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National Audit Office’s Annual Report to Parliament 2020

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Management of employment calls for accurate information on the impact of measures

Central government can support the labour market by effective employment policy measures, such as pay subsidies to businesses or youth workshops. The Government should examine the impacts of new measures through well-planned experimental designs. The public authorities should cooperate more closely to better meet the needs of different customer groups. Not all services can operate online on a self-service basis. Customers of several different services benefit most from face-to-face meetings.

One of the key objectives of the latest Government Programmes has been the promotion of employment. Increasing the relative share of the employed population has been considered important for securing people’s subsistence and welfare services, and reducing the sustainability gap. Central government debt has continued to increase despite a slight upturn in recent years, and the dependency ratio continues to weaken because of the ageing population.

One of the objectives of Prime Minister Sanna Marin’s Government has been to improve the employment rate to 75 per cent and reduce the unemployment rate to 4.8 per cent. In 2020, the coronavirus epidemic has increased lay-offs and unemployment, which has slowed down the achievement of the objectives.

The employment rate does not distinguish between part-time and full-time work

The employment rate discloses the ratio of employed people to the total population aged between 15 and 64. The figure is based on the monthly labour force survey by Statistics Finland. In this survey, a person is considered employed if they have been in gainful employment for at least one hour during the survey week.

The employment rate as such does not reveal anything about the success of the employment policy. If the majority of new jobs are temporary or part-time jobs of only a few hours per week, the role they play in increasing tax revenue is minor compared with full-time paid employment.

Tax revenue is also impacted by the quality of jobs.

An overall picture should therefore be drawn of employment measures and their impacts on general government finances. This would provide more comprehensive data for the preparation of the measures. It is also important to consider the individual: even a temporary job can support wellbeing and prevent social exclusion.

Visualization: The group of the unemployed is constantly changing

In the following visualization, you can view the shifts that have taken place in the labour market compared with the preceding quarter. In the drop-down menu above the visualization, you can select a quarter (between 2017/1 and 2019/3) and gender. To highlight a shift, move the cursor on it. Below the visualization, there is a table that shows all the figures related to the filter criteria you used.

Get background information about the visualization here.


Pay-subsidized work in a company improves an individual’s employment opportunities

Central government has limited opportunities to create permanent new jobs. However, it can promote the employment of unemployed jobseekers in the open labour market by pay subsidies, for example.  

Pay subsidies granted to employers by the state are considered a somewhat effective measure. According to econometric studies, pay-subsidized work in a private company improves a person’s employment probability after the pay subsidy period. In turn, pay-subsidized work in the public sector has not been found to have an effect on the person’s subsequent employment. In 2015–2019, the amount of pay subsidies to the private sector reduced, while the use of pay subsidies in municipalities increased.

Reduction of long-term unemployment requires a long-term perspective – experiments should be carefully planned

Those who have been unemployed for a long time often have a long way to the open labour market, and some of them are unlikely to be employed regardless of support measures. In addition to public employment services (TE services), the long-term unemployed often also need social and health care services, as well as social assistance.

Prime Minister Juha Sipilä’s Government Programme included a regional employment experiment, where municipalities assumed responsibility for employment of the long-term unemployed in their own area. A total of 23 municipalities took part in the experiment, implemented between 2017 and 2018. The experiment was funded by the reallocation of resources. 

Visualization: Regional employment experiments reduced unemployment

The five ELY centre areas in which the treatment municipalities of the regional employment experiments are located are highlighted in the map. The boundaries of the treatment municipalities are indicated by a thick line. Those municipalities in the ELY centre areas whose boundaries are not indicated by a thick line did not participate in the experiment. To select a period, use the slider bar above the map and drag the circles to the desired months.

Get background information about the visualization here.

Visualisointi – Työllisyyskokeilun vaikutus työttömyysasteeseen

During the experiment, long-term unemployment and the unemployment rate reduced in the municipalities participating in the experiment (Figure 1). The experiment can also be considered to have reduced registered unemployment, but it is unknown how many people found a job in the open labour market, and how many participated in employment-promoting activities through the TE services.

Registered unemployment was reduced in the municipalities participating in the employment experiment.

The number of experiments and reformed measures related to employment policy is high. During the ongoing government term, the aim is to carry out municipal employment experiments. The employment experiments should be based on carefully planned experimental designs, their results should be monitored systematically, and comparable high-quality impact assessments should be made of them. It should also be ensured that the results of the assessments are used in the development of the measures.

Cooperation between public authorities should be improved

During the programming period 2014–2020, about EUR 70 million of national public funding has been allocated annually to the projects of the European Social Fund (ESF). Of this, 75 per cent comes from central government, and the rest from local government. According to the operational programme approved by the EU, the funding is intended to improve the position of people in a weak labour market position and prevent social exclusion.

The connection between the targets of the ESF project activities and the national employment policy should be strengthened.

However, the participants in the ESF projects have been mainly employed people and students; only about one in four participants has been unemployed. The participants are also in many other respects better positioned than the average unemployed, and it has been impossible to assess the impact of their participation on their employment or income.

The Ministry of Economic Affairs and Employment should ensure that ESF project funding is better targeted at the main target groups. The Ministry should also more clearly define the objective of ESF project activities and their relationship with the national labour market policy.

It has proved difficult to get unemployed participants in the ESF projects. The cooperation between the ELY Centres (Centres for Economic Development, Transport and the Environment), which grant funding for the projects, and the TE Offices (Public Business and Employment Services), which are responsible for unemployed jobseekers, is obviously not working sufficiently well in this respect.

Better cooperation is also required between central and local government. The government proposal related to the transfer of basic social assistance to Kela (the Social Insurance Institution of Finland) failed to ensure sufficiently well that municipal social work and financial support would continue to be interconnected, particularly in the case of disadvantaged customers. The preparation of the law also failed to assess how the legislative amendment would affect the supplementary and preventive social assistance expenditure of municipalities and the operations of TE offices, for example.

When preparing the comprehensive social security reform, the Government should ensure the coordination of benefits and services so that the law can be implemented smoothly from the perspective of both the public authorities and different customer groups.

Services for young jobseekers should be provided on a needs-based one-stop principle 

Youth workshops help young people to proceed in their studies and working life. They allow young people to try out different jobs, consider interesting industries and participate in rehabilitation. Workshop training clearly increases young people’s willingness to study: it encourages them to complete their upper secondary education and continue studying.

The Ministry of Education and Culture should continue to develop workshops activities so that they more clearly provide support for under 20-year-olds and young people with only basic education in their studies, and in completing their upper secondary education. The Ministry should also allocate discretionary government transfers for workshops more clearly according to regional needs.

Youth workshops should focus on study and its completion.

Guidance centres are low-threshold one-stop service points that help young people in issues related to studying, finding employment, and wellbeing, for example. At its best, the operation of guidance centres promotes young people’s employment in the long term.

It is often functional to bring services together in one place, as it may be difficult for young people especially to know where to get which service. Many young people would also like to have an opportunity to discuss with an adult who has time to listen to them and help them in various problems and transitions.

Electronic service cannot always replace personal service

The employment and benefit services provided by central government have been increasingly digitalized in recent years. The unemployed and applicants for benefits should register for the services on the Internet, seek open jobs in various search services and apply for benefits online. At the same time, the management of self-service and electronic service channels has become more important.

At the beginning of the 2010s, the future vision of the Ministry of Economic Affairs and Employment was a “virtual TE Office”. Accordingly, the reform of TE services in 2013 was largely based on increasing the use of electronic and other service channels. The aim was to target face-to-face service, which requires the most human resources, at those who need it the most. At the same time, TE offices were closed, especially in sparsely populated areas.

However, it is impossible to completely replace personal service. The average duration of unemployment increased in municipalities where the TE office had been closed. Not all customers can seek employment independently without help, or they need deeper personal advice and guidance.

The long-term unemployed often also need social assistance, which must now be applied for on the Internet. Application for basic social assistance involves similar problems as the digitalization of employment services: some customers are unable to use electronic services.

Further information

Ville Vehkasalo
Principal Performance Auditor