Social inequality 2021
The coronavirus pandemic increased the number of young adults receiving long-term social assistance

13.1.2022 13.38 | Published in English on 25.3.2022 at 14.17
Kuvituskuva artikkelliin. Kuvassa kolme nuorta miestä istuu joen rannassa ja katselevat vastarannalle.

The indicators of the social inequality basket reflect, for their part, economic inequalities and the situation of people in an economically weaker position. In the light of the indicators, the growth in income disparities and the share of low-income earners seems to have come to a halt in the past ten years. On the other hand, the differences are great compared to, for example, the years before the turn of the millennium. In 2019, the share of those at risk of poverty and social exclusion in the Finnish population was 16 per cent in total. This indicator also suggests that the development has remained fairly stable over the past ten years. As regards these indicators describing economic inequalities, the latest data are from 2019, which means that the possible impact of the coronavirus pandemic on the indicators cannot yet be examined. On the other hand, the number of people living on long-term social assistance increased slightly in 2020. The biggest change was seen in the number of young adults receiving long-term social assistance. In addition, the indicators of the social inequality basket also reflect the support Finland provides globally to people in a disadvantaged position. In this respect, the figures deteriorated slightly in 2020.

Small growth in the low-income rate, especially for families with children

Gini coefficient (disposable money income, incl. current transfers), low-income rate (disposable money income, excl. current transfers, 60% of the median income)

Income development of the lowest and highest income deciles (income shares,%)

Income differences can be measured with different types of indicators. The Gini coefficient, which measures relative income disparities and uses a range between 0 and 100, is the most commonly used scale. A Gini coefficient of zero is depictive of a society where everyone receives the exact same income. A Gini coefficient of 100 represents a society in which all income is concentrated on one person. Overall, income differences below 25 can be considered minor.

Another approach to measuring inequality in income distribution is to calculate the relative low-income, i.e., poverty rate, in which case the established practice involves determining the low income threshold as 60 per cent of the country’s median income. Everyone below this line will be considered a low-income earner.

Changes occurring at the opposite ends of the income distribution scale are measured by relation between the highest and lowest 10 per cent of earners or by how the real incomes have developed in each 10-per cent group of earners. The income shares of the highest and lowest 10 per cent used in the present document describe the income shares as a percentage of the income of the total population. The graph indicates the share of total income received by the highest and lowest 10 per cent annually.

Economic inequality is a theme interlinked with various aspects of sustainable development. One key factor from the perspective of sustainable development is that both privilege and disadvantage tend to accumulate: for example, economic deprivation, health hazards and lower life expectancy often affect the same people. Deprivation also has the tendency to be inherited, meaning it is passed on from one generation to the next.

Finland’s current situation

The most recent statistics are from 2019 and, on their basis, the Gini coefficient and low-income rate have remained almost unchanged from the previous year. In 2019, Finland’s Gini coefficient was 27.9 (disposable money income, incl. current transfers). In 2018, the figure was 28.1. In terms of the Gini coefficient, income disparities of less than 25 can be considered minor.

The latest statistics on low-income earners from 2019 indicates a low-income rate of 12.3 per cent in Finland. The figure increased by 0.5 percentage points from the previous year and by 0.6 percentage points for low-income families with children.

In 2019, the lowest 10 per cent received 3.8 per cent of all incomes in Finland and the top ten per cent received 23.5 per cent of all incomes. Compared to the previous year, the share of the lowest 10 per cent remained unchanged and that of the highest 10 per cent decreased by 0.3 percentage points.

When examining the five per cent of population with the highest income, in 2019, their gross income per consumption unit in Finland averaged EUR 133,498, compared to EUR 9,577 for the five per cent with the lowest income. In 2019, the gross income of the highest earning 1 per cent of population per consumption unit averaged EUR 266,351.

Finland’s recent development

According to Statistics Finland, at the end of the 1990s income differences grew fastest in Finland in a comparison with other OECD member countries. The economic upturn that began after the mid-1990s affected the income of the top ten per cent (especially that of the top 1 per cent). The share of the top ten per cent of total income has increased since 1995, while the share of the lowest ten per cent has decreased somewhat over the years.

The strong growth in income gaps halted after 2008. Subsequently, for example, the Gini coefficient and the development of income shares of the bottom ten per cent and top ten per cent have remained fairly stable. However, it should be noted that in 2019 the economic inequality figures still remained at a significantly higher level than in the early 1990s.

Other observations related to the indicator

Wealth inequality is also one of the key factors that is telling of economic inequality. Wealth differences in Finland increased at the end of the 1990s at the same time as other income differences also increased. The development of income inequalities has been quite stable since the early part of the new millennium, but in terms of wealth inequalities, the situation is slightly different: Wealth disparities have increased during the 2000s as well as after the 2008 economic crisis. According to the latest statistical data published by Statistics Finland, wealth inequalities also increased between 2016 and 2019, as the share of net assets owned by the wealthiest ten per cent increased (Source: Statistics Finland, Households' assets).

The number of young adults receiving long-term social assistance increased

Persons receiving long-term social assistance by age group. (Source: Finnish Institute for Health and Welfare)

Social assistance is a means-tested last-resort form of financial assistance that can be received by a person or a family whose income is insufficient for covering necessary daily expenses. The number of clients receiving social assistance indicates the development of unemployment, but also the failure or success of primary income transfer systems.

When comparing the Nordic countries, Finland has large shares of social assistance recipients compared to its population size, although the content of the assistance and the criteria for access to it vary between different countries. As regards sustainable development in general, it can be said that society is not on a sustainable basis if the number of people receiving social assistance is large.  

Finland’s current situation

The number of social assistance recipients increased as a result of the economic downturn that began in 2008. The transfer of responsibility for basic social assistance to Kela at the beginning of 2017 increased the number of assistance recipients by more than 40,000 between 2016 and 2018.

In 2020, the number people receiving long-term social assistance rose in age groups other than those aged 65 or over compared to the population of the same age. In 2019 and 2020, 2.3 per cent of the population received long-term social assistance. In 2020, 85,533 of all Finnish households received long-term social assistance. In 2019, the corresponding figure was 82,320, which means an increase of 3,213 in the number of households.

Finland’s recent development

As regards basic social assistance, the drop in the number of recipients in 2019 remained short-lived, as the coronavirus pandemic impaired many people’s financial situation. The number of recipients of basic social assistance increased in spring 2020, and a larger share of the population received assistance compared to spring 2019. The number of recipients was at its highest in June 2020, when 251,827 people received assistance in 169,431 households.

The number of recipients of basic social assistance is usually highest in the summer, as many students and recent graduates need assistance after their studies have been interrupted or have ended. As a result of the crisis caused by the coronavirus pandemic, more and more students were also left without summer jobs.

The need for basic social assistance concerns particularly young age groups. Even under normal circumstances, uncertainty related to labour market status, more stringent conditions for obtaining unemployment security for those under 25 years of age, and a lack of savings and assets result in young people being overrepresented among the recipients of social assistance. In addition, the restrictions imposed to control the coronavirus pandemic and the related lay-offs hit young people. This manifested itself as an increase in the need for basic social assistance, especially in young age groups.

Other observations related to the indicator

The number of basic social assistance recipients is in its entirety also linked to economic upward and downward periods and thus, for example, to employment. This is demonstrated, for example, by the development that has taken place after 2008. The numbers are quick to react to economic slumps, while reacting much slower to upswings. In general, the number of recipients of basic social assistance also reflects the low level of basic social security: When social assistance is a last-resort benefit, the level of other benefits received by those eligible for them is insufficient in relation to expenditure deemed necessary for living. For example, almost 40 per cent of the labour market subsidy recipients also receive basic social assistance. Similarly, recipients of minimum daily allowances are often also entitled to basic social assistance. Basic social assistance is often needed to cover housing expenses, which are high particularly in the Helsinki Metropolitan Area.

Risk of poverty or social exclusion remained fairly stable

Share of the population at risk of poverty and social exclusion in Finland

The AROPE (At Risk of Poverty or Social Exclusion) indicator describes the risk of poverty or social exclusion among the population. This refers to being a member of a low-income household, experiencing severe material deprivation or living in an underemployed household. The regional analysis of the indicator shows differences in the development of the indicator in different regions between 2008 and 2019. In this context, the regional analysis is limited to the statistically available comparisons between the Helsinki Metropolitan Area, university cities, other urban municipalities, semi-urban municipalities and rural municipalities.

Number of people at risk of poverty or social exclusion in different regions 

Finland’s current situation

In 2019, the share of those at risk of poverty or social exclusion in the Finnish population was 16 per cent. When examined by region, in 2019 the number of people at risk of poverty or social exclusion increased from the previous year in semi-urban and rural municipalities and to some extent also in Helsinki. For the rest of the Helsinki Metropolitan Area, the number of people at risk of poverty or social exclusion remained the same in 2019 as in the previous year. For other university cities and urban municipalities, the number of people at risk decreased slightly from the previous year.

Finland’s recent development

Since 2008, the development of the risk of poverty or social exclusion has been fairly stable throughout Finland, being at its lowest in 2016 (15.7%) and at its highest in 2010 (18.0%). Source: Statistics Finland, Persons at risk of poverty or social exclusion by age and sex.

The regional approach is strongly influenced by factors such as population development, which has been relatively high in regions like Helsinki during the period under review (2008–2019). It also includes migration from other regions.

Number of quota refugees and persons granted a positive asylum decision continued to decline

Number of quota refugees. (Source: Migri

Positive asylum decisions. (Source: Migri

In 2015, the number of refugees grew exponentially worldwide. The impacts of world conflicts were also visible in Finland, and the number of asylum seekers increased significantly. The numbers indicate an acute situation of refugees and the extensive scope of problems. The statistics on quota refugees arriving in Finland and those granted a positive decision on their asylum application indicate the extent to which Finland bears its share of international solidarity and responsibility. At the moment, the largest burden of responsibility is being carried by the neighbouring regions of the countries in crises: the majority of the world’s refugees are in developing countries.

Finland’s current situation

In 2020, 730 quota refugees were selected for Finland, of which a total of 661 arrived. In 2019, a total of 891 quota refugees arrived in Finland.

In 2020, 2,066 asylum seekers received a positive asylum decision. In 2019, 2,959 applicants were granted asylum in Finland.

Finland’s recent development

The number of quota refugees arriving in Finland grew in 2014 and dropped in 2018 closer to the level in 2011 and the situation before this. Quota refugees are persons who have been given refugee status by the UN Refugee Agency (UNHCR) and who have been granted a residence permit in the approved refugee quota in the State budget. In its quota policy, Finland particularly emphasises the resettlement of the most vulnerable groups. Such groups include families with children and women in a difficult situation (widows, single parents, people experiencing loneliness). About ten per cent of the annual quota is reserved for refugees resettled on an emergency or urgent basis.

The Parliament sets an annual refugee quota in the context of approving the Budget. According to the Government Programme, in 2020, at least 850 quota refugees will be admitted to Finland. This number will thereafter be assessed annually and set at 850–1,050, taking into account the number of asylum seekers: for example, in 2021, Finland will receive 1,050 quota refugees. The figure is lower than, for example, in Sweden where the quota for refugees is 5,000.

Other observations related to the indicator

The number of asylum seekers to arrive in Finland grew dramatically in 2015. Based on the annual statistics on the asylum decisions by the Finnish Immigration Service, the majority of the asylum applications received in 2015 were registered for 2016. Asylum was granted to 7,745 persons based on the applications registered for 2016. Asylum applications and favourable decisions from the same year are not directly comparable as an application registered for a specific year may still be pending, for example, the following year.

Conclusion

Indicators particularly focusing on economic inequalities and the risk of poverty or social exclusion were selected for the social inequality indicator basket. In addition to this, consideration was also given to how Finland bears responsibility for reducing global inequality. Inequality is also linked to the indicators in other sustainable development monitoring baskets, such as health, inclusion and social exclusion.

As part of updating this basket, the share of people at risk of poverty or social exclusion and the number of persons at risk at regional level were added to the indicators in this basket. On the other hand, the number of young adults satisfied with their lives was omitted, as new updated information was not yet available when the indicator data was compiled. In other respects, statistics and perspectives remained largely the same as in the previous year.