0

Pension system reform, health and education: the Finnish way

par Timo Spangar - 02 Juin 2010

Finland is now in a turning point where new policies for extending citizens' working life are in the process of being developed and debated.

 

sauna

In Finland, the current pension system was reformed in 2005 and includes a flexible retirement age between 63 - 68 years, incentives for staying longer in work through a step by step increasing accrual rate (1.5 % until the age of 53, during 53-62 1.9% and between 63 - 68 4.5%), cutting the relative amount the paid pensions by the life expectancy coefficient (the longer the life-expectancy of each cohort at the age of 62, the lower the pension will be in relation to the full pension) thus encouraging people to go on working in order to obtain full pension entitlements and reforming the unemployment pension (by abolishing the unemployment pension entitlement from those born in 1950+ and giving them instead an extension of the unemployment benefit until 65) and the part-time pension (by raising the lower boundary age to 56 years for those born in 1946 or before and to 58 years for those born 1947+) as its core elements.

 

 

The government set up two working groups consisting of mainly social partners. The first working group - the "Rantala group" aimed at reforming the rules of the game (the retirement age, new rules for the unemployment pension etc). The second working group - the "Ahtela group" - worked on reforming working life "from the inside", trying to seek structures within companies and the workplaces suitable to help extend working lives. The first group could not achieve a unanimous set of proposals and withheld from making them. The Ahtela group ended up with a number of detailed suggestions and proposed a set of sub-working groups to continue the work. Frustrated by the slow advancement with the social partners the government asked the OECD to give Finland country-specific advice for further actions.

 

 

The OECD sent its requested report to the Prime Minister at the beginning of March. It based its report mainly on the 2009 report5 on Finnish disability policies and in fact very much repeated what the conclusions were then. The main points the OECD now wanted to make were the following. First, Finland was recommended to abolish the early retirement pension at age 62 and, second, to raise the lower level of the pension age from 63 to 65. These two measures, taken simultaneously, "greatly improve the incentives to work longer." These main arguments, as well as the thesis that "soft measures .... alone will not necessarily extend people's working lives" were received with mixed feelings in Finland and interpreted as favouring this or that pre-determined opinion. Most importantly, however, the OECD report kicked the ball back to Finland. The government, for its part, passed the ball to the six working groups. The outcomes of the working groups are expected next autumn.

 

 

However, at the end of the day, the government set up six sub-working groups for the further preparation of measures to be taken in order to lower the retirement age (indicated by „retirement age expectancy‟ equal to the expected average retirement age at the age of 25). The target set for the working groups was to find the appropriate measures by which the current actual retirement age could be raised from 59.4 years by, at least three years by 2025.

 

 

The Ahtela group made concrete proposals in three policy fields: 1. measures to be taken for improving work ability, 2. measures for improving well-being at work, 3. measures to lengthen the early phases of careers (by making transitions from basic education to the secondary education and to the higher education faster and more effective) and improve employability throughout working life. The measures in the first field included actions aimed at more preventive and effective occupational health services and enhancing the availability of good quality occupational health services as well as earlier intervention with work related disabilities. The most important reform in the second field was the establishment of new "Centres for well-being at work" to provide individual work places with practical tools and services. Proposals in relation to the third topic were mainly about ensuring flexible transitions between different levels of education, smoother progress of studies, and linking education more closely with working life.

 

 

In general terms, employers were quite critical about the Ahtela group outcomes. The Research Institute of the Finnish economy (ETLA) criticises the Ahtela group of ambiguous pondering on links between health, occupational health and the length of careers arguing that the Ahtela report barely at all refers to the research in the field, the report does not assess the costs, and there is no timetable for the reforms. ETLA argues that there is actually evidence that laying off older workers have led to a significant improvement in companies' productivity. Also, it is unclear whether increasing well-being at work really increases productivity. ETLA (and the Confederation of Finnish Industries EK) would like to see a removal of early retirement schemes, improvement of the incentives of the disability pension funding, raising eligibility ages for some pension forms as methods for extending the citizens work life.

 

 

The labour unions, on the contrary, expressed their satisfaction with the Ahtela group. The Central Organisation of Finnish Trade Unions (SAK), the Finnish Confederation of Professionals (STTK) and the Confederation of Unions for Professional and Managerial Staff in Finland (Akava) considered that suggestions made by the Ahtela group were enough to achieve the goals set for the working groups. The Labour Institute for Economic Research (Palkansaajien tutkimuslaitos) argued in its statement that the hypothesis behind the working groups has been an overemphasis on the retirement age and the length of careers as a core prerequisite for the economic growth. The Research Institute sees the age policy only as one method to the future growth of the economy affecting mostly labour force availability. According to them, a more critical factor in the forthcoming years will be the issue of how to create new jobs and, in contrast to earlier predictions in Finland, unemployment and underemployment will be serious problems. The Research Institute also emphasises the significance of education. The better education of the workforce as well as enhancing staff participation in in-work training increase the retirement age quite significantly. The Research Institute also argues that the life expectancy coefficient applied in Finland from the beginning of 2010 will in the years to come have a long-term effect on the pensions paid. By reducing the amount of pensions paid this also reduces the macroeconomic pressures on the pension system as well as strongly encourages people to work longer.

 

 

The Finnish Institute of Occupational Health makes a strong point of the fact that the number of work disability pensions among the age group 16 - 34 has increased by 37 % during the years 2003 - 2008. The calculations made by the Institute show that the total costs of young people's disability pensions are nearly as high as those in the age group 55+. The increase in costs in this field is largely due to the rise in mental health issues faced by young men. Mental health disorders should therefore be given increasing consideration in the occupational health system.

 

 

The National Institute for Health and Welfare (THL) emphasises in its statement the significance of a well functioning basic health care system. It suggests that the "Centres for well-being at work" suggested by the Ahtela group could be organised as part of the normal nationwide system of Health Care Centres thus enabling SMEs and the unemployed, for example, a better access to the services.

 
haut de page

A propos de cet article

Auteur(s) : Timo Spangar

Mots clés : Pension system, reform, Finland, retirement