Assessment of combined impacts of social security changes now ready
The two memorandums published on 23 September 2024 assess the combined impacts of the changes to income security that the Government is preparing or implementing for the years 2024–2025.
The memorandums also assess the changes concerning the financial position of households and the changes to income security and health and social services in relation to fundamental and human rights obligations. The memorandums were prepared to support parliamentary decision-making.
Combined impacts of the changes taking effect in 2025 on income differences and low incomes to be minor
The memorandum assessing how the changes to income security will affect the financial position of households is mainly based on calculations made by using the SISU microsimulation model. The memorandum describes how the income security changes are targeted at groups formed, for example, on the basis of income level, family type, gender or age. The assessment also takes into account the impact of the proposed changes to income taxation and, in a separate section, the impact of certain changes to health expenditure. The estimates are static, meaning that they do not take into account, for example, employment generating impacts.
The memorandum examines the impacts of the changes that have taken effect in 2024 and the changes proposed for 2025 to unemployment security, general housing allowance, child benefit and income taxation, among other things. In addition to the years 2024 and 2025, the combined impacts are presented separately for 2025.
The impacts of the changes in 2025 will be smaller than those of the changes in 2024, and they will slightly reduce income differences when measured with the Gini coefficient.
When assessing the combined impacts of the changes in 2024–2025, they will increase the relative low-income rate and income differences of the population. These changes are largely explained by the changes made to social security for the year 2024.
Around half of the total population, about 44 per cent, live in households where the changes in 2024–2025 will raise their disposable income by at least 1 per cent. A slightly more than one third of the population, about 38 per cent, live in households where the disposable income will not change in practice. Around 7 per cent of the population will experience considerable (change of at least 5 per cent) losses of income, and these losses will focus mainly on those in the three lowest income deciles. Such changes of income do not describe the development of real household income, which is affected by many other factors.
Of all family types, losses of income will affect most severely single-person households and single-parent households. A reduction in disposable income will be most common among those aged 18–24. The rise in the government guarantee for a student loan is not included in people’s disposable income.
In addition to the changes to income security and income taxation, household incomes will be affected by changes affecting health expenditure. Changes to client fees in public healthcare will increase the health costs of individual persons the most. However, the increases that have already been made in private healthcare reimbursements reduce the amount of health costs incurred by people. In proportion to income, health expenditure will increase the most in the three lowest income deciles. However, even in these income deciles, the impact on income is fairly moderate on average, compared to the impact of the changes to social security.
The estimates do not take into account that people with low incomes may receive social assistance for client fees or that wellbeing services counties may reduce fees or waive them altogether.
- Combined impacts of the social security changes in 2024–2025 on the financial position of households (Assessment memorandum, in Finnish)
- Combined effects of social security changes on households' financial position (Excel table, in Finnish)
Aiming to strengthen general government finances and employment rate
The social security changes presented above are based on the Government’s objectives to strengthen general government finances and the employment rate. The Government’s overall objective is to increase employment by 100,000 people. The Government will monitor the achievement of the employment targets based on Ministry of Finance evaluations throughout the parliamentary term.
Based on an evaluation made by the Ministry of Finance in April 2024, the measures taking effect in 2024 are estimated to increase medium-term structural employment by about 74,000 people. The newly published memorandum does not assess how the changes will affect general government finances or employment.
- Assessment of combined impacts of social security changes completed (Press release 9 October 2023, in Finnish)
- Monitoring of employment targets (Ministry of Finance, in Finnish)
Assessment of fundamental and human rights focuses on vulnerable groups
The assessment memorandum concerning fundamental and human rights examines the changes from the perspective of how they are targeted at different groups of people. It also assesses the combined impacts of the changes from the perspective of fundamental and human rights.
The cross-cutting theme was found to be that the changes have the greatest impact on those who are already vulnerable, i.e. people who are on low incomes and use public services frequently. Of all working-age people, the following people are considered to belong to vulnerable groups as described above: young adults, people with impaired capacity to work and unemployed people with difficulty finding employment. However, the memorandum also found that social assistance compensates for the impacts of the changes when it comes to those with the lowest incomes. In the long term, effects can be balanced to some extent if more working-age people access employment.
The changes concerning the maximum waiting times for access to care, centralisation of urgent and emergency care services and client fees may impair the availability of services. The changes will have a particular effect on low-income service users, such as people with disabilities, older people and families with children. However, the measures aim to ensure the availability of services in the long term.
As a rule, the weak state of general government finances constitutes an acceptable reason for amending the social security system. The Constitutional Law Committee has drawn attention to the fact that fundamental rights do not aim at safeguarding the level of certain benefits. It has also stated that social security is tied to the economic resources of society and thus it is justified to take account of the state of general government finances and the national economy when determining the level of benefits. In this way, attention is paid not only to the recipient but also to the resources of society when assessing the level of fundamental rights.
The Constitutional Law Committee has paid attention to the fact that when the impacts affect the same people, the combined impacts should also be examined in respect of the proposals’ fundamental and human rights impacts.
Inquiries:
Anna Cantell-Forsbom, Director General, Department for Clients and Services in Healthcare and Social Welfare
Liisa Siika-aho, Director General, Department for Insurance and Social Security, tel. +358 29 516 3085
Anna Cantell-Forsbom, Director General, Department for Clients and Services in Healthcare and Social Welfare, tel. +358 29 516 3351
Annakaisa Iivari, Director General, Department for Communities and Functional Capacity, tel. +358 295163371