The study also found that more than 136,000 people were trapped in unemployment last year, a situation where job search is not financially viable. Such situations were common, especially among recipients of earnings-related daily allowance.
The trap was defined as a situation where admission to a job offer increases net income by no more than 20 percent. If the limit is raised to 25 percent, there would be as many as 300,000 people in the unemployment trap, according to a Helsinki-based research institute.
“Recipients of earnings-related unemployment benefits have, on average, weaker financial incentives than recipients of Kela unemployment benefits.” said Päivi Puontiresearcher in Etla.
As the established definition of an unemployment trap is a participation tax rate of more than 80%, about 12% of recipients of earnings – related unemployment benefits and 9% of recipients of each basic allowance and labor market support were trapped in 2021.
The participation tax rate refers to the share of earned income that has been paid in taxes or lost due to incapacity for work due to the transition to employment. According to previous studies, the average tax rate in Finland is 69 percent.
For home care recipients, work incentives are better than unemployment benefits.
Etla also revealed that 72 percent of women and only 28 percent of men were trapped in unemployment. It added that people in such situations are often the best working age, 30-50 year olds, with secondary education and children under school age.
Families with children and families receiving both housing and subsistence benefits were most likely to be in a situation where accepting a job offer may not be economically viable.
The survey was conducted using the microsimulation model Sisu developed, maintained and distributed by Statistics Finland. The underlying registry-based survey data covers about 400,000 households.
Aleksi Teivainen – HT
Source: The Nordic Page