Trade unions: Employment measures are budget cuts

Trade unions: Employment measures are budget cuts

In fact, structural employment measures aimed at strengthening public finances are budget cuts and not alternatives to the cuts as presented, according to a report by two major Finnish trade unions and the social and health care umbrella organization SOSTE.

The Confederation of Finnish Trade Unions SAK, the Central Organization of Personnel STTK and SOSTE issued an opinion after examining the employment measures proposed by the Ministry of Finance.

"When talking about employment measures, it is important that the audience understands whether it is an abstract, vague reorganization or a cut. Of course, cuts can be a valid way to strengthen public finances, but it is good to be clear about what is at stake," SAK’s chief economist said Ilkka Kaukoranta.

In order to balance public finances and contain debt, the remedy is usually to raise taxes or reduce spending. When neither is preferred, politicians, officials and experts often present restructuring as an option.

Employment measures “would lead to cuts of € 1 billion”

In August 2020, the Ministry of Finance introduced employment measures that were estimated to create 60,000 jobs.

However, according to a report by SAK, STTK and SOSTE, the proposed employment measures would lead to cuts of more than € 1 billion.

The actual amount is estimated to be much higher, but as the size of all budget cuts cannot be estimated, they are not included in the amount.

According to calculations by the Ministry of Finance, each new employee strengthens public finances by EUR 23,500. These calculations mean that 60,000 extra workers would earn € 1.4 billion in revenue.

Jobs and budget cuts will thus bring a total of € 2.5 billion to public finances, and the cuts would account for at least 43% of the budget balance.

The report highlights employment measures that are rapidly improving public finances. These measures are mainly cuts in social security and unemployment benefits.

For example, investment in education and employment support is not popular because it increases public spending and the benefits of education in particular do not produce results in the short term.

Chief Economist of STTK Patrizio Lainà says that employment measures are greatly limited by the fact that they are not allowed to increase costs.

"Only the cutting mechanisms remain in the tool set. There are few indications of employment measures that will strengthen public finances without cuts," Lainà says.

Unemployed and low-paid people suffer the most from the cuts

Restructuring is not progressing as these are often politically passionate projects and different partners disagree on what needs to be done.

Of these measures, the removal of the “pension pipeline” is progressing as part of the 55-year-old employment plan. At present, the system (pension tube Unemployed workers close to retirement age can claim higher income-based unemployment benefits for a long time until they can claim a pension.

According to the loan, the loss of the measure is a small victim compared to the employee benefit.

"The employment benefit of these cuts is surprisingly good, employment is much improved compared to the cuts. This is a restructuring rather than many of these other reforms," Lainà says.

It is estimated that these spending cuts of almost € 70 million will create 9,000 new jobs.

As regards certain fiscal consolidation measures, such as the staggering of earnings-related unemployment insurance, the government is sharply divided and no formal proposal has been made.

Reductions in public expenditure related to employment measures mainly affect low incomes.

As a result, available jobs should not be accepted unless the situation of the unemployed deteriorates, according to the report.

Some of the measures proposed by the Ministry of Finance have not been of interest to the current government and have not come under public debate.

The largest savings, EUR 700 million, are estimated to result from the elimination of pension accumulation from unemployment insurance. There would be no pension accrued during unemployment, which is believed to encourage job search.

Rotation time (rotation free is in the cutting block because it has not been considered to promote employment. The ministry estimates that the abolition of financial support for adult education will increase employment figures, as the opportunity will mostly be taken advantage of by well-educated people who already have jobs. However, when they are in school, they are not part of the workforce.

Restricting unemployment benefits is intended to limit study in such a way that it does not take people out of the workforce. However, these measures can be put on the agenda of the next government.

Employment targets too optimistic

Calculations of how far the government is from meeting its employment targets are unclear. During the spring budget negotiations, the government announced that it had decided on measures that would reach more than 40,000 potential employees. However, the Ministry of Finance estimated the same measures at only 11,000 new jobs.

In last autumn’s economic talks, the government announced it had agreed on measures that would create 31,000 to 36,000 jobs.

An employment rate of 75% or 60,000 additional jobs was the government’s original goal of strengthening the sustainability of public finances. The revenue generated by the increase in employment was intended to cover a significant part of the permanent increases in expenditure, EUR 1.2 billion.

Covid changed the scenario by extending the schedule for another three decades, but still needs to create 80,000 new jobs.

According to Kaukoranta, these were initially unrealistic expectations. Job growth during the former prime minister Juha SipiläFinland’s (Cen) term, when Finland experienced an economic upturn, gave an overly optimistic picture of job creation. Kaukoranta believes that there will no longer be too much emphasis on employment measures in the next election period.

"If we want to make up for the sustainability gap, it would only be realistic to consider spending cuts and tax increases," he said.

Every government has a favorite program. During Jyrki Katainen(NCP) government term, the focus was on credit ratings, the last election focused on competitiveness and this year’s election mantra has focused on increasing employment, Kaukoranta says.

Source: The Nordic Page