'World's happiest country' faces job creation challenge

HELSINKI • Finland is ranked the world's happiest country but its population is ageing faster than most.

That, in turn, is putting pressure on the government to get more people into jobs to help pay for those retiring.

The issue of fixing the country's labour market is likely to dominate the agenda when Finns go to the polls on April 14 to elect a new government.

The new administration will need to raise the employment rate to 75 per cent of working-age Finns by 2023, and to 80 per cent after that, according to a civil servants' report published yesterday that outlines the key challenges ahead.

The rate now is at 72 per cent, meeting a 2015 target set by Prime Minister Juha Sipila, which at the time was deemed almost impossible.

That year, the mood was grim as just 68 per cent of working-age people had jobs while the country was clawing its way out of a three-year economic slump - its second since the financial crisis in 2008.

Now, with about 140,000 more people at work compared with when Mr Sipila took office, about 150,000 more jobs are still needed to safeguard the country's welfare model, the report said.

 
 

Nordea Bank chief economist Aki Kangasharju, in an interview, said: "The funding of our Nordic welfare model that makes us the happiest country in the world, with an incredibly high standard of living, relies on higher employment levels."

What Finland needs is that "everyone who is able to work has a job", he added.

Mr Sipila on Sunday said keeping economic growth at about 2 per cent will generate a gradual increase in employment towards the target.

When Finland's government is "able to raise the employment rate permanently above 75 per cent, that actually fully resolves the spending gap", he said during an interview on YLE Radio Suomi.

The Finnish government has already pushed through several measures to boost employment, including cutting the cost of labour as well as the introduction of the so-called active model aimed at pushing unemployed job seekers back to work.

There has also been a lot of hiring after the global economic upswing. Yet that tailwind is about to stop blowing as growth eases in most major economies.

Mr Kangasharju said the remedy is more labour market reforms to increase the number of jobs available. Alternatively, Finns should gird themselves for more belt-tightening.

Said Mr Kangasharju: "If we don't reach higher employment levels, we'll face more austerity, with cuts on spending and public sector jobs, leading to smaller tax revenues and higher unemployment spending."

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A version of this article appeared in the print edition of The Straits Times on January 29, 2019, with the headline ''World's happiest country' faces job creation challenge'. Print Edition | Subscribe