Memorandums assessing combined impacts of Government’s social security changes now published

Memorandums assessing combined impacts of Government's social security changes now published

The Ministry of Social Affairs and Health has today published three memorandums assessing the combined impacts of the Government's changes to social security during this parliamentary term. The memorandums focus particularly on the impacts of the comprehensive reform of social assistance.

The first memorandum discusses how the changes made to social security and taxation in 2024-2025 and the comprehensive reform of social assistance affect the use of social assistance by households and the income distribution of households.

The second memorandum assesses, by groups of people, the impact of the changes to social security and health and social services proposed through finance and expenditure acts. This assessment is made from the perspective of fundamental rights and human rights obligations.

The third memorandum was prepared together with the Ministry of Economic Affairs and Employment, and it examines the government proposals on social assistance, on the general social security benefit and on employment services and unemployment security sanctions.

The memorandums were prepared to support parliamentary decision-making.

Government's social security changes to affect recipients of social assistance more than previously estimated

The first memorandum examines how the social security changes made by the Government in 2024-2025 have affected the use of social assistance and the distribution of income. It also assesses the impact of the 2026 social assistance reform in relation to previous changes to social security and taxation. This assessment is based on the statistics provided by the Social Insurance Institution of Finland (Kela) and on the calculations made by using the SISU microsimulation model. The purpose of the memorandum is to supplement the assessments included in the government proposal on the comprehensive reform of social assistance and to specify the previous assessments of the impact of legislative amendments made during this government term on income distribution and low-income households.

The assessments included in the memorandum show that the legislative amendments made by the Government in 2024-2025 have also affected households receiving social assistance during this year more than previously estimated. Moreover, social assistance has compensated for the cuts in other benefits (mainly those in housing allowance and unemployment security) less than what was previously predicted. The more accurate assessments are based on a model developed by the Finnish Institute for Health and Welfare (THL) which, in certain respects, makes it possible to prepare more accurate assessments than the previously used models. Despite this new model, the assessments still contain significant inaccuracies.

Based on the assessments, the legislative amendments made in 2024-2025 and the comprehensive reform of social assistance will raise the low-income rate for the whole population by 2.2 percentage points and the low-income rate for children by 3 percentage points. According to Statistics Finland's data, the low-income rate was 13.4 per cent and the low-income rate for children 12.2 per cent in 2023. The comprehensive reform of social assistance in 2026 would increase low-income rates and the number of people on low income only little. The Government's changes to social security are also shown in Kela's statistics on the recipients of social assistance. In 2025, the number of people receiving social assistance has started to rise, especially because of a prolonged process of receiving assistance. However, there has been no significant rise in the number of new households receiving social assistance during this government term.

• Combined impacts of social security changes (Gateway to Information on Government Projects, in Finnish)

Changes to social security affect those in a disadvantaged position

The memorandum on fundamental and human rights, which is published now for the second time, examines the legislative amendments concerning social assistance and health and social services (2024-2026) from the perspective of how they affect different groups of people. It also assesses the combined impact of the amendments from the perspective of fundamental and human rights. The Constitutional Law Committee has paid attention to the fact that when the impacts focus on the same people, the combined impacts should also be examined in respect of the proposals' impact on fundamental and human rights.

The reason for the cuts made to social security during this government term is the poor state of general government finances. It has also been necessary to seek savings by making direct spending cuts, and because social security expenditure is a significant item of expenditure for general government finances, savings must be made in social security, too. This is an acceptable approach from the perspective of the Constitution of Finland and the human rights obligations binding on Finland. When it comes to social rights, the Constitutional Law Committee of Parliament has not detected any such problems with the legislative proposals it has discussed during this government term that would have prevented the proposals from being considered in the ordinary legislative procedure.

Although, as a rule, the poor state of general government finances constitutes an acceptable reason for lowering the level of benefits, the planned and the earlier cuts to social security -especially the freezing of index increases in 2024-2027 and the cuts in the last-resort financial support, i.e. social assistance - are not without problems in light of fundamental and human rights obligations when considering the impact of these cuts on different groups of people. Those affected by the cuts see them as weakening the protection of rights, even if the cuts are permitted as such in light of the fundamental and human rights system.

• Combined impacts of social security changes (Gateway to Information on Government Projects, in Finnish)

Impact of social security changes on unemployed people to depend on their actions

In addition to the Ministry of Social Affairs and Health's memorandums on social security changes, the Ministry of Social Affairs and Health and the Ministry of Economic Affairs and Employment have together prepared an assessment of the combined impacts of the government proposals concerning social assistance, general social security benefit, and employment services and unemployment security sanctions.

The combined impacts of these three proposals on the income of unemployed people would largely depend on their own actions. According to the memorandum, the right to social security would only be weakened by the abolishment of the earned income allowance included in social assistance and by the proposed change in the level of the basic amount of social assistance. In all other respects, unemployed people, and applicants for social assistance who are guided to register as jobseekers with the employment authority, could act in a way that they would not lose their right to unemployment benefit or that social assistance would not be reduced. Recipients of social assistance could avoid any reductions in social assistance by, for example, registering as an unemployed jobseeker. The proposals aim to ensure that unemployed jobseekers would not fail to participate in the jobseeker's service process or the available services or to seek employment.

The implementation of the reform package includes introducing a text message that is sent to jobseekers in advance to remind them, for example, of meetings with the employment authority as part of the service process and of the deadline for implementing a measure agreed in the employment plan. A reminder sent in advance would prevent any unintentional failures by jobseekers that are caused by human error or forgetfulness. This would make it easier for jobseekers to avoid situations where they could lose their right to benefits due to unemployment security sanctions.

As the age structure of unemployed people varies and there are gender differences among unemployed people and recipients of social assistance, the proposals are assessed to have a combined impact particularly on young people and men. The combined impact would also affect those with a low level of education, immigrants and long-term unemployed people.

• Government proposal: Reform of social assistance (Gateway to Information on Government Projects, in Finnish)
• Government proposal: A general social security benefit (Gateway to Information on Government Projects, in Finnish)
• Government proposal: Employment services and unemployment security sanctions (Gateway to Information on Government Projects, in Finnish)

Changes aim to strengthen general government finances and employment rate

The social security changes presented above are based on the Government's objectives to strengthen general government finances and the employment rate. The Government's overall objective is to boost employment by 100,000 people. The Government will monitor the achievement of the employment targets based on the Ministry of Finance's projections throughout the parliamentary term.

Based on a projection made by the Ministry of Finance in May 2025, the measures already in force or the measures prepared by the Government by March 2025 will boost medium-term structural employment by about 90,000 people.

• Monitoring of the employment targets for the structural policy measures under the Government Programme (Ministry of Finance), in Finnish

The government proposals on the comprehensive reform of social assistance, on the general social security benefit and on employment services and unemployment security sanctions will strengthen general government finances directly by about EUR 78 million. They are also expected to boost employment and thereby general government finances by around EUR 48 million. All in all, they are estimated to strengthen general government finances by approximately EUR 126 million.

Inquiries

Annu Jaakkola, Special Adviser to the Minister of Social Security, tel. +358 29 516 3560, [email protected]
Liisa Siika-aho, Director General, Department for Insurance and Social Security, Ministry of Social Affairs and Health, tel. +358 29 516 3085, [email protected]
Anna Cantell-Forsbom, Director General, Department for Clients and Services in Healthcare and Social Welfare, Ministry of Social Affairs and Health, tel. +358 29 516 3351, [email protected]
Annakaisa Iivari, Director General, Department for Communities and Functional Capacity, Ministry of Social Affairs and Health, tel. +358 29 516 3371, [email protected]
Toni Ruokonen, Senior Specialist, Employment Promotion and Skills Matching Group, Ministry of Economic Affairs and Employment, tel. +358 29 504 7213, [email protected]