150,000 unemployed have no motivation to work in Finland
Shortage of manpower is still the main obstacle to the growth of Finnish small and medium-sized enterprises Mika MalirantaDirector of the Labor Institute for Economic Research (Laboren).
Aki KangasharjuAccording to the CEO of Etla’s Economic Research, the problem should be addressed by increasing the foreign workforce and removing barriers to employment, write Helsingin sanomat newspaper.
Etla has calculated that about 150,000 unemployed people in Finland are trapped in unemployment. The research institute defines an unemployment trap as a situation where taxes eat at least 75 percent of additional income on return to work. However, Kangasharju acknowledged that people behave differently and the threshold does not apply to all the unemployed.
“Some people think it is not pleasant to go to work if society takes half of the new earnings and others when the share is 90 per cent. We can never fully comprehend how many people actually quit their jobs for these reasons, he reminded Finance Finland at a press conference in Helsinki on Monday.
According to Etla’s analysis, traps have become a slightly smaller problem since 2015.
Kangasharju and Maliranta attended the seminar to discuss their ideas for maintaining the country’s attractiveness as an investment destination.
Maliranta mentioned Denmark and Sweden as examples of how well the Finnish economy could do, and reminded that the inactivity traps in these two countries are even higher than in Finland.
“If passivity traps are so important, one might wonder how soaring growth could be achieved in Denmark and Sweden if they removed these even worse inactivity traps,” he commented.
Kangasharju said the traps may not be as high here, but they have gotten more people than in Denmark and Sweden.
“There are especially many people in Finland in these traps, which may not be as high, but are traps nonetheless. Our welfare benefits are distributed so much to high-income people as well, ”he explained and referred to the situation where day care fees are becoming an obstacle to family-free work.
“The tax on participation in work is close to a hundred, and it’s not worth taking a job,” he said.
According to Kangasharju, if Finland wants to accelerate economic growth, it should follow in Sweden’s footsteps. Sweden has taken steps to reduce the tax burden on middle- and high-income earners.
“15 percent of Finns are in a situation where society has a negative appreciation of them. Our taxation is already so tight that relaxing taxation would increase our tax revenue, he argued, and reminded that taxation can be a barrier to career advancement and encourage people to move their earnings abroad.
Etla has estimated that as many as 900,000 people are already trapped in the country, which means that taxes would eat at least half of the increase in earnings.
Aleksi Teivainen – HT