Back to work: Finland

1. Ann Vourc’h, OECD Directorate for Employment, Labour and Social Affairs
Merja Kauhanen, Labour Institute for Economic Research
Back to Work: Finland
Improving the re-employment prospects of displaced workers Seminar
Ministry of Economic Affairs and Employment
Helsinki, 24 November 2016

2. 1. Background: OECD review on displaced workers
2. The labour market situation of displaced workers
in Finland
3. Policies to assist displaced workers: strengths,
weaknesses and possible ways forward
- Prevention and early intervention
- Income support and re-employment assistance
4. Main recommendations
Outline of the presentation
2

3. Phase 1: Analytical report focussing on
comparable statistics on job displacement and its
consequences in Employment Outlook 2013
Phase 2: Nine country case studies: Korea,
Canada, Japan, Sweden, Australia, the United
States, Denmark, Finland, and New Zealand
Phase 3: A synthesis to be published in the
OECD Employment Outlook 2017
OECD policy reviews on displaced workers
Definition of displacement: Workers are defined as displaced if
they are dismissed from jobs, with one or more years of job tenure,
because of economic reasons such as plant closings, business
downturns and changes in technology
3

4. THE LABOUR MARKET SITUATION
OF DISPLACED WORKERS
IN FINLAND

5.  2000-12, 5.4% of employees with at least one year of
tenure lost their job each year for economic reasons
o This rose to 7.3% in 2009 due to the global financial crisis
o It receded only very slowly in 2010 and 2011 and slightly more in
2012, in line with the subdued labour market performance
 Some workers are particularly vulnerable to displacement:
o Short-tenure workers
o Youth
o Tertiary sectors
o Crisis specific effects: older workers, manufacturing
Job displacement in Finland: key facts
5

6. Displacement rates in Finland higher than
in other OECD countries…
Percentage of employees aged 20-64 who are displaced from one year to the next,
averages 2003-2008 and 2009-2010
Source: OECD (2016), Back to work Finland: Improving the re-employment prospects of displaced workers,
Paris: OECD Publishing. 6
0
1
2
3
4
5
6
7
8
0
1
2
3
4
5
6
7
8
Japan
NewZealand
France
Canada
Russian
Federation
United
States
Australia
Korea
Germany
Sweden
Denmark
Portugal
United
Kingdom
. .
%% 2003-08 2009-10 f010
J
a…
N
e…
F
r…
C
a…
R
u…
U
n…
A
u…
K
o…
G
e…
S
w…
D
e…
P
o…
U
n…
. .
2003-08 2009-10
Self-defined displacement Firm-identified displacement
Finland

7. …but so are re-employment rates,
reflecting Finland’s flexible labour market
Re-employment rates in Finland and other selected OECD countries as a % of all
displaced workers, averages 2003-2008 and 2009-2010
Source: OECD (2016), Back to work Finland: Improving the re-employment prospects of displaced workers,
Paris: OECD Publishing. 7
0
20
40
60
80
100
0
20
40
60
80
100
France
Korea
Canada
Japan
Russian
Federation
United
States
NewZealand
Australia
Portugal
United
Kingdom
Germany
Denmark
United
States
Sweden
.
. .
%%
Re-employed within one year
(2003-08)
Re-employed within two years
(2003-08)
Re-employed within one year
(2009-10)
Self-defined displacement Firm-identified displacement
A. Re-employment rates for displaced workers, Finland and other selected OECD countries
Finland

8. Scarce information on quality of new jobs
suggests no large fall on average
 Information on job quality in FLEED is very scarce
 Since the GFC, re-employment rates of long-tenure
workers, as well as of workers in the manufacturing
and construction sectors and trade workers or machine
operators worsened
 Earning losses after displacement appear limited, but
higher and more persistent for older workers
8

9. Some Finnish regions suffer more from
displacement than others
 Displacement rates are very high in Uusimaa and
Pirkanmaa, and high in Kymenlaakso, Satakunta,
South West Finland and North Ostrobothnia
 Not problematic if re-employment rates are also high,
but this is not the case in South-West Finland and to a
lesser extent Satakunta and Kymen-Laakso.
 Other regions have relatively low displacement rates
but also very low re-employment rates: Kainuu, North
Karelia and Lapland
 Internal migration plays a very limited role in reducing
these regional disparities
9

10. POLICIES TO ASSIST DISPLACED
WORKERS: STRENGTHS,
WEAKNESSES AND POSSIBLE
WAYS FORWARD

11.  Employment protection for permanent workers close to
OECD average:
o Relatively high protection against individual dismissal
o Low additional requirements in case of collective dismissal
 Priority re-employment rule often circumvented through
negotiated packages
 High labour market dynamics suggest that EPL
requirements are not restrictive in practice: workers are
more vulnerable to job loss than in other countries, but
correspondingly more likely to find a new job
Labour law in Finland protects workers
without hampering labour market dynamism
11

12. The temporary layoff scheme prevents layoffs
but probably not only unnecessary ones
 Attractive option for employers: easy eligibility, work-
sharing and conditionality requirements and, above all,
no direct cost
 Take-up is high, and despite a reduction after the crisis
remains much higher than before
 Regional use of the scheme reflects economic dynamism
and sectoral specialisation of regions, as well as climatic
conditions (seasonality); also shows positive correlation
between regional participation in the temporary layoff
scheme and the unemployment rate
=> Probably some overuse (deadweight and displacement
effects) and, thus, delayed adjustment and job search
12

13.  Change security effectively provides information to displaced
workers in large firms
 But does not provide much effective employment services or
training before worker registers as a jobseeker (in particular
individual interviews and counselling)
 The effectiveness of Abrupt structural change cannot be
assessed (invest in any case in firms rather than workers)
 Lack of early intervention is problematic for less qualified
workers in less dynamic sectors
 New training obligation agreed may increase early support, but
remains to be defined.
Early intervention to assist
displaced workers is under-resourced
13

14. The three-tier unemployment benefit system
protects workers relatively effectively
 At 75%, the coverage rate of displaced workers by unemployment
benefits is relatively high in international comparison.
 Unemployment benefit payment duration is long compared with
most other OECD countries, in the range of the other Nordic
countries.
 Net replacement rate in the first year is in the top third of OECD
countries, and in the top 20 % over a five year period.
 In 2015, 50% of all recipients received earnings-related
unemployment benefits, 38.2 % labour market subsidy and 11.7%
basic unemployment allowance
 The low level of basic unemployment allowance and means-tested
labour market subsidy are reflected in relatively high poverty rates
among unemployed persons (about 40% over the last decade)

15. Forthcoming benefit reform will reduce
generosity but does not solve unemployment
tunnel problem for older workers
 Unemployed people are entitled to extended unemployment benefits
until the age of 65 if they turn 60 before the end of their 500-day
unemployment benefit entitlement
 Research shows that this contributes to the relatively low
employment (and reemployment) rate of older (displaced) workers
 Recent refrom has shifted the age limit but with forthcoming pension
reform the tunnel is getting longer again
 Future reform will reduce the duration of earnings-related benefits to
400/300 days and remove the benefit top-ups for those unemployed
with a long work history (over 20 years) but leaves entitlements for
those over age 58 untouched
 The social partners agreed to reassess the situation in mid-2019

16. Spending on active labour market programmes
is very high but not targetted enough
 Finland spends more on ALMP than most OECD countries:
ALMP spending was around 1% of GDP in 2014, the third-
highest share after Denmark and Sweden
 More emphasis on training measures within ALMP spending
than in other countries, especially for displaced workers
 But little is known about the effectiveness of training in
general and even more so for displaced workers
 Older and long-term unemployed jobseekers are highly
underrepresented on active labour market measures (15%
and 10% activation rate against 25% overall)
=>Weaker re-employment assistance and weaker chances to move out of
unemployment

17. But PES is underfunded and shortage of
operational resources weakens effectiveness
 The budget to run the PES is small in Finland relative to the
budget available for active labour market programmes
 The number unemployed per employment counsellor has
doubled in Finland during the past decade
Source: OECD (2016), Back to work Finland: Improving the re-employment prospects of displaced workers,
Paris: OECD Publishing.

18. Activation rate keeps falling while the number of
long-term unemployed keeps increasing
Source: OECD (2016), Back to work Finland: Improving the re-employment prospects of displaced workers,
Paris: OECD Publishing.

19. MAIN RECOMMENDATIONS

20. Raising the effectiveness of labour market policy
 Shift PES resources to lower the caseworker-customer
caseload and enable more and earlier face-to-face contact
 Address underrepresentation in active labour market
programmes of groups struggling to return to employment
 long-term unemployed, older and low-skilled displaced workers
 Enhance the activation stance of labour market policy
 Ensure quick registration with the PES
 Tighten job-search requirements
 Gradually remove special unemployment benefit rules for
older workers
 Raise the impact of the training system
 Provide more steering to the education sector
 Introduce a system of recognition of skills acquired on the job
 Switch towards results-based funding of services

21.  To avoid packages delaying job search, draw a tighter link
between access to unemployment benefit and registration
with employment services
 Make employers bear part of the cost of the temporary layoff
scheme to reduce possible overuse and the associated delay
in adjustment and job search
 Increase resources for the Change security process to reach
also small businesses and provide more real help early when
needed (including individual counselling and training)
 Increase the involvement of the social partners to improve the
number of immediate job-to-job transitions prior to dismissal,
as is done in other Nordic countries, especially Sweden
Preventing job losses and intervening early
21

22.  Important to be able to track displaced workers to evaluate
effects and effectiveness of policies (such as temporary layoff
scheme, change security process, abrupt structural change)
 Invest in rigorous, systematic evaluation of training
programmes and employment interventions, including their
effectiveness for displaced workers
 E.g. by setting aside a certain share of total programme costs for the
assessment of employment outcomes
 Research on effect of displacement on job quality needed, by
linking FLEED with other data sets including information on
type of contracts, wages, etc.
More evaluation needed
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23. For further information:
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OECD Directorate for Employment, Labour and Social Affairs: www.oecd.org/els
OECD work on displaced workers: http://www.oecd.org/els/emp/displaced-workers.htm
OECD Employment Outlook: www.oecd.org/employment/outlook
@OECD_Social
Contact: christopher.prinz@oecd.org