Welfare Policy and Income Distribution: the Finnish Experience in the 1990s

Résumé 0

This article contrasts economic, employment and social policies of Finnish governments with data on income distribution and poverty for the period 1990-2000. The starting point of the article is the heavy economic recession in the 1990s, which, accompanied with political judgements, resulted in a shift of emphasis in social policy.To start with, the article situates Finland on the map of Europe with the help of most recent Eurostat data on social protection expenditure and poverty. In the light of comparative data Finland still performs well in the international scene, but nevertheless shows increases in relative poverty rates and income differentials. The article then seeks to find explanations to these increases. First, the authors document the main economic, employment and social policy aims of Finnish governments in the 1990s and bring forward some of the essential modifications made to the income transfer system. Second, the authors estimate the impact of political choices in the development of income differences and poverty.The authors argue policies have been a success when it comes to economic progress and public finances. For employment, judging success is more ambiguous: while employment has increased, unemployment remains a challenge. Moreover, assessing their social costs, efforts to increase employment via incentives have only been partly successful. While cuts in social benefits and overall efforts to modify incentives have increased employment and reduced the extent of income traps, policy changes have also contributed to wider income differences and higher poverty rates.