Adequacy of basic social security in Finland 2011–2015

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Title: Adequacy of basic social security in Finland 2011–2015
Author: The second expert group for evaluation of the adequacy of basic social security
Publisher: Kela
Date: 2015
Language: eng
Number of pages: 143
Belongs to series: Working papers ; 80
ISSN: 2323-9239
Abstract: In accordance with the act on the national pension index, the Ministry of Social Affairs and Health is to commission an evaluation of the adequacy of basic social security every four years. An independent expert group is to be appointed for the task and to carry out the assessment autonomously. In April 2014, commissioned by the Ministry of Social Affairs and Health, the National Institute for Health and Welfare convened the second expert group for evaluation of the adequacy of basic social security, and to conduct the second evaluation of its kind. The second expert group decided to conduct the evaluation by applying the same basic solutions as the first evaluation group did but developed and intensified the evaluation in several aspects. The second evaluation examines the development of the adequacy of basic social security and the factors affecting it from 2011 to 2015. The model family calculations applied in the evaluation have been generated with the new SISU microsimulation model of Statistics Finland. As a rule, the disposable income of households depending on basic benefits (or on low wages) increased between 2011 and 2015, in relation to average wage-earners and in real terms, both before and after dwelling costs. However, during the same period, the real wages of an average-earning household remained essentially at the same level. Persons living alone in rental dwellings and receiving the basic benefits are calculatedly entitled to means-tested basic social assistance. Their income level is determined according to the level of basic means-tested social assistance, and amounts to 43 per cent of the income level of average earners living alone. As the level of guarantee pension is higher than the other benefits, the estimated entitlement to means-tested social assistance is not realised. The income level of single-dweller guarantee pension recipients is 48 per cent of the income level of average earners. In Finland, the income level guaranteed by basic social security is in line with the average level in Western Europe, both before and after housing costs. With the exception of pensioners, the income level of persons relying on basic social security is not adequate to cover reasonable minimum costs determined in reference budgets. In 2014, the income level of unemployed persons, students or sickness allowance recipients living alone in rental housing was enough to cover 71 per cent of reasonable minimum costs. The respective figure for guarantee pension recipients was 102 per cent. The income level of persons on basic social security has increased since 2011 compared with the reference budgets of reasonable minimum costs. Their income level proves to be inadequate when compared with the level deemed adequate by the general public. It amounted to 66 per cent of the monetary sum deemed adequate. The income level of persons on guarantee pension amounted to 85 per cent of the level that the Finnish general public regarded adequate for living. The total number of people living in households completely dependent on basic social security—basic benefits, housing allowances and means-tested social assistance—totalled 231,000 or 4.3 per cent of the Finnish population in 2013. The number has increased since 2011. The average duration of total dependence on basic security is four years on average. A total of 71 per cent of households on basic social security benefits are at risk of poverty (the respective percentage for the total population is 13), and 54 per cent report their income to be inadequate (respectively, 25 per cent of the total population). When monitoring the benefits administrated by the Finnish Social Insurance Institution (Kela), the majority, or 64 per cent, of basic benefit recipients are women. Meanwhile, 61 per cent of general housing allowance recipients living alone are men. Further, of all recipients of means-tested social assistance 53 per cent are men. Reforms in benefit and tax legislation during 2011–2015 have decreased the Gini coefficient used to measure the income gap by approximately 0.8 percentage points, and the relative poverty risk by approximately 1.4 percentage points. Due to legislative amendments, the share of unemployed persons in unemployment traps has increased. Furthermore, the participation tax rate has increased, both regarding the transition from unemployment to full-time work and from part-time to full-time work.
Description: Originally published as Perusturvan riittävyyden arviointiraportti 2011–2015. Available at
Subject: social security
basic social security
minimum subsistence
income security
social insurance

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