Tuesday, October 3, 2023

Editorial: This is why more and more citizens are unable to work on their salary – good luck to Peteri Orpo for the government negotiations


Finland’s public revenue and expenditure must be balanced, but the task is complicated by a problem in the private economy. The income earned by more and more households is not enough to live on.

The main economic policy of government negotiations focused on the remaining problems of Finland’s public finances.

Less attention has been paid to another economic balance problem, which is at least as important – and which has many points of connection with the public finance balance.

It deals with the citizens’ own finances, as it appears that households have the same monetary concerns as state and other public finances.

According to Statistics Finland, the household savings rate – ie the share of disposable income remaining in savings after consumption expenditure – has fluctuated around zero percent over the past ten years with two notable exceptions.

The first exception was experienced in the two corona years, when restrictions on movement and transactions restricted consumption more than the recessionary low income – and hence a smaller proportion of income remained in savings in the long run.

The next exception started last year and has had the opposite effect, as more money has been spent on consumer spending than available income since last year. This difference is met by the savings or loan accumulated earlier.

The “overspending” of last year can be seen at least partly as a temporary release of consumption needs and desires that had built up during the Corona years. But this is hardly the whole truth.

The economy of low- and middle-income earners, especially those living on earned income, has been strained by the strongest inflation in decades, as prices have risen and living has become more expensive than income growth.

The worsening balance problems in the private economy are also indicated by the fact that, according to Kela, more and more people who work need to rely on income or housing assistance or housing assistance in addition to their earned income to cope with their daily essential expenses. Both are required.

Although the recovery in employment over the past year has reduced the need for various livelihood and housing benefits overall, support needs for those out of work have also increased.

In addition to rising costs of living and declining real wages, it should be noted that in recent years a large proportion of new jobs have been created in low-wage sectors – and that the category of the working poor has grown in Finland as well.

Although the major challenges of the public economy are to be addressed in the board talks of Satitalo, the remaining problems of the private economy must also be taken into account.

As well as the fact that the Finnish economy, let alone public finances, cannot necessarily be saved only with the help of new low-wage jobs. It also requires more well-paying jobs – and higher-income taxpayers.

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