Social inequality 2020
The number of people receiving long-term social assistance decreased before the coronavirus pandemic

12.4.2021 10.13
The number of people receiving long-term social assistance decreased before the coronavirus pandemic

Inequality is a global problem. Growth of inequality particularly challenges socially sustainable development, while it also strongly affects other areas of sustainable development. Inequality is manifested in aspects such as income disparities, health, social exclusion, perceived wellbeing and life satisfaction, education, and confidence in the future and personal opportunities for influence. The factors behind inequality may be an outcome of long-term trends or caused by unexpected, sudden events. The different dimensions of inequality are also strongly interconnected and have an impact not only on people’s welfare, finances and employment but also on social peace.

Growth in income disparities seems to have come to a halt, but differences still considerably higher than in the 1990s

Figure: Gini coefficient, at risk of poverty rate, income development of the highest and lowest ten per cent. (Source: Statistics Finland, links in caption)

Income differences can be measured with different types of indicators. The most commonly used indicator is the Gini coefficient, which measures relative income disparities. The income available after taxes and current transfers are taken into account in calculating the coefficient.  A Gini coefficient of zero expresses a society where everyone receives the exact same income. A Gini coefficient of 100 represents a situation in which all income is concentrated on one person. Income disparities below 25 can be considered minor.

Another way of measuring inequality in income distribution is to calculate the 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. (Median is the average value of the population’s incomes organised in increasing order.) 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, for example, the relationship between the highest and lowest ten per cent of earners or the development of real income. The income shares of the highest and lowest 10% 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% annually.

Privilege and disadvantage tend to accumulate.  In particular, 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.

Current situation in Finland

The most recent statistics are from 2018 and show a slight increase in the Gini coefficient in recent years. In 2018, Finland’s Gini coefficient was 28 (disposable cash income, incl. sales profits).

The most recent statistic from 2018 indicates a low-income rate of 11.8% in Finland. The income share of the first ten per cent has remained stable at just under five per cent, while the income share of the top ten per cent has increased slightly in recent years. The at-risk-of-poverty rate decreased by 0.3 percentage points from the previous year.

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 led to an increase in the income of the top ten per cent (especially that of the top 1 per cent).

The major growth of income gaps halted after 2008. Subsequently, for example, the Gini coefficient and the development of the income shares of the bottom ten percent and top ten percent have remained fairly stable. However, it should be noted that economic inequality remains at a higher level than in the 1990s. Measured with the Gini coefficient, the other Nordic countries and the Netherlands and Austria are approximately at the same level as Finland.

The decline in low-income earners during the economic depression of the 1990s can be primarily explained by a decrease in the average income of the population, which also resulted in lowering the limit for being considered a low-income earner. As a result, some of those previously considered low-income earners were moved over the limit for low-income earners. Similar development was evident also as the result of the recession, which began in 2008. The low-income rate of households with children is quite consistent with the development of the low-income rate in general. .In 2018, the low-income rate in households with children was 9.1 per cent. Compared to the previous year, the rate decreased by 0.4 percentage points.

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. While the amount of disposable funds increased most for the bottom ten per cent in the period 1966–1990, the trend reversed in the period 1990–2017. During the latter period, the assets of the wealthiest ten per cent increased by 0.2 percentage points. Meanwhile, the income of the bottom ten per cent of earners dropped by 4.1 percentage points.

Moreover, during the recession from 2009 to 2016, the share of net assets increased for the one per cent wealthiest in terms of their net assets.

The number of people receiving long-term social assistance decreased, the pandemic will bring about changes

Figure: 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 basic 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 2019, the number of people receiving long-term social assistance decreased age groups other than those aged 65 or over. A total of 28 per cent of the recipients of social assistance received it for a long time, i.e. between 10 and 12 months.

A total of 8.2 per cent of the Finnish population and 9.5 per cent of all Finnish households received social assistance in 2019. Social assistance was paid to a total of 298,017 households and 452,991 persons.  A total of 408,393 persons, or 7.4 per cent of the population, received long-term basic social assistance in Finland in 2019.

Overall, in 2019, the number of households receiving social assistance decreased by 2.3 per cent and the number of persons by 2.7 per cent compared to 2018. Expenditure on social assistance decreased by 4.7 per cent.  

Finland’s recent development

The decrease in the number of clients receiving social assistance in 2019 is likely to be short-term, as the coronavirus pandemic has impaired many people’s financial situation. As a result of the coronavirus crisis, the number of recipients of basic social assistance increased in April 2020, and more people were receiving assistance in the spring months than in the summer months of 2019. 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.

The crisis has particularly struck the livelihoods of young people, especially young women. 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 the overrepresentation of young people among the recipients of social assistance The coronavirus crisis has brought these challenges related to young people's livelihoods to the forefront.

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.

Finnish young people much more satisfied with their lives compared to the European average

Figure: Satisfaction with life among young people. (Source: European Social Survey)

Life satisfaction is considered one of the best individual indicators of wellbeing. This is linked to sustainable development through aspects such as faith and trust in the future: life satisfaction and happiness reflect hope for future prospects and belief in the opportunities provided by society, especially for young people.

Finland’s current situation

The most recent results are from 2018, during which time 88.8 per cent of young adults were satisfied with their lives. According to statistics compiled by the European Social Survey, the share of Finnish young adults satisfied with their lives grew at the beginning of the 2000s. Since 2008, the development has been fairly stable.

Other observations related to the indicator

Looking at European statistics as a whole reveals that 76 per cent of the age group of young adults in Europe were satisfied with their lives in 2018. The level of satisfaction among Finnish young people was significantly higher than the European average. Only 67.3 per cent of Europeans over 25 years of age were satisfied with their lives, whereas in Finland, satisfaction among the older age group was even slightly higher than among the younger age group at 89 per cent.

Number of quota refugees increasing, number of asylum seekers rising before the pandemic

Figure: Number of quota refugees. (Source: Migri)

The indicator describes the number of quota refugees arriving in Finland and the number of asylum seekers granted a positive decision on their asylum application. This indicator contributes to describing Finland’s responsibility for global problems that reflect on migrants and the status of migrants. 

Finland’s current situation

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 following statistics also highlight 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.

Figure: Positive asylum decisions. (Source: Migri)

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. In 2019, a total of 891 quota refugees arrived in Finland. In comparison with other Nordic countries, Norway will receive over 3,100 quota refugees in 2020, and the Swedish quota has stabilised to 5,000 people.

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. In the period 2017–2019, the number of asylum applications has been lower, although some growth was again apparent last year. In 2019, 676,300 asylum seekers sought international protection from the current EU Member States (EU-27), which was 11.2% more than in 2018. The number of asylum applications increased for the first time compared to the previous year after 2015. In 2019, 2,959 applicants were granted asylum in Finland. Correspondingly, 19,000 applicants were granted asylum in Sweden in 2019.

Conclusion

Indicators particularly focusing on economic disparity were selected for the social inequality indicator basket. In addition to this, consideration has been also given to satisfaction with life, which is strongly linked to wellbeing and Finland’s responsibility in 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 number of persons receiving long-term social assistance was included in the indicators of this basket. In other respects, statistics and perspectives remained largely the same as in the previous year. 

Sources and further information:

Anna-Stiina Lundqvist, Social Insurance Institution of Finland