Is Finland fighting efficiently against inequalities?

tony-atkinsonAs stated recently by Oxfam, the richest 1% now have more wealth than the rest of the world’s population combined. Global inequality is worse than at any time since the 19th century.

People looking at the success of Donald Trump, or of the far-right of the far-left parties in a majority of other western countries,  should not be surprised: inequalities grow, it affects negatively our economies, and it provokes  unrest in our societies.

Anthony Atkinson, the famous British economist, who is now a professor at the London School of Economics after teaching at Harvard and at  the Paris School of Economics, has published  in Spring 2016  a very important book, “Inequality”, in which he calls for action and presents 15 proposals to reduce inequalities.

In this article, we analyze where is Finland in the implementation of these proposals.

Proposal 1: The direction of technological change should be an explicit concern of policy-makers, encouraging innovation in a form that increases the employability of workers and emphasizes the human dimension of service provision.

Finland’s governments have  been traditionally very keen on taking on board the technological changes, and tried to facilitate innovation, improve the employability of workers in particular. However, the present government, with cuts in research, education and social services does not seem to go in the same direftion

Proposal 2: Public policy should aim at a proper balance of power among stakeholders, and to this end should

  • (a) introduce an explicitly distributional dimension into competition policy;
  • (b) ensure a legal framework that allows trade unions to represent workers on level terms; and
  • (c) establish, where it does not already exist, a Social and Economic Council involving the social partners and other nongovernmental bodies.

This looks quite fulfilled, even if the government has tried, more or less in vain, to break the balance in the tripartite negotiations, by threatening to regulate by legislation insted of negotiations with social partners. Happily, it more or less failed.

Proposal 3: The government should adopt an explicit target for preventing and reducing unemployment and underpin this ambition by offering guaranteed public employment at the minimum wage to those who seek it.

The Finnish government did not set a stable and clear target for preventing and reducing unemployment, but seems to take it seriously. The idea of guaranteeing public employment at the minimum wage, which would be great for fighting inequalities, is not on the table.

Proposal 4: There should be a national pay policy, consisting of two elements: a statutory minimum wage set at a living wage, and a code of practice for pay above the minimum, agreed as part of a “national conversation” involving the Social and Economic Council.

This can be considered as fulfilled, at least partially, in Finland, and it is a reason why the situation is not worse than it is in other countries, even if inequalities are growing in Finland.

Proposal 5: The government should offer via national savings bonds a guaranteed positive real rate of interest on savings, with a maximum holding per person.

It is not the case today in Finland, or at least not with government’s guarantee. Finnish people can lose their savings.

Proposal 6: There should be a capital endowment (minimum inheritance) paid to all at adulthood.

This would be important, and could be an efficient way to fight capital inequalities. It could be financed by the taxes on inheritance, as it does not look fair that some get in adulthood with a lot of inherited money, and some with nothing.

Proposal 7: A public Investment Authority should be created, operating a sovereign wealth fund with the aim of building up the net worth of the state by holding investments in companies and in property.

Our government is doing the opposite by selling the state properties and diminishing the state wealth.

Proposal 8: We should return to a more progressive rate structure for the personal income tax, with marginal rates of tax increasing by ranges of taxable income, up to a top rate of 65 per cent, accompanied by a broadening of the tax base.

This does look like a problem for Finland, as the rate structure is relatively progressive.

Proposal 9: The government should introduce into the personal income tax an Earned Income Discount, limited to the first band of earnings.

Again, not really a need in Finland, considering the tax system

Proposal 10: Receipts of inheritance and gifts inter vivos should be taxed under a progressive lifetime capital receipts tax.

Same remark, to my knowledge, this proposal is more specific for the British system.

Proposal 11: There should be a proportional, or progressive, property tax based on up-to-date property assessments.

it is not the case in Finland, where property taxes are levied annually on present market value. General rates are 0.60–1.35%, 0.32-0.75% on regular housing and 0.50-1.00% on leisure properties. There is a 4% property transfer tax for property, and 1.6% for stock and housing cooperative shares. All this is not progressive, ant it could be discussed.

Proposal 12: Child Benefit should be paid for all children at a substantial rate and should be taxed as income.

The situation is quite mixed in Finland, with some benefits taxable (Maternity, Paternity and Parental Allowances,Partial Parental Allowance,Child Home Care Allowance,Private Day Care Allowance,Partial Care Allowance,Special Care Allowance,Study Grant) and others are not (Maternity Grant, Child Benefit,Adoption Grant,School Transport Subsidy). There could be more done in this field, but one cannot be sure that it would be really efficient and acceptable by the population.

Proposal 13: A participation income should be introduced at a national level, complementing existing social protection, with the prospect of an EU-wide child basic income or Proposal 14:  There should be a renewal of social insurance, raising the level of benefits and extending their coverage.

The government seems to have chosen proposal 13 with a basic income, but not targeted at children, who are excluded from the system. It is true that the situation is relatively good in Finland, who, according to the OECD, is with Denmark one of the 2 countries where the child income poverty rates is the lowest  among OECD countries.However, it is also one

Proposal 15: Rich countries should raise their target for Official Development Assistance to 1 per cent of Gross National Income.

Sad story: the  Finnish government has  cut development aid by 43% when arriving in power. The OECD recommended level of development aid was 0,7 %, and Finland was at 0,56 % in 2015, against  for example 1,4 % for Sweden. Thanks to the government, this will still go down and goes against the reduction of inequalities between countries.

Conclusion:

According to Atkinson recommendations, Finland is still in a relatively correct position for fighting against internal inequalities, even if there are measures which would be necessary to correct the deepening gap between the richest and the poorest in the country,but the measures taken by the government have made things worse. A national debate about inequalities could prevent Finland to navigate towards dangerous social problems.

New book: “Inequality – What can be done?”, Anthony B. Atkinson, ISBN 9780674504769
Published by Harvard University Press (Link)



Categories: Economy, Social

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