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Report on alternative ways of organising social security published

Ministry of Social Affairs and Health
Publication date 10.1.2023 9.01
Press release
Kuvituskuva

Different ways of organising social security have been examined as part of the preparation of the social security reform. The report on alternative ways of organising social security, which was made by a working group consisting of researchers and experts, was published on Tuesday 10 January 2023.

The report assesses whether alternative ways of organising social security — primarily basic income, a social account and one basic security benefit together with a participation supplement — are suitable for the Finnish social security system. The report also provides an overview of the discussion on ways to organise social security and of the previous experiments and impact assessments and then compares the basic principles for different ways of organising social security with those of the current system.

“The report combines in an interesting way the theory and practice of social security, i.e. the choices of principle and the impacts that these choices would have. Both of these aspects should be taken into account during discussions,” says Research Manager Jussi Tervola of the Finnish Institute for Health and Welfare, who is also the chair of the working group.

Assessment focused on basic income, social account, and one basic security benefit and participation supplement

Ways of organising social security could be implemented using a number of different methods, and their impact would vary depending on how they are implemented. Because of this, the working group created example models for organising social security, and the report assesses the impacts of these models. In its impact assessment, the working group decided to focus on the following three models that are assessed in light of the current system:

  • basic income  
  • social account  
  • one basic security benefit and participation supplement.

According to the basic income model, a basic income equal to the amount of current basic security would be paid to all people aged 18–64 who are not on pension (EUR 742 per month). The basic income would replace the basic security benefits, the basic amount of the earnings-related benefits, the study grant for those aged 18 or over, and the child home care allowance. The report also assesses a lower-level basic income (EUR 256 per month).
  
Under the social account model, payments made to fund benefits would be directed to a personal account. The model examined by the working group would cover unemployment security and financial aid for students, but in other respects, the current system would remain unchanged. Unemployment benefits and student financial aid would reduce the account balance. The account surplus would be available for personal use when the account holder retires, for example. In the social account model, the levels of benefits and the conditions for receiving benefits would remain unchanged.
  
The working group has also examined the model for one basic security benefit and participation supplement. In this model outlined by the working group, the basic component of one basic security benefit would combine the basic security benefits for working-age people and the study grant. The child home care allowance and the informal care support would form the care component. People would receive a participation supplement on top of the basic component when they meet the participation criterion.

The report also assesses the impact on different groups of beneficiaries and other groups of people as well as on costs and the funding structure. The impacts of different ways of organising social security are also assessed in light of the key problems highlighted by the social security reform. These problems include the complexity of social security, the reconciliation of benefits and gainful employment, the role of last-resort financial assistance and the link to services.

All models provide solutions to some of these problems, but at the same time they may also exacerbate other problems. In addition, there is considerable uncertainty involved in anticipating the impact of major changes, and research data on behavioural impacts in particular is scarce. 

“Major changes in social security may affect people’s behaviour in a way that is difficult to predict. Experiments provide solutions to these only to a very limited extent,” says Tervola.

When it comes to the example models, a number of choices were made that would, in reality, require political discussion. The models are rough outlines, and they cannot be adopted as such.

Results to be used in the work of the Social Security Committee

The Social Security Committee is preparing an interim report, which will be published in March 2023. The interim report will set the guidelines for reforming social security and make proposals for reforms concerning the current system that the next Government can include in its programme. Examining alternative ways to organise social security is part of the Committee’s work during its first term. Over the course of last autumn, the Committee discussed the alternative of harmonising basic security benefits in particular.
 
“The study conducted by the working group provides a solid basis for a further study on harmonising and combining basic security benefits, although this would entail a more advanced model than what the Committee is proposing,” says Pasi Moisio, Chair of the Social Security Committee.

Inquiries

Jussi Tervola, Research Manager, chair of the working group, tel. +358 29 524 6134 [email protected]
Pasi Moisio, Research Professor, Chair of the Social Security Committee, tel. +358 29 524 7228, [email protected]
 

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