Jobs, labour, productivity: Finland’s priorities for the decade ahead
Our recent pro-bono work
The Finnish economy faces significant challenges in the decade ahead. Finland’s population is aging at the fastest rate in Europe, which is causing strain on its welfare model. As our pro-bono contribution to the discussion on the Finnish economy, we have sought to quantify the key challenges facing Finland in terms of jobs, labour and public sector productivity; and its opportunities to respond to these. Our most important message is that Finland should now quickly move to execution mode to solve the challenges ahead.
The current welfare model has succeeded well and the well-functioning public sector is one of Finland’s strengths. We have sought to find solutions which would preserve the valuable features of the Finnish welfare state.
The size of the challenge ahead is quantified by examining trends in the support ratio. With the support ratio we mean the proportion of the rest of the population to privately funded sector employees. This ratio is related to the sustainability of the economy as jobs represent a major source of tax gains needed to finance the welfare model. In the base case, if nothing is done, the support level will reach the level it had in the worst years during the 1990’s recession—which is unsustainable.
Finland’s priorities for the decade ahead
Making a turnaround towards a more sustainable future sets three priorities for the Finnish economy:
Priority 1: Increasing the number of jobs in the private sector
Our analysis suggests that by 2020, in the private sector, Finland needs a net increase of 100,000–150,000 jobs compared to the level in 2007. This corresponds to a net increase of 150,000–200,000 jobs compared to the level in 2010.
Priority 2: Increasing the supply of labour to the private sector
Our analysis suggests that in relation to the currently estimated baseline Finland will need approximately 270,000–320,000 more people in the workforce available to the privately financed sector in 2020.
Priority 3: Producing more public services with the same resources
Our analysis suggests that Finland has to improve the productivity of publicly financed services by approximately 1.2 percent a year. Productivity could best be improved by changing working methods and procedures—not primarily through staff cuts. The size of the improvement in productivity is estimated by assuming that the public sector would not employ a net number of additional staff despite the increased need for services.
The report presents ideas and examples from other countries on how Finland could respond to these challenges and secure a functioning welfare state in the decade ahead.
Download the 2010 report: Finnish version / English version
You can also download our earlier report “Finland’s Economy—Achievements, Challenges and Priorities” from 2007. English version / Finnish version / Swedish version