This Survey is published on the responsibility of the Economic and Development Review Committee of the OECD, which is charged with the examination of the economic situation of member countries.The economic situation and policies of Finland were reviewed by the Committee on 19 October 2020. The draft report was then revised in the light of the discussions and given final approval as the agreed report of the whole Committee on 25 November 2020.The Secretariat’s draft report was prepared for the Committee by David Carey and Naomitsu Yashiro, with contributions from Hyunjeong Hwang, under the supervision of Vincent Koen. Statistical research assistance was provided by Hyunjeong Hwang and Natia Mosiashvili and editorial assistance by Michelle Ortiz and Sisse Nielsen. The previous Survey of Finland was issued in February 2018.Information about the latest as well as previous Surveys and more information about how Surveys are prepared is available at http://www.oecd.org/eco/surveys.

The COVID-19 pandemic plunged Finland into a deep recession. The government provided substantial financial support to protect jobs and help households and businesses get through the crisis. However, 25% of temporarily laid-off workers were not eligible for earnings-related unemployment benefits.

The COVID-19 pandemic has plunged Finland into its deepest recession since the early 1990s. Distancing (whether voluntary or obligatory), to limit the spread of the virus, drastically reduced supply, primarily in service sectors, many of which have frequent social interactions. Exports also fell sharply as Finland’s trading partners cut demand for its exports. The economic and social impact of this contraction has been substantial as services account for a high proportion of value added and tend to be labour intensive (Box 1.1). The number of people temporarily or permanently laid off amounted to 15% of the population aged 15-74 by mid-August and job opportunities for people entering the labour market, notably the young, and for the unemployed dried up. The ensuing labour market crisis has hit low-income households harder than high-income households, most of which switched to teleworking, had more secure employment contracts and were entitled to unemployment insurance benefits in the event of a layoff. Women also fared less well on average than men did (Helsinki Graduate School of Economics, 2020[1]).

In the context of the COVID-19 pandemic and resulting economic contraction and government debt build-up, the government is formulating reforms to raise employment by 80 thousand workers by 2029. Finland’s employment rate has been lagging behind the Scandinavian Nordics, with most of the gap attributable to older workers, who have more favourable access to early retirement schemes than their Scandinavian counterparts. To restrict their use, extended unemployment benefit, which is paid to unemployed persons aged 61 or more after normal unemployment benefit expires until they retire or reach 65, should be phased out and non-medical conditions should no longer be taken into account for disability benefit applications of persons aged 60 or more. Activity rates for mothers of young children are also lower in Finland than in the Scandinavian Nordics mainly owing to Finland’s generous homecare allowance. It should be reduced and access to convenient early childhood education and care services expanded to improve mothers’ work incentives. By increasing mothers’ work experience at critical points in their careers, such a reform would also help to narrow Finland’s large gender wage gap. As part of its 2021 budget, the government is setting out labour market reforms to increase employment by 31 to 36 thousand workers. Such reforms should focus on promoting employment of older workers.