Government stimulus measures aimed at halving growth in unemployment

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Finland’s four-party coalition government estimates that the upcoming growth in unemployment will be half of what it would be if it did not implement the stimulus package that was announced on Friday.
     “If the indirect impact is taken into account, the employment effect will be a combined 25,000 jobs”, said Prime Minister Matti Vanhanen at a press conference held on Friday.
     “We have estimated that unemployment will increase by 40,000 to 50,000 people in 2009. This means that the increase in unemployment will be cut in half as a result of this stimulus package”, said Minister of Labour Tarja Cronberg (Green).
     
The government’s planned stimulus package commits EUR 1.2 billion in state funds to the project, over a period of three years.
     The aim of the measures is to minimise the number of people who are left without jobs, and to make it easier for those who are unemployed to return to work.
     Job-creation measures include investments in transport infrastructure, public construction, and the lifting of social insurance contributions from employers.
     On the education side, important solutions include improved access to vocational education. The plight of tens of thousands of people on temporary redundancy is to be improved by giving them access to labour services previously reserved to those who were made permanently redundant.
     
The offer of a 10 per cent subsidy for repairs to apartment buildings runs out at the end of this year.
     Minister of Finance Jyrki Katainen (Nat. Coalition Party) said that the limitation is aimed at encouraging quick decisions on repair projects.
     
The most controversial measure was relieving employers of having to pay social insurance contributions for their employees. The move will lead to a gap of more than EUR 830 million in state income. According to Vanhanen, the gap will be compensated for in the future mainly by raising environmental and energy taxation.
     “Finnish working life has had this kind of solidarity dimension. Now it is going away. This is unfortunate. At the moment, solidarity should be strengthened”, Cronberg says.
     However, she is pleased that the government made it clear that there will be no gaps in the financing of social services. Cronberg agreed with Katainen’s assessment that the lifting of the social insurance contribution will reduce the need for temporary layoffs by local authorities.
     “The move will ease the economic burden on local authorities by about EUR 248 million a year”, she noted.
     
Economists were mainly pleased with Friday’s announcement.
     “The total sum, 1.7 per cent of GDP, is big enough to be felt. Another positive aspect is that there are many public projects that increase overall demand”, says Juhana Vartiainen of Konjunkturinstitut - Sweden’s National Institute of Economic Research.
      Roope Uusitalo, head of research at the Government Institute for Economic Research (VATT) describes the package as a quick reaction.
     “There is the risk that projects may get support that do not quite meet the requirements of viability. I am a bit surprised at the timing of the social insurance decision - the contribution will not actually be lifted until next year, and can it really be seen as stimulus?”
     The stimulus package will come before Parliament in about a week.


Previously in HS International Edition:
  Government unveils stimulus package (30.1.2009)

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