Photographer: Ville Mannikko/Bloomberg

In Finland, the Magic Number Is Far Out of Reach

That's the 72 percent employment rate the government says it needs to keep the economy in balance

In Finland, self-deprecation is a political strategy. 

Having spent much of last year complaining about low productivity, the government is now telling Finns how dysfunctional their job market is.

It has “serious problems,” Finance Minister Petteri Orpo said last week. Finland's  unemployment rate is at 9 percent while its employment rate is the lowest in the Nordics. 

The government eventually managed to convince employers and unions to work longer hours and accept less in pay. But its ultimate objective — increasing the employment rate among 15 to 64 year-olds to 72 percent — still looks elusive.

At stake is a much admired social model that has turned Finland into one of the best countries in the world in which to be a mother or get an education.

“Without a high employment rate it is not possible to sustain our Nordic welfare society,” Orpo said.

The 72 percent target, which according to HYPO chief economist Juhana Brotherus implies an unemployment rate of just 5 percent, even below Finland’s structural rate, was first formulated by the previous government in 2011.

The deadline has since slipped, from 2015 to 2019. But even the new timeline seems overly ambitious.

The last time Finland’s rate climbed above 72 percent was back in 1990. And according to the government's latest forecasts, it will only rise to 69.1 percent by 2018.

The government is not about to give up just yet. The 2017 budget is expected to include measures designed to reduce the jobless rate and, consequently, its pressure on the state’s coffers. They may range from making it harder for the unemployed to turn down a job offer, to cutting the duration of earnings-related benefits.

Brotherus predicts that failure to hit 72 will likely lead to “belt tightening.” Past experience suggests strong opposition to yet more cuts to education and innovation. With 2019 an election year, the government would instead likely have to cut “a bit from everywhere,” the economist said.


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