing of social security expenditure
| Denmark | Finland | Iceland | Norway | Sweden | |
| 1981: | |||||
| Public authorities | 87.4 | 43.7 | 67.6 | 41.5 | 50.1 |
| Employers | 10.4 | 48.5 | 25.9 | 38.2 | 48.9 |
| The insured | 2.2 | 7.8 | 6.5 | 20.3 | 1.0 |
| 1992: | |||||
| Public authorities | 87.3 | 50.7 | 60.2 | 58.8 | 54.9 |
| Employers | 7.3 | 38.1 | 32.2 | 25.5 | 43.5 |
| The insured | 5.4 | 11.1 | 7.6 | 15.6 | 1.6 |
Source: Nososco, Social Security in the Nordic countries, 1995
Since the recession the trend has been to increase the contribution by the employers and the insured.
With the decrease in GDP and the increase in unemployment benefit, welfare expenditure rose dramatically during the recession of the early 1990s and became very costly. In 1994 a number of reforms were introduced. The indefinite duration for the basic unemployment allowance was dropped, and the rules governing entitlements to such benefits were tightened. These measures were intended to provide greater incentives for the unemployed to find jobs. In the area of pensions, the standard retirement age for civil servants was raised in 1993. A decision followed, in 1994, to increase the minimum age for early retirement for all categories of workers. Moreover, the grant system was changed in 1993, so as to encourage cost savings at the local level and allow a tighter control of welfare spending by the central government.
However, according to OECD, these reforms will not be sufficient, also because the ageing of the populations is expected to give a further boost to the expenditures. OECD therefore proposes additional spending restraint and better control of local welfare spending [54].
Below you will find a brief description of some of the most important schemes.
6.2. Pensions [55]
Statutory pensions comprise national pensions and the employment pension. Those resident in Finland who are 16 or over are insured under the National Pensions Act. Those who work in Finland are also insured under the Employee's Pensions Act or the Self-Employed Persons' Pensions Act (or similar act). Both schemes apply more or less the same eligibility criteria.
The purpose of the national pension is to guarantee an adequate minimum income for all pensioners. It comprises old-age pension, early old-age pension, early disability pension, full disability pension, unemployment pension and survivor's pension. If the pensioner has been resident in Finland for less than 40 years, the pension is proportionate to the period of time the insured has lived in Finland.
The maximum national pension is FIM 2532 per month. The sum goes down proportionally according to marital status and living costs of the area for those who receive an employment pension, so that people who receive an employment pension of more than FIM 5188 cannot receive the national pension.
The purpose of employment pension is to guarantee that the level of consumption attained by employees and the self-employed during their active working career is maintained. The employment pension is determined on the basis of the duration of employment or self-employment, and the earnings from work or the income from self-employment. There is no upper limit to the wage that constitutes the basis for the pension. The target, or maximum amount, of the pension represents 60% of the wage, and it is accrued over a 40-year-period. In the year 2002 the system will be fully operational. The employment pensions are compulsory. The scheme is run by private employment pension institutions. Until the end of 1992, employees' pensions were financed entirely on the basis of contributions made by employers. In 1993, employees started to contribute towards their pensions.
The benefits under the statutory employment pension scheme comprise old-age pension, early and deferred old-age pension, part-time pension, full disability pension, partial disability pension, early disability pension, unemployment pension and survivor's pension. Employees aged between 58 and 64 are entitled to a partial early retirement pension provided they continue to work part-time.
Pensions are taxable income. However, if the pensioner has no income other than the full national pension, he is exempt from taxation.
The following table compares the pensions benefits received in different Member States, as a percentage of previous earnings. Most of the benefits are also dependent to some extent on the length of contributions.
| A | B | D | DK | E | F | FIN | GR | I | IRL | L | NL | P | S | UK | |
| Min | 39 | 47 | (a) | 52 | 50 | 46 | 60 | 30 | 19 | 35 | 46 | 70 | 30 | 55 | 31 |
| Max | 83 | 73 | (a) | 60 | 100 | 88 | 60 | 80 | 89 | 42 | 78 | 70 | 80 | 55 | 44 |
N.B. All the figures are in per cent
(a) depending on length of contributions
Source: European Commission, Tableau de Bord, 1995
6.3. Health Care [56]
At the end of 1994 there were 455 municipalities in Finland. They provide social welfare and health services. Health care is funded primarily by the State and local authorities but the users of services also contribute. In 1993, the public sector accounted for 77% of health care funding, the users of services for 19% and others, i.e. relief funds, employers and private insurance, for 4%.
Primary health care in municipalities is handled by health centres set up either by one local authority individually or together with a neighbouring municipality. In 1994, there were 243 health centres in Finland's 455 municipalities. Health centre services were basically free of charge until 1993, when the payment system was revised. Local authorities can now charge either an annual sum or a certain fee per attendance for treatment by a doctor. There is also a daily charge for hospitalisation. Health centre services are free to young people less than 16 years old. Moreover, no charge is made for preventive health care.
Local authorities can either provide services themselves or purchase them from the private sector. The scope, content and organisation of services are not usually defined by law, so differences can be expected from one local authority to another.
There is, however, legislation prescribing the main basic services that all local authorities must provide. Recommendations for rectifying shortcomings in the provision of services are made by the basic security guarantee board, which functions in conjunction with the Ministry of Social Affairs and Health.
Cash sickness benefit is paid to compensate loss of income during illness.
6.4. Unemployment benefits [57]
Both an earning-related and a basic unemployment allowance exist. The basic unemployment allowance is paid, without means-testing, to unemployed persons aged 17-64 who have registered as unemployed jobseekers for a full-time job, are capable of and available for work and satisfy the employment condition, and for whom no work or training has been provided by the employment office. To be eligible for the earnings-related unemployment allowance a person has in addition to be a member of an unemployment fund. Persons in receipt of other benefits, like sickness, maternity, paternity or parental allowance are not entitled to the unemployment allowance. The benefit is taxable income and the maximum payment period is 500 days during four consecutive calender years.
People who have received unemployment allowance for the maximum period are subsequently entitled to a labour market support.
The basic allowance amounts to FIM 118 a day. Child supplements are also available. Membership of at least six months in an unemployment fund is required for entitlement to an earnings-related allowance, the maximum of which (including child supplements) may not exceed 90% of daily pay.
A person who left his/her job without a valid reason or was himself/herself the cause of the termination of the employment contract is not entitled to an allowance for eight weeks. A person who repeatedly refuses to make use of the measures offered by the employment office or who refuses to supply the information required by the Labour Exchange Act is not entitled to the allowance for six weeks.
If the unemployed jobseeker fulfilling the employment condition reaches the age of 55 before the 500-day entitlement period has elapsed, the right to the unemployment allowance is retained until he/she reaches the age of 60.
6.5. Family benefits [58]
6.5.1. Child allowances
Child allowances are paid for every child who is permanently resident in Finland and who has not reached the age of 17 irrespective of his or her nationality.
Child allowances:
Single parents are entitled to an increase of FIM 200 per child.
6.5.2. Maternity, paternity and parents' allowances
The maternity and parents' allowance during employment is equivalent to the daily allowance under sickness insurance. The minimum daily allowance is FIM 60.
The total period of entitlement to the maternity and parents' allowance is 263 weekdays. The share of the maternity leave is 105 weekdays. The expectant mother may begin the maternity leave at between 50-30 weekdays prior to the estimated date of birth.
The father is entitled to a paternity allowance for 6-12 weekdays at the child's birth and, in addition, for six weekdays at a point of time he himself chooses during the parental leave. Neither of these periods of leave reduces the entitlement to the parents' allowance.
Safe work shall be arranged for pregnant women doing dangerous work for the period of pregnancy. If that is not possible, the woman is entitled to take a special maternity leave for the period of pregnancy and to receive a special maternity allowance for the period.
6.5.3. Child day care and maternity grant
From the beginning of 1996 all children under school age have the right to municipal day care. Municipal day care is available as full-day care and part-time care either at a day care centre or in family day care. Day care services have been arranged also for those doing shift and night work. There were 192,000 day care places at the beginning of 1996 in Finland. Day care fees are monthly fees which can be collected for a maximum of eleven months during a year of activity. The fees are determined on the basis of the caring time, the service user's ability to pay, the size of the family and the number of children cared for.
To organise day care other than municipal day care the parents for day care of a child under school age receive a private care allowance payable in money cash. The allowance comprises, depending upon the age of the child, FIM 500-1200 and a supplementary allowance, depending on the family's size and income. One parent may stay at home to take care of the child and if the child is under three, he/she retains his/her employment. The parents can also take turns in caring for the child.
The family of each new-born child is entitled to a maternity grant. Most often families choose this benefit in the form of a "maternity pack" including clothes and requisites for baby care. If the family takes the grant in cash the amount is FIM 760.
European Parliament: October 1996