The future of Finland’s welfare state: employment, taxation, and services

Abstract

The preservation of Finland’s welfare state is often said to require higher employment. In Finland, it is a mainstream view that employment can be increased by lowering taxes and cutting unemployment benefits. In this context, reference is often made to other Nordic countries.

This PT Policy Brief shows that other Nordic countries do indeed have a better employment situation. At the same time, it demonstrates that these countries have higher levels of taxation than Finland and at least equally generous unemployment benefits. Thus, the claim made in Finland about the employment effects of taxes and transfers is not supported by Nordic comparisons.

The analysis also shows that other Nordic countries have better-resourced labour market and education services. This is made possible by higher taxation, which may well be one explanation for the stronger employment performance in the comparison countries.

• To increase employment in Finland, tax cuts and reductions in unemployment benefits are often proposed.
• In Nordic comparisons, other countries show both higher employment and higher levels of taxation than Finland.
• In the comparison countries, labour market and education services are also more extensive than in Finland.
• Tax-funded services are, in other Nordic countries, a key instrument for maintaining the welfare state.

(AI translation)

• Publication in PDF-format