Universal social security to stay

1.9.2014 11.45
News item N5-65031

"If national and EU social security legislation are at odds with one another, the latter takes precedent. This is why preserving Finnish social security demands an active approach to the preparation of EU legislation", says Ministerial Counsellor for legal affairs Marja-Terttu Mäkiranta.

Social security in Finland is universal, or residence-based, meaning that everyone living in the country is entitled to it.  In EU legislation, entitlement to social security is employment not residence based. This model is being applied in the context of cross-border movements.

"According to EU regulation 883/2004 on the coordination of social security systems, a worker coming from another country is covered by the Finnish social security system, even though he or she does not live in Finland. We have been used to the situation already for 20 years, but mentally the issue remains a bit difficult", explains Mäkiranta.

A specific example of the mismatch produced by different approaches to social security involves the payment of child allowances for the children living in the country of origin of workers coming to Finland. The arrangement does not comply with the residence-based model but it does comply with EU regulations. Though in overall terms the issue concerns small sums of money, it irks many people's sense of propriety. This is especially so in situations where people come to Finland to work for short spells.

The coordination of different systems is examined in a recent  report commissioned by the MSAH. Following consultations on the report this autumn, definite measures and their organisation will be agreed. The report gives a detailed analysis of the practical implications of applying EU rules on social security in a national context. It also takes a comparative approach by looking at the experiences and situations of other member states.

Terms of free movement

In principle, EU jurisdiction does not extend to the social security arrangements of member states. In practice, these principles set boundary conditions. As is pointed out in the report, the idea that social security is a national matter is no longer as unambiguous as it was in the past.

"EU regulations are structured to further the free movement of labour. Economic growth finances welfare, and the aim is to promote this by ensuring social security for labour moving from one country to another in the same manner as for our own working residents. In addition to EU nationals, the right to equal treatment and social security is now guaranteed to third country national coming to work in the EU area," says Mäkiranta.

The development poses a challenge to member state legislators, who are tasked with applying EU requirements to their own regulations. The situation has also prompted concerns about welfare tourism.

"There's been discussion about this in other parts of Europe already for some years. There are no indications of this sort of misuse in Finland, but of course we too have to be alert to it."

No drastic changes

In terms of impact, current issues in the EU to do with coordinating social security systems concern achieving a uniform interpretation of residence, revising the rules of unemployment benefits and long-term care , and developing legislation to help in preventing abuses of social security provisions.

"At EU level, we are also discussing the social security regulation and the directive on free movement especially concerning those not belonging to the workforce as well as the payment of family allowances. The topics are of a very fundamental nature, which is why it is important to participate, even though there is not a Commission proposal on these matters."

The report dealing with residence-based social security and EU legislation does not propose a radical overhaul of the Finnish system. Though there is no need to dispense with the universality principle, there are nevertheless many challenges in the coordination of the different approaches to social security. EU legislation should therefore be taken into account in the preparation of domestic legislation. Benefits should also be considered on a case-by-case basis, and thought should be given to refining their eligibility criteria.

"Other Nordic countries also have residence-based social security social security as us, and they have to consider the same problems. In Sweden there is already a greater differentiation made between residence-based and employment-based rights than we have."

Benefits and funding balance

One of the proposals of the report is for starting to prepare models that take account of the EU regulation, but maintain a balance between financing and benefits in the future. This would not mean there would be efforts to restrict the movement of labour, which is considered an advantage for Finland. The effects on the economy would depend largely on employment among immigrants, which is why supporting it is regarded as crucial.

"Employment will also increase the legitimacy of the system, as the people who will be covered by benefits will also participate in their funding. Linked to this is the recommendation to find alternatives to situations where employment is short-term or when the linkage to Finland is even more slim", says Mäkiranta. 

A clear problem with cross-border movement, she points out, is the lack of relevant information. "Decision-making requires more precise international statistics, exchanges of information and cooperation between the authorities, both within states and between them."

 Paula Mannonen & Mark Waller