ETLA: Income disparity likely to increase as economy slows down

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The income disparity between well-off and the not so well-off Finns is likely to increase, says the Research Institute of the Finnish Economy (ETLA) researcher Hannu Kaseva. This will be due to the economic trends of the near future, Kaseva believes.
      According to Kaseva, a recession should not be expected, at least not in 2008. A recession means that the gross national product decreases in two consecutive quarters.
      Still, the growth of both the economy and the labour situation will slow down, and this will have an impact particularly on the lives of those who already have it tough.
      The growth will be weakened by problems with the international economy, especially in the United States, but also by the already agreed wage settlements in Finland.
      Because of the large percentual rises in salary, businesses’ potential for hiring new workers will be severely weakened. The large percentages will still not significantly increase people’s purchasing power, so inflation is likely to accelerate.
     
"What is worrying, is what will happen to those who have been outside the labour market for quite some time already", Kaseva says.
      "Those who are in trouble now, will soon be in even greater difficulties."
      "The sense of national togetherness will take a hit", Kaseva predicts.
      According to various sources, 50,000 new jobs will be created this year. The government’s objective is 80,000-100,000 new jobs during this electoral term, in other words, by the end of 2011.
     
The greatest impediment to growth on the domestic side is likely to be the ageing of the population - the relationship of those of working age to those in retirement will change, and the process of heading into retirement will accelerate from 2010.
      Some companies will suffer from manpower shortages, and in the relatively well-situated south and the metropolitan area it is hard for outsiders to move in, owing to the high cost of property.
      Rising energy costs will eat into purchasing power.
      And for the first time in a long while, consumer confidence is not as buoyant: the figures turned down last week.
      Abroad, the credit crunch in the United States is having an impact on the EU in the form of a tighter lending market, and the weak and ever-weakening dollar will hurt EU members' exports.


Previously in HS International Edition:
  Shopping the good shop against the threat of recession (27.11.2007)

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