1. Background
Finland has a population of around 5.4 million, slightly higher
than that of Scotland (5.1 million) and a similar uneven population
distribution, with a concentration around Helsinki and the south.
Finland shares many common features with Scotland, being a small,
open economy with a high dependency on the service sector and
international trade.
Recent employment issues faced by Finland have a similarity to
those faced in Scotland. From a recession in the early 1990s,
Finland experienced sustained employment growth until the
international downturn of 2008/09. During this upswing recruitment
problems appeared, largely due to skill shortages rather than
number of applicants. These were reported mainly in the technology
and construction industries, real estate and social and health
services. A key cause of many of these was lack of occupational
training and work experience in response to changing employment
patterns.
The legacy of the economic upswing and the resulting skill
shortages was a high degree of labour market polarization, with
those with little or no education left behind as new skills were
demanded. These people are now in danger of experiencing structural
long-term unemployment as the effects of the recession take hold,
resulting in increased competition for employment, even for
entry-level jobs.
In addressing the twin issues of unemployment and skill
shortages, the Finnish Government is effectively implementing a
three-pronged approach:
- improving the vocational and education system to better address
labour market demand;
- activating jobless groups such as disability pension
recipients, women and older workers; and
- controlled immigration to attract skilled foreign labour to
meet specific identified skills needs.
The present report confines itself to parts of the first two
challenges described above and investigates Finnish active policies
aimed at lowering unemployment, raising employment and enhancing
vocational and job search skills. These active measures are
classified into three categories, which are examined in turn in
this report:
- employment counselling interviews and individual action
plans;
- job search and job matching services; and
- referrals to active labour market programmes geared towards
skills enhancement. The last category is most clearly linked to
skills enhancement of the labour force.
2. Employment counselling interviews and individual action
plans
A registration interview takes place within two weeks of
unemployment, involving setting up the initial job-search plan. The
plan may include referrals to labour market programmes, such as
training and subsidised work (paying a regular wage). There is a
fixed schedule for interviews later during the unemployment spell,
one after 3 months and then one every 6 months. The Activation Plan
is established after 100 or 136 weeks of unemployment and includes
programmes such as on-the-job training (where the participant is
not paid a regular wage).
3. Job search and job matching services
Job search and matching services in Finland are operated by the
Public Employment Service (PES). These are either passive or active
measures, depending on the work-readiness of the jobseeker.
Passive services
These are targeted at jobseekers who are job-ready and include
self-service vacancies, available online or through traditional
notice boards. There are help desks and PES officers on the
premises who provide guidance to jobseekers on how to use the
e-services. Notification of vacancies can also be sent to
jobseekers by e-mail and to their mobile phones.
The development of e-services has meant that a large amount of
screening and matching of jobseekers to vacancies occurs more or
less independently of the PES staff. Fewer and often no personal
interventions are required for most vacancies advertised on the
internet service, which are 'open', i.e. they contain all the
information a jobseeker needs to apply for the job.
Active services
These are aimed at jobseekers who are further from the labour
market and require more intensive support. An employment officer
may directly refer jobseekers to vacant jobs when they first
register. Otherwise, the employment officer may make contact with
jobseekers by telephone, and perhaps interview them before referral
to an employer if it is not clear whether they are suitable for the
vacancy.
While the immediate objective is placement of jobseekers into
vacancies, the PES also has the function of providing long-term
guidance and counselling development. Compared with many comparator
countries, vocational guidance services in Finland are well
developed and are provided by a range of specialists including
vocational guidance psychologists, educational advisers and
employment consultants.
Specific one-to-one support includes:
- practical job clubs where jobseekers receive training in job
applications an employer recruitment practices;
- educational advice on different courses, study routes and
finance; and
- vocational and career planning guidance delivered by
psychologists, who map out a career path for jobseekers tailored to
their individual circumstances.
The quantity of one-to-one intensive advice on offer has been
decreasing in recent years, as online services, such as education
and training options become more widely available. Active
one-to-one advice continues to have a role, but is focused on
services where individuals require intensive personalised
support.
4. Active Labour Market Programmes
4.1 Different types of programme
Specific Active Labour Market Programmes (ALMPs) are currently a
fairly high proportion of GDP in Finland, compared with other
European countries, particularly the UK (Figure 1). Training
schemes account for the largest share of ALMP expenditure.
Employment subsidies are also important and account for a
relatively modest share of ALMP spending and participants.
Figure 1: Expenditure on ALMPs by main category, selected OECD
countries, 2007
Source: Duell et al. (2009)
4.2 Employment subsidies
There is only one form of employer wage subsidy in Finland - the
Pay Subsidy. This is designed to address deficiencies in
competence, skills or productivity of a worker, for example due to
long-term unemployment or disability. The basic subsidy is
equivalent to the level of the basic Unemployment Allowance (an
average of around EUR 550 (£486) per month), plus an additional
component for employing specific disadvantaged groups, or if
apprenticeship training is provided. The objective is to take these
disadvantaged groups closer to the labour market, but it is
currently too early to assess whether they have had an impact on
the employment outcomes of participants.
Finland also provides a subsidy for the employment of low-paid
older workers and a domestic help credit which encourages
employment in household services. While these have been effective
in placing people into employment, it is thought that there is
considerable deadweight loss involved, i.e. a large proportion of
subsidised workers would have been employed without the
subsidy.
4.3 Labour Market Training
Labour Market Training in Finland is provided for people over 20
years of age who are unemployed or under threat of unemployment. It
consists of:
- basic preparatory training; and
- more advanced vocational training, mainly for adults who
already have work experience.
Preparatory training provides basic job-search skills and
guidance towards vocational training. It is aimed mainly at
immigrants (integration training) and disadvantaged groups
(vocational guidance), with an element of basic computing and
language skills also included.
Vocational training accounts for the majority of training
provided in Finland. Almost three-quarters of the participants are
trained in the largest target occupations: industrial professions;
construction; administration; and health and social work. Since the
late 1990s, the key structural change has been a shift from
administrative professions to health care and social work.
To inform training provision, various studies have estimated
labour shortages, recruitment and training needs at regional and
national level. But in practice the purchasing of vocational
training is based very much on the supply from training institutes,
which in turn is built upon budget information. A key aim in
Finland is to integrate the use of studies and tools to build up a
more transparent system of demand and supply.
Training is more financially attractive to the unemployed, and
three-quarters of the participants in Labour Market Training were
unemployed prior to participation. However older workers (50+) and
the long-term unemployed are under-represented. There is a high
take-up of training among immigrants, linked to eligibility
criteria for Integration Assistance allowance. Delivering training
in remote regions remains costly, although distance learning is
becoming more common.
4.4 Other training measures
Apprenticeship (dual) training is open to all ages in Finland,
and can be used for new recruit and CPD. Around 25,000 people took
part in the scheme in 2007. The employer is compensated to cover
the estimated costs of providing workplace training. An employer
who hires an unemployed jobseeker on an apprenticeship agreement
can receive an additional pay subsidy. Most apprenticeship training
is qualification driven, and only 7% is delivered as an ALMP to
unemployed people. Apprenticeships have proven relatively
effective, with a 70% post-completion employment rate.
A training subsidy is also available to employers providing
on-the-job training as an ALMP, again with a top-up paid for
training the most disadvantage groups. The numbers of unemployed
participating have increased by 50% since 2001, but post-completion
employment rates remain low, at 15%. On-the-job training, like
preparatory training, most often leads to participation in another
measure rather than directly to employment.
Young people under 25 account for the vast majority of
on-the-job training participants: this is linked to eligibility
criteria for LMS (income support) payments.
4.5 Evaluations of Labour Market Training
An evaluation in 2007 reported that three months after the
completion of vocational Labour Market Training an estimated 40% of
participants were in employment, 19% had started in another measure
and 31% were still unemployed. A further study estimated that the
employment rate had increased to over 50% after two years. However,
the additionality of these programmes on employment rates has been
estimated at only around 3%. This may be due to the fact that those
selected for this training are more highly motivated and have fewer
health-dependent issues.
Conclusions
Finland is moving from delivering all but the most intensive
employability support from a one-to-one basis to a web-based
service. Overall, Labour Market Training and Apprenticeships have
been more effective than employment subsidies in moving people into
long-term employment. This is partly because subsidies are directed
at the long-term unemployed and linked to short-term contracts.
However employment subsidies have been shown to stimulate
additional jobs in firms receiving a subsidy.
Aki Kangasharju,
Director General,
VATT: Government Institute for Economic Research,
Finland
Professor Aki Kangasharju's research interests cover labour
market issues, regional economic development, the efficiency of
public service provision and the estimation of effects of various
social programmes. He concentrates on applied empirical work using
advanced econometric approaches. In the beginning of 2011,
Professor Kangasharju started as the Director General at VATT - a
60-person research institute focusing on economic issues relevant
to the Finnish public sector.
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