2. The labour market and active labour market policies in Finland
This chapter sets out some of the key trends in the labour market in Finland and reviews some of the features of the system of provision of active labour market policies (ALMP). This is important context for how the training provided to jobseekers helps to connect them with jobs. The chapter documents the responsibilities of the key institutional stakeholders in the ALMP system and how they interact to provide services for jobseekers. Upcoming reforms to the ALMP framework of support for jobseekers are also discussed.
The labour market in Finland has higher employment and labour market participation than other OECD countries but suffers from higher unemployment. Compared to its Nordic neighbours, improvements could also be made to further increase employment and reduce unemployment and inactivity. Finland provides a generous mix of active labour market policy, but outreach from its public employment service could be enhanced to connect more people with good jobs. A mix of stakeholders implement active labour market policies (ALMPs) and a forthcoming transfer of power to municipal bodies is designed to align incentives and improve outcomes. This sits alongside a “Nordic” reform to activation policy that will increase contact between the public employment service (PES) and jobseekers, with an increasing emphasis on job search.
The next section presents the main labour market trends and identifies the challenges that Finland continues to face. The following section provides an overview of the system of ALMPs and the final section discusses the ongoing and planned reforms in the areas of ALMPs and PES.
This section reviews some of the key features of the labour market in Finland, setting them in context of other OECD countries. It covers key labour market indicators such as the employment, participation and unemployment rates, before looking further into whether different groups of individuals are affected differently by these broader trends. It goes on to review ALMP spending and its composition in Finland and how stakeholders work together to deliver these services and programmes, before briefly summarising two key current reforms to the system of ALMP delivery in Finland that will significantly alter this delivery.
2.2.1. Relatively high levels of unemployment characterised the Finnish labour market over the past decade
Over the last decade, Finland’s labour market has been characterised by higher levels of unemployment relative to the OECD average. In the decade up to 2021, Finland’s annual unemployment rate averaged 8.2% compared to an OECD average of 7% (Figure 2.1). When compared to its Nordic neighbours, its unemployment is relatively higher still, with Nordic countries (excluding Finland) having unemployment rates averaging 6.4% over the same period. Finland, the OECD and Nordic countries have seen continued improvements in unemployment rates as economies have moved into 2022. In 2022 Finland’s unemployment rate decreased to 6.9%.
Note: OECD and “Nordic countries” (Denmark, Iceland, Norway, Sweden) are weighted averages.
Source: OECD dataset LFS by sex and age – indicators, http://dotstat.oecd.org//Index.aspx?QueryId=54218.
Unemployment took longer to return to pre-COVID-19 levels, but overall employment and labour force participation are high
The slower short-term recovery to unemployment rates in Finland is mirrored when considering the broader recovery from COVID-19. Finland took 27 months to return to its pre-COVID-19 unemployment rate, six months longer than the OECD average of 21 months (Figure 2.2). By July 2022, Finland and Estonia were the only two OECD countries to have unemployment rates more than 0.5 percentage points above their pre-COVID-19 rates (OECD, 2022[1]).
The relatively high and persistent unemployment rate in Finland must be set in context of its overall employment and labour force participation rates, which are above the OECD average. In 2021, Finland’s employment rate of adults aged 15-64 was 73%, which is 5 percentage points higher than the OECD average (Figure 2.3). This figure is also reflected in its labour force participation, defined as the labour force divided by the working age (15-64) population. In 2021, Finland’s labour force participation was 79%, 6.6 percentage points higher than in the OECD as a whole (72%). This strong performance continued into 2022 with labour force participation increasing to 79.3% and the employment rate increasing to 73.8%. All in all, Finland does well in ensuring its citizens are actively engaged with the labour market but has room for improvement in helping those people without work connect with jobs.
Note: OECD represents the unweighted average of the 33 countries shown. Countries with a value of 31 are still above their pre-COVID-19 unemployment rate.
Source: OECD Short-term Labour Market Statistics, https://stats.oecd.org/index.aspx?queryid=35253.
Note: OECD and “Nordic countries” (Denmark, Iceland, Norway, Sweden) are weighted averages.
Source: OECD dataset LFS by sex and age – indicators, http://dotstat.oecd.org//Index.aspx?QueryId=54218.
Long-term unemployment is high relative to other Nordic countries
Individuals unemployed for one year or more made up 24.2% of total unemployment in Finland in 2021, relative to only 20.4% for other Nordic countries, yet well below the 28.4% for the OECD as a whole (Figure 2.4). This is unlikely to be due to underlying benefit generosity, as replacement rates in Finland are similar to other Nordic countries (OECD, 2022[2]). The share of jobseekers with durations over six months is similar between Finland and other Nordic countries, meaning that the problem lies in a lower probability of exiting from unemployment at longer benefit durations. In this context, it is important that the PES has a suitable set of ALMPs to help individuals that are less connected with the labour market to find jobs, alongside an effective engagement and co-operation with other institutional stakeholders providing education, health and social services.
Note: OECD and “Nordic countries” (Denmark, Iceland, Norway, Sweden) are weighted averages.
Source: OECD Unemployment by duration dataset http://dotstat.oecd.org//Index.aspx?QueryId=9594.
Finland also has a high volume of individuals with weak labour market attachment
Finland has a large number of individuals who are not actively looking for work but who would be willing to take work. These individuals are classified as “marginally attached” because despite not actively seeking work, they have done so in the last year and would be willing to take work if it was offered. Relative to the size of its labour force, Finland has a higher number of marginally attached workers compared to other OECD countries (Figure 2.5). In the five years preceding 2021 Finland’s rate of marginally attached workers, at 5%, was almost three times higher than the OECD average of 1.8%. Despite improvements between 2016 and 2019, the onset of COVID-19 has served to re-open the gap, and Finland’s rate of 6.8% in 2021 was some 5 percentage points higher than the OECD average.
Note: Marginally attached workers are persons aged 15 and over, neither employed, nor actively looking for work, but are willing/desire to work and are available for taking a job during the survey reference week as a share of the extended labour force (labour force + marginally attached workers). OECD and “Nordic countries” (Denmark, Norway, Sweden) are weighted averages. OECD excludes Colombia, Costa Rica, Iceland, Korea, Mexico and the United States for which no data are available.
Source: OECD Incidence of marginally attached workers dataset, http://stats.oecd.org//Index.aspx?QueryId=37636.
2.2.2. Large labour market disparities exist between different groups of population
This section reviews disparities in labour market outcomes between different groups in the population, defined by gender, age and education.
There is a mixed picture on gender gaps in the labour market for Finland
The gender gap in employment and participation rates, whilst still present, is lower in Finland than for OECD countries in general. Figure 2.3 shows that in 2021, the female employment rate in Finland was 71.7%, well above the OECD average of 60.5%, but still slightly below the rate of other Nordic countries at 74.3%. However, the employment rate is relatively worse for men, which sees Finland below both OECD and Nordic countries. The male employment rate in Finland in 2021 was 73.8%, against 75.2% for the OECD.
The picture is similar when looking at labour force participation. In 2021, the female participation rate was 77.3% in Finland, 12 percentage points above the OECD average, but 2 percentage points lower than other Nordic countries.
Contrary to OECD countries and the Nordic countries, Finland has lower unemployment rates for women (7.2% in 2021) compared to men (8.3%) (Figure 2.6).
Unemployment is relatively higher for younger and older individuals
The age profile for unemployment in Finland is similar to the OECD in general, though older jobseekers fare relatively worse and the dynamic is more pronounced for men. In 2021, unemployment rates for men and women aged 15-24 in Finland were similar at around 16%. This is higher than the OECD average but reflects a similar trend to overall unemployment in Finland (Figure 2.6)
For men and women aged 55-64, unemployment in Finland is also significantly higher than OECD countries. The unemployment rate for men in Finland in 2021 was 8%, a full 3.2 percentage points higher than OECD countries. The unemployment rate for women was 6.8%, 2.3 percentage points higher than OECD countries.
Note: OECD and “Nordic countries” (Denmark, Iceland, Norway, Sweden) are weighted averages.
Source: OECD dataset LFS by sex and age – indicators, http://dotstat.oecd.org//Index.aspx?QueryId=54218.
Lower and middle educated jobseekers face higher unemployment in Finland
Finland has higher rates of unemployment for lower and middle educated people compared to other OECD countries (Figure 2.7). For those with a tertiary education, Finland’s unemployment rate (4.4%) was almost at parity with other OECD countries (4.3%) in 2021. But the gap for lower educated workers (below upper-secondary education) stands in starks contrast. The unemployment rate for lower educated workers in Finland was 13.8% in 2021, 3 percentage points higher than the OECD average of 10.7%. This suggests that policies that better align skills demand and supply, particularly at lower and middle levels of education, would be beneficial at reducing structural unemployment resulting from mismatches. Making changes to the adult education system to encourage participation of adults with low skills, will be key to unlocking the potential of all individuals. Upskilling individuals, to ensure they have sufficient skills to perform highly skilled jobs is particularly important for Finland, which suffers from a high share of vacancies that are highly skilled occupations, relative to other OECD countries (OECD, 2020[3]). Improving the inclusiveness of Finland’s system of adult education will be an important step to driving up results in this regard (OECD, 2019[4]). This is of importance in a world emerging from the COVID-19 crisis, to ensure that vulnerable groups do not become further detached from the labour market (OECD, 2021[5]) and in the context of high numbers of open job vacancies, which were at their highest level for 30 years in 2021 (JOTPA, 2022[6]).
Note: OECD and “Nordic countries” (Denmark, Iceland, Norway, Sweden) are unweighted averages. Education defined by ISCED 2011: Below upper secondary (levels 0-2), Upper secondary and post-secondary non-tertiary- (Levels 3-4), Tertiary (Levels 5-8).
Source: OECD calculations based on the OECD dataset Educational attainment and labour-force status, (http://stats.oecd.org//Index.aspx?QueryId=93191.
The previous section illustrates that despite having good participation and employment rates, there are still underlying challenges in Finland to help support jobseekers into work. Unemployment is above the OECD average and there are a number of underlying groups of jobseekers that fare worse than others. In this context, having a set of ALMPs that fit within broader provision of social services and education policy to help these jobseekers into work is essential. This section reviews the composition of ALMP spending in Finland and describes how its main stakeholders interact to deliver these policies. It also contextualises this in the ability of its public employment service (PES) to connect with jobseekers.
2.3.1. Finland spends generously to support its jobseekers
To support unemployed people, Finland has a relatively generous set of ALMPs. In 2020, its spending on ALMP as a percentage of GDP (0.86%) was lower than that of Denmark and Sweden only, of the 32 OECD countries for which data are available (Figure 2.8). This is a feature that has persisted over time.
This spending is heavily focused on training and direct job creation (Figure 2.9). In 2020, 0.36% GDP in Finland was spent on training and 0.13% GDP on direct job creation. Spending on training, as a proportion of GDP, was only higher in Austria. It also has relatively generous spending on employment policies for people with disability, general placement services by the PES and start-up incentives (0.15%, 0.08% and 0.01% of GDP respectively in 2020). The only exception to this is for employment incentives, where Finland spends less than the OECD average. To support ALMPs, it is important that a complete evidence base exists, so that funding is directed to policies that best help its citizens achieve their ambitions in the labour market.
Note: OECD is an unweighted average of the 32 countries shown. Data for 2020 refer to 2019 (Israel, Korea, New Zealand, OECD). Data for 2004 refer to 2005 (Poland), and to 2008 (Chile, Korea). Employment incentives are net of category 42 (Employment maintenance incentives), to remove as much as possible measures that are specific to COVID-19.
Source: OECD Database on Public expenditure and participant stocks on LMP, http://stats.oecd.org//Index.aspx?QueryId=8540.
Note: OECD represents the unweighted average of 32 countries, excluding Colombia, Costa Rica, Greece, Iceland, Türkiye and the United Kingdom, and including 2019 data for Israel, Korea and New Zealand. Employment incentives are net of category 42 (Employment maintenance incentives), to remove as much as possible measures specific to COVID-19.
Source: OECD Database on Public expenditure and participant stocks on LMP, http://stats.oecd.org//Index.aspx?QueryId=8540.
2.3.2. A network of stakeholders work together to deliver ALMPs
The provision of active labour market policy in Finland is undertaken by a mixture of government bodies and third-party stakeholders. The main agents are the Ministry of Economic Affairs and Employment (TEM), the Ministry of Education and Culture (OKM), the Ministry of Social Affairs and Health (STM), municipalities, the ELY and KEHA centre, and TE Offices (Figure 2.10). A network of organisations, such as trade union bodies and employer confederations, advocates and negotiates for members rights within this system. This network of interactions can be rather unwieldy and historically there have been recommendations for reform, to reduce the fragmentation within the system, so that responsibilities and accountabilities were clarified and improved (Duell, Grubb and Singh, 2009[7]). The forthcoming reform of employment services detailed in the last section of this chapter attempts to make similar improvements, by streamlining accountability and aligning incentives. It will be important for this process to review and address these areas to ensure the cohesion and efficiency of the system is improved.
Source: OECD visualisation of ALMP stakeholder interactions in Finland.
Whilst the main role of supporting jobseekers is primarily undertaken by the TE Offices in a practical sense and owned by TEM for the main policy development, a number of organisations interact to deliver different aspects of the system. OKM is involved in across two of the main training programmes for jobseekers, either through provision of education directly or via funding and planning. Similarly, there are links between the organisations that provide passive labour market support and the TE Offices in the co-ordination of training policy delivery. Ancillary back-office services like IT systems and procurement are outsourced from TEM and the TE Offices to other government bodies. This means the system has multiple layers in which to ensure that policy is joined up and delivers on joint objectives.
The Ministry of Economic Affairs and Employment (TEM)
TEM is responsible for a broad range of policies across the economy that affect both business and workers. This includes industrial policy, competition policy and the functioning of markets, innovation policy and energy policy. TEM’s objectives include the integration of workers, entrepreneurs, students, researchers and trainees in the labour market, which it manages through employment policy and business regulation.
TEM manages and monitors the implementation of public employment and business services (TE services) across Finland, which help businesses to recruit individuals and individuals to search for work, improve their skills and connect to jobs. TE services are designed to improve jobseekers’ employment prospects and maximise the supply of a well skilled workforce to support the Finnish economy.
TEM has oversight and strategic control of the Employment and Economic Development Offices (TE Offices), which directly implement the delivery of TE services. There are several social partners who are also involved with provision of services. Enterprises, regional and national business service organisations and educational institutions, third-sector actors, public-sector joint service points, recruitment agencies and private employment exchanges also help to provide these services. TEM owns the policy framework for the TE services and decides on the legislative framework which they, and the associated stakeholders, operate in.
Employment and Economic Development Offices (TE Offices)
TE Offices offer customers a comprehensive selection of various services that support job search and employment as well as business activities. There are 15 regional offices located around Finland.
Jobseekers are predominantly directed to register for TE Office services online, via the JobMarket Finland (Työmarkkinatori) website. Registering via this process notifies the social insurance institution, KELA, and the individual unemployment funds, of the commencement of eligibility for unemployment insurance payments.
TE Offices provide a range of activities including provision of information about vacancies, professions and trends in professional sectors, advice and coaching for jobseeking, personal guidance and support for career planning, training for new skills or changing professions, support for re-entering the labour market following life events and information about entrepreneurship. As part of the Nordic labour market reforms that are being introduced, renewed emphasis will be placed upon coaching for jobseeking and applying for vacancies.
Vacancies are posted online, allowing jobseekers to search directly for adverts. A new service called “TE Live”1 allows jobseekers to connect with existing workers at firms, to ask them directly about working conditions and practices at recruiting firms. Employers have been able to utilise online job vacancies postings for around two decades. A new service updates these existing services to a new portal and introduces new functionality. In May 2022 the Job Market platform introduced artificial intelligence (AI) services to facilitate matching jobseekers to vacancies. A separate portal also allows jobseekers to search for vocational training course vacancies.
TE Offices are part of the local administration coming under the ELY centres. The task of the ELY Centres is to steer TE Offices in achieving their objectives and developing their services. However, KEHA is also involved, the development and administrative Centre for ELY Centres and TE Offices, provides development and administrative services. These include human resources and payment and procurement functions.
Centres for Economic Development, Transport and the Environment (ELY centres)
Finland has a total of 15 ELY Centres, which are tasked with promoting regional competitiveness, well-being and sustainable development and curbing climate change. ELY Centres collect information on the state of their regions’ business, environment, and infrastructure and employment opportunities and anticipate future development trends, to support regional decision-making. The ELY Centres belong to the administrative branch of TEM. However, several other ministries are also involved to steer their varying functions.
In terms of support for employment, the ELY centres provide a number of services. Forecasts are produced of long-term regional education and training needs, in co-ordination with regional councils, so that it can help to inform local delivery of ALMP policy by TE Offices. The aim is to ensure supply of education and training is in accordance with the demand for it. ELY Centres aim to promote the smooth functioning of the labour market by supporting TE Offices to develop and co-ordinate employment services that promote employment opportunities and prevent discrimination and social exclusion. ELY Centres make co-ordinated efforts to ensure that all statutory services are available to all customers of TE Offices. They are responsible for the procurement and tendering of training contracts used by the individual TE Offices.
KEHA centre
The KEHA centre was formed in 2015 and tasked with providing administrative and development support to the network of ELY and TE Offices. It provides services like personnel management, budgeting, payment services for different benefits and IT development, alongside human resources support for the development of staff in TE and ELY centres. It employs around 550 experts to deliver their range of services.
KEHA is responsible for direct payment of several TE services, such as the Start-up grant for entrepreneurs, pay subsidies for employers, rehabilitative work activities and the employment policy project support (discretionary funding support for service procurement, managed by the TE Offices).
One of the most important elements of the KEHA centre’s work is the provision of IT infrastructure, to manage the flow of information with TE Offices. The forthcoming change to service provision, detailed later in the chapter, brings challenges to the centralisation and standardisation of these services, as municipalities will be able to diverge in the manner of their own choosing. This risks reversing the system of centralising back office support that the KEHA centre was designed to introduce. The idea for the KEHA centre was to streamline support so that standardised processes could create efficiencies in delivery.
The Ministry of Education and Culture (OKM)
OKM has responsibility for education policy in Finland. This includes two important elements for ALMP delivery- vocational education and training (VET) and higher education. For VET, it has responsibility for funding the element of labour market training (LMT) that falls directly within the remit of VET. LMT is the main vocational training programme available for jobseekers, evaluated in Chapter 6 of this report. This responsibility includes all training that is leading directly towards an accredited qualification. It also includes the granting of education providers permits to provide VET, which are managed and procured by the ELY centres for the TE centres to deliver. It also has the responsibility for higher education and directly funds the education provided to jobseekers under the self-motivated training (SMT) programme. SMT is the other major training programme for jobseekers and allows them to complete degree-level study, becoming an integral part of training provision for jobseekers since its introduction in 2010.
The Ministry of Social Affairs and Health (STM)
STM has responsibility for developing and preparing the legislation on income security for the unemployed. This includes provision of the unemployment allowance and labour market subsidies. However, via its role in the provision of income security, it also contributes directly to labour market activation, as some of its budget on unemployment benefit is deployed on active measures. This includes the mobility allowance; the job alternation leave benefit; direct job-creation in the public sector or employment subsidies for private employers; start-up grants; and rehabilitative work activities.
Finland’s Ammattibarometri helps labour market actors plan for labour demand
The occupational barometer (OB) was first conceptualised in the Turku ELY centre in 2007 to provide an assessment of occupational demand and supply and was implemented in all ELY centres and TE offices by 2011.
The OB is updated twice year (around the start of spring and autumn)- to provide an updated assessments of occupational demand and supply, and insight into which occupations are in likely to be in shortage or surplus over the next 6 months.
The OB is based upon the assessment of experts within local TE offices, who undertake a workshop in advance of each publication to assess the level of demand and vacancies in their area. Each assessment takes around 2-3 hours to complete.
The OB includes 200 professions included in the International Standard Classification of Occupations (ISCO 4), which together account for just under half of workers.
Reports are available at differing levels of regional disaggregation. This includes nationally, at the level of the 15 ELY centres and for 56 sub-regions. Each regional report provides an estimated demand across occupations in the next six months and estimates the relative balance between supply and demand in these occupations. These indicate whether demand is increasing, decreasing or remaining unchanged and whether any change is fast (effectively a five-point scale). Similarly for the demand and supply balances it classifies shortages, surpluses and whether these are “serious”, and in-balance.
Summaries are also produced across geographies to highlight the top 15 occupations in shortage and surplus and include the assessment of the speed of change and “posters” which provide a slightly larger infographic with more occupations and covering both shortage and surplus and in-balance occupations.
ELY centres and TE offices can then use this information to plan the services they offer, including the labour market training they offer and procure for individuals to address these skills gaps.
As of the most recent OB, there were shortages in 56 occupations and the largest shortage existed in the health and social services sectors. Shortages most acute among nurses, social work specialists, early childhood educators and special needs teachers. This continues a similar finding from the spring 2021 update to the OB.
Source: https://www.ammattibarometri.fi/, https://tem.fi/en/-/occupational-barometer-increase-in-labour-shortages-has-slowed-down-but-health-and-social-services-continue-to-ac-count-for-top-shortage-occupations, Marttinen (2012[8]), Occupational Barometer - A Short Term Tool Anticipating the Prospects of Occupations, https://oa.inapp.org/bitstream/handle/20.500.12916/3034/MARTTINEN_Finlad_net-work_29_nov_2012.pdf.
2.3.3. Outreach of PES services could be strengthened
Strengthening the outreach of the public employment service may help to improve job matching for jobseekers but also to strengthen labour market ties for those marginally attached. In 2020, only 44% of jobseekers in Finland contacted the public employment service to search for work (Figure 2.11). Another route to job finding support is via the use of private employment services, however, only 23% of jobseekers sought this route to employment. This means that a relatively large proportion of jobseekers undertake job search completely independently. Therefore, they do not avail themselves of the expertise and infrastructure of support that the PES can provide, either in help for their job search directly or via participation in ALMPs to augment and increase their skills and improve their labour market prospects.
This highlights some of the inconsistency within the Finnish system. When connected to its jobseekers, it has a relatively generous system of support to help individuals acquire skills and connect with jobs, but this co-exists with a large number of individuals who do not take advantage of the support that is available to them and which could help them find good jobs.
Note: The purple bar represents the unweighted average of the 26 European countries shown.
Source: OECD calculations based on the EU Labour Force Survey (EU-LFS).
Finland has embarked on an ambitious programme of reform that aims to improve its framework for delivering employment services. This falls under two strands; a reform which changes how jobseekers interact with employment counsellors with respect to job search and a transfer of power away from central government to local municipalities in the funding and delivery of employment services.
At the heart of both reforms is a change to the incentive structures that underlie the interactions between stakeholders in the system. The reform of jobseekers’ obligations on job search in their receipt of unemployment insurance will change the incentives they face, placing greater emphasis on regular job applications to maintain receipt of this insurance. The transfer of power to municipalities will change the underlying incentives municipalities have to implement ALMPs, by broadening their responsibility for payment of unemployment benefits. In addition to payment of the labour market subsidy, municipalities will be responsible for payment of the basic allowance and the share of earnings-related unemployment allowance that corresponds to the basic component. The funding share under the responsibility of the municipalities will also increase as jobseekers spend longer in unemployment. Labour market services have been reformed to increase contact between jobseekers and counsellors.
2.4.1. Reform to the system of interaction with jobseekers
On 2 May 2022, a new customer service model came into force, designed to provide jobseekers with more support, alongside obligations on job search. The reform intends to bring the Finnish system closer to that of some of the other Nordic countries, by increasing support to jobseekers with more time allotted with job counsellors, alongside increasing the requirements on them to search for work. Prior to the reform, Finland’s model of support for unemployed jobseekers was comparatively lenient, in terms of the obligations that it placed upon jobseekers, which could result in a removal of benefit if they were not met (Immervoll, Knotz and Otmani, 2020[9]). The objective is for jobseekers to find employment as quickly as possible. TEM estimates that the reform will increase employment by around 10 000 by 2025 (Ministry of Finance, 2022[10]). It is expected that the new reform will have a positive impact on public finances of EUR 230 million (TEM, 2022[11]).
The customer journey prior to the reform
Prior to the reform, jobseekers had little interaction with job counsellors. Registration with TE Offices was completed in person or online. In 2018, 83% of such registrations were completed online. An initial interview with the jobseeker was expected to take place within two weeks of the initial registration. This was not necessarily completed in person and could be completed over the telephone. The first interview consisted of checking and supplementing job seeking information, assessing the need for further services and drawing up an employment plan. The employment plan stipulated the required actions that the jobseeker would undertake in order to search for work. After the initial interview, further interviews were scheduled every three months. These additional interviews were only made mandatory in 2017 and typically lasted between 10 and 30 minutes. There was no stipulation for evidence on job search to be presented, though the TE Offices could ask for it. Usually, it was sufficient that the jobseeker informed the TE Office that the task in the agreed employment plan had been carried out. There were no regulations or guidelines on the specified number of job search actions, but it would be agreed between the jobseeker and the TE Office in the employment plan.
The reform introduces requirements on job applications and fortnightly meetings with counsellors
As part of the reform, jobseekers are expected to apply for work on their own initiative and agree to a personalised plan which includes requirements on expected applications to vacancies. The exact number of required applications differs between jobseekers and is agreed between the job counsellor and the jobseeker in the employment plan but is expected to be between zero to four applications per month (Ministry of Finance, 2022[10]), with the “usual” expectation that it would be four applications. Alongside obligations on applications, additional support is provided in the form of extra time with counsellors, with meetings now taking place fortnightly for the first three months of the claim and the initial meeting with the counsellor taking place earlier on in the unemployment spell. The policy design has reduced the intended delay between registration and the time until the initial meeting with a counsellor from two weeks to five days. Discussions between counsellor and jobseeker are determined by the agreed employment plan, but focus on strategies to improve job search, reviewing job applications and determining whether additional services, such as training, might help to improve employment prospects. To combat long-term unemployment, every six months jobseekers participate in a more intensive period of activity, lasting for one month. This period includes two job search discussions. The format of these meetings is the same as the fortnightly meetings that occur in the first three months of the claim. In between the periods with fortnightly meetings (the first three months of claim, then one month at month six of claim), jobseekers apply for work on their own initiative. Jobseekers are subject to sanctions if they fail to meet the obligations agreed to with their TE Office or municipality. This increase in contact time with counsellors means that around 1 200 additional job counsellors have been hired to cater for increased demand for services. This represents an increase of 40% of staff, relative to TE Office resources in 2019 (TEM, 2022[11]).
2.4.2. In 2025 employment services will transfer to municipalities
Preparations are under way to transfer TE services to municipalities, with the aim to bring municipalities closer to their customers and align funding incentives so that municipalities benefit more directly from helping individuals into work. At present, KELA is responsible for the payment of the basic unemployment allowance to jobseekers. This means for those individuals receiving that benefit, there is no direct financial implication for municipalities on the receipt of this payment when individuals are helped into work. When this expenditure is paid for by central government, there is little incentive for municipalities to deploy their funding on such policies, instead placing greater reliance on central government to do so. This potentially gives room for a greater disconnect between the local knowledge of firms and individuals that municipalities possess and the implementation of policies designed to help them (when they are delivered centrally). The ongoing reform aims at changing the incentive structure for municipalities by transferring the funding and responsibility for payment of this allowance to municipalities. This will incentivise investment in policies by municipalities which help to connect jobseekers to the labour market, so that expected future benefit expenditure is directly reduced. The objective is to create a service structure that promotes the rapid employment of jobseekers and increases the productivity of employment and business services. TEM estimates that this reform will create an extra 7 000 to 10 000 jobs, as it encourages municipalities to develop employment promotion activities (TEM, 2022[12]).
The risk around this kind of decentralisation, is that it potentially creates room for regional divergence, so that jobseekers in some municipalities are not offered the same quality and standards of employment policies as in others. This can also bring benefits, where municipalities can innovate to improve standards and outcomes (and underpins TEM’s own estimates of additional jobs). This kind of inequality may also exist within a municipality, if certain individuals are given preferential services at the expense of others as municipalities seek to make financial gains from helping those that they are more able to influence the outcomes of. These dynamics are not new and the same considerations exist when policy is controlled centrally. However, co-ordination of these risks, management of them and evaluation of their outcomes can be easier to achieve when it is organised centrally. The implementation of some kind of minimum service standards can serve against some of these potential inequalities and the precise design of the accountability framework will be of critical importance, to ensure that this is not the case after services are decentralised.
Before the reform is implemented, there are three areas in which the government wants to gather more information on, to provide evidence for decisions on how to change responsibilities and accountability. The first is in creating an incentive structure for financing that encourages municipalities to provide effective services to help jobseekers find work, by making them responsible for unemployment benefit payments. The second is in ensuring equity in access to services provided by municipalities through appropriate legislative definition of services. The third is to ensure appropriate national service structures are in place to support the localised delivery of services.
As part of the preparations for the reform, a series of pilots will provide evidence on local government employment services provision. From March 2021 to June 2023, a total of 25 areas and 118 municipalities will participate in the pilots. Unemployed jobseekers, including those covered by employment services but not entitled to earnings-related unemployment allowance, are participating in the pilot areas. After the TE service reform is fully rolled out in 2024, these customers will continue being served by municipalities, so that there is a seamless transition to the new operating model for these customers. The objective of the pilots is to provide information on the effectiveness of combining state and local government funding, expertise and customer service. TEM, in conjunction with municipalities and other stakeholders, have prepared national monitoring indicators and a joint evaluation plan. Administrative data will be delivered on individual outcomes to the pilot areas monthly to monitor progress of the pilots. In addition to the monitoring indicators, a series of online customer surveys will be implemented to provide research on customer experiences in the new initiative, with the aim to help authorities and stakeholders develop and reform their services. (TEM, 2022[13]).
2.4.3. Building evidence will be critical to the success of both reforms
In order to evaluate the success of both reforms to the system of ALMPs, it will be critical to build evidence, to present a convincing case that the changes have had their desired impact. This has already been built into the roll-out of the transfer of power to the municipalities with the pilots that are being undertaken, but it should continue when the reform is fully rolled out. Pilots provide a useful gauge of the expected direction of change, however they can suffer from being tightly controlled and monitored during implementation which may limit how well the results can be replicated when the policy is implemented nationally. For example, if a policy is tested in a local office and there are numerous officials involved in the pilot to ensure the policy design is properly implemented, case workers and staff may pay close attention to the rules and procedures of that policy. When the policy is delivered in all offices without this monitoring, staff may not follow the rules of the policy as closely and the outcomes of that policy may be different. Adoption of a staggered roll-out to remaining municipalities, by which municipalities are randomly assigned their roll-out could provide further evidence on effects of implementation. It is not currently planned for in the Finnish reform, where all services are due to be transferred on 1 January 2025. It will be important to set metrics on the administrative data that can establish impacts on jobseekers. In particular, ensuring that equity of service provision is adopted may be analysed by reviewing metrics which analyse service take-up for individuals across different socio-economic characteristics.
Despite Finland’s generally good performance in ensuring its population is engaged with the labour market, there remain challenges to help individuals that are looking for work. The unemployment rate in Finland is higher than the OECD countries, suggesting room to further engage with and help unemployed people look for work. Groups with additional need for help in this respect are younger and older workers and those with lower amounts of education, all of whom suffer higher unemployment than similar individuals in OECD countries. In addition to this, there are a large number of workers who are more marginally attached to the labour market.
To help these jobseekers search for work, Finland has a generous set of ALMPs particularly focused on training and direct job creation. Knowing whether and for whom these policies work for is vital in ensuring that they help individuals to connect to jobs in the labour market. The evaluation of labour market training and self-motivated training, presented later in this report, provides evidence on how well these training programmes help to connect people with jobs.
A number of different institutional stakeholders work together to deliver ALMPs in the labour market and the transfer of powers to municipalities will alter the way this engagement takes place. It will be essential to closely monitor these changes to ensure that service provision to jobseekers remains comprehensive and allows all individuals to participate fully in the ALMPs available. On top of this, building evidence on the newly implemented customer service journey for jobseekers is needed to allow an assessment of how this reform helps individuals to find work.
References
[7] Duell, N., D. Grubb and S. Singh (2009), “Activation Policies in Finland”, OECD Social, Employment and Migration Working Papers, No. 98, OECD Publishing, Paris, https://doi.org/10.1787/220568650308.
[9] Immervoll, H., C. Knotz and I. Otmani (2020), “Activity-related eligibility conditions for receiving unemployment benefits”, OECD Report to the European Union, OECD, Paris, https://www.oecd.org/els/soc/Activity-related%20eligibility%20conditions_2020.pdf.
[6] JOTPA (2022), Valtakunnalliset osaamiskapeikot – ennakointituloksia ja tilannekuva vuodelle 2022 - JOTPA Valtakunnalliset osaamiskapeikot – ennakointituloksia ja tilannekuva vuodelle 2022 [National Capacities - Forecast results and snapshot for 2022 - JOTPA National Capacities - Forecast results and snapshot for 2022], JOTPA, Helsinki, https://jotpa.fi/openfile/MTY0NzQ5NzMwMl9KT1RQQSBWYWx0YWt1bm5hbGxpc2V0IG9zYWFtaXNrYXBlaWtvdCDigJMgZW5uYWtvaW50aXR1bG9rc2lhIGphIHRpbGFubmVrdXZhIHZ1b2RlbGxlIDIwMjIucGRm.
[8] Marttinen, J. (2012), Occupational Barometer - A Short Term Tool Anticipating the Prospects of Occupations, https://oa.inapp.org/bitstream/handle/20.500.12916/3034/MARTTINEN_Finlad_net-work_29_nov_2012.pdf.
[10] Ministry of Finance (2022), Finland’s National Reform Programme 2022.
[1] OECD (2022), OECD Employment Outlook 2022: Building Back More Inclusive Labour Markets, OECD Publishing, Paris, https://doi.org/10.1787/1bb305a6-en.
[2] OECD (2022), Reaching Out and Activating Inactive and Unemployed Persons in Bulgaria, Connecting People with Jobs, OECD Publishing, Paris, https://doi.org/10.1787/7b91154a-en.
[5] OECD (2021), “Building inclusive labour markets: Active labour market policies for the most vulnerable groups”, OECD Policy Responses to Coronavirus (COVID-19), OECD Publishing, Paris, https://doi.org/10.1787/607662d9-en.
[3] OECD (2020), Continuous Learning in Working Life in Finland, Getting Skills Right, OECD Publishing, Paris, https://doi.org/10.1787/25206125.
[4] OECD (2019), Getting Skills Right: Future-Ready Adult Learning Systems, Getting Skills Right, OECD Publishing, Paris, https://doi.org/10.1787/9789264311756-en.
[13] TEM (2022), Local governement pilots on employment, https://tem.fi/en/local-government-pilots-on-employment.
[11] TEM (2022), Questions and answers on Nordic labour market service model, https://tem.fi/en/questions-and-answers-on-nordic-labour-market-service-model.
[12] TEM (2022), TE services reform 2024, https://tem.fi/en/te-services-reform-2024.
Note
← 1. See https://te-live.fi/ for further information.