Situation room report 03.12.2020 – latest developments in the labor market, households and firms

December 3, 2020

The Helsinki GSE situation room continues publishing reports based on up-to-date data every other week. The reports follow the economy’s development from the labor market’s, households’ and firms’ perspectives.

Many figures use the year 2019 as a comparison period. The background information for the figures has been collected from the Statistics Finland’s registers. The latest available background information from Statistics Finland is from the end of 2018.

Labor market

Labor market – wage sum

The figure below shows the monthly sum of wages in 2019 and 2020 based on the Income Register. In May, the wage sum lagged circa 0.6 billion euros behind 2019’s levels, whereas in June this deficit had reduced to approximately 0.4 billion. In July, the wage sum has reverted back to the level of 2019 and even surpassed it slightly, but in August it dropped again circa 0.25 billion below 2019 level. In October the wage sum is above the 2019 level.

When examining the wage sum figures, it is good to keep in mind that information is uploaded to the Income Register with varying degrees of lag, so the figures may always slightly change in the future. In practice, data more than one month old can be considered nearly final – this means that the wage sum of October is likely to be below the final figure.

The following figure represents average wages of those who started an employment, furlough or unemployment spell in April 2020. Whereas the average wages of employed are slightly higher compared to last year, the average wages of furloughed have not reached last year’s level. The wages of unemployed in April have recovered even at a lower pace. Slow recovery can partly be explained by prolonged furlough and unemployment spells.

The figure below compares the industry wage sums in October 2019 and 2020. All off the larger industries, such as public administration, manufacturing etc. are above last year’s levels. Support services, logistics, recreational services, and hotels and restaurants have had clearly smaller wage sums in October 2020 than October 2019.

The following three figures show the total labor earnings in Finnish municipalities in 2019 and 2020. The first figure shows the total labor earnings in Finland’s 20 largest municipalities, while the second figure shows the percentage changes. In October, Järvenpää and Vantaa had the largest drops in relative earnings.

The third figure shows the ten municipalities which have performed best and worst, among all municipalities. In October the sum of earnings dropped most in Naantali (-2,3%).

The next two figures show labor earnings by age group in September. The figures show that labor earnings have decreased for young workers. In both absolute and relative terms, the age group of under 25 years has suffered the largest decrease. Wage sums have either stayed nearly the same or increased in all other age groups.

Labor market – furloughs and layoffs

The figure below shows the weekly new furloughs and unemployment spells in 2019 and 2020. Amount of new spells increased a lot in the beginning of the crisis, but have declined after that. The number of new furlough spells has remained near last year’s level during recent weeks.

The next figure breaks down the sum of new unemployment and furlough spells in 2019 and 2020 by industry. The number of newly unemployed and furloughed has grown in all industries, apart from households as employers. The largest growth has been in manufacturing, trade and hotels & restaurants. Of the major industries, public administration has been least affected.

Households

Households- salary development of Kela benefits applicants

The following picture shows the average wages by month for those who have applied first time unemployment benefit in April. Wages decreased in April and May compared to earlier months, but since August, the average wage has returned to the original level.

This phenomenon can also be seen from the lower graph, which shows the wage development of those who have applied first time housing allowance in April. Unemployment benefit applicants are those, who are furlough or laid off. Notice that this group unemployed differs from the group considered in the wage sum section. Here we considered unemployed who are not eligible to apply earnings-related unemployment benefit but have applied their unemployed benefit from Kela. Numbers at horizontal axis describe months.

Households – housing allowance

The number of applications for Kela’s housing allowance started to exceed the level of last year as the state of emergency came into effect in mid-March. Since May, the growth in the number of applications has followed last year’s trend. Numbers at horizontal axis describe months.

The growth in the number of applications for housing allowance has increased most in Uusimaa with about 15% more applications in 2020 compared to the corresponding period in 2019. Over 100 000 individuals from Uusimaa have applied for housing benefits in 2020. The second-largest region in growth has been Etelä-Pohjanmaa. No more than 5% growth in benefit applications has been observed in Pohjois-Karjala, Pohjois-Savo, Keski-Suomi and Kainuu.

Households – unemployment benefit

The number of applications for Kela’s unemployment benefits exceeds last year’s by more than 130 000 applications. The numbers started to grow sharply a week after the state of emergency came into effect. Since May, the growth of the number of new applications has slowed down, and it is now roughly equal to that of last year. Numbers at horizontal axis describes months.

The COVID-19 pandemic has taken its toll on the labor markets across the nation. Uusimaa, the largest region , has experienced nearly 90% growth in the number of unemployment benefit applicants in October. Even in regions with relatively low unemployment benefit application growth rates, the applications have increased by around 25%.

The restrictions during the state of emergency and social distancing affected service industries the most. The characteristics of service industry employees are reflected in the sex and occupation distributions of those applying for Kela’s unemployment security. The fact that most of the applicants belong to the younger age groups, follows from their lower rates of belonging to unemployment funds and fulfilling employment conditions.

Comparing unemployment benefit applications with last year’s figures show that the state of emergency has affected families more strongly than those living alone.

Nearly 75% of those who have been furloughed during the crisis belong to single-family households. However, the number of laid off workers living alone and in single-family households have increased relatively equally from last year.

Firms

Firms – the share of firms with furloughs

The figures below show the share of all firms with at least one furlough. The share of employees in the firms that have been furloughed is not considered. The figures shows numbers by industry, county and the size of firms (in terms of employees).

Since the beginning of March, over 20 % of the hospitality and restaurant businesses operating in Finland have furloughed workers. The largest shares occur in Lapland (Lappi) and Uusimaa. The figures also show the larger companies have been more likely to furlough workers.

In every industry, region, or firm size class, the share has increased considerably in March-April and relatively little during May-November.

Firms – the share of furloughed employees

The below figures show the share of employees that have been furloughed, in firms that have furloughed employees. Each point on each horizontal line describes the situation for a particular month with the month numbers marked inside the points. E.g., in the first figure, a point with number four inside tells the share of employees that has been furloughed on average by firms of that particular industry in April (4th month), if any employees were furloughed – the numbers do not include firms with 0 percent of employees furloughed. The figures show the numbers by industry, county, and the size class of firms (in terms of employees).

From the first figure, we see that in March and April, in many industries the share of employees furloughed was high. For instance, in the hospitality industry (Horeca), the share of furloughed employees, in firms that furloughed employees, was around half in March but from May to October, the share of employees furloughed was 20% or less. The same phenomenon can be seen from the second picture as well. The amount of furloughs has clearly slowed down.

The last figure shows that the largest firms have furloughed the smallest share of their employees and the smallest firms have furloughed the largest share of their employees.

Firms – bankruptcy applications

The last figure shows the cumulative number of bankruptcy applications in a given year up to a certain date (27.10.). The x-axis shows the date, and the y-axis the total number of bankruptcy applications left by that date since the start of the year. Years 2018 and 2019 are used for comparison with 2020.

Before the implemented actions against the coronavirus, there were more bankruptcy applications this year than in the previous two years. The rate of accumulation of applications has not increased from mid-March. Instead, since June, the cumulative number of applications has been lower than in previous years, and the amount of bankruptcies is now clearly less than last year. This is most likely explained by the change in law (HE 46/2020) in April, where the creditor’s right to file for bankruptcy was temporarily restricted.

  • Additional information about the Helsinki GSE Situation Room consisting of researchers from Helsinki GSE, University of Turku, VATT Institute of Economic Research and Statistics Finland:  https://www.helsinkigse.fi/research-group/covid-19/
  • Additional information about the report: Otto Toivanen, otto.toivanen [at] aalto.fi
  • Suggested citation in mediaCite Helsinki GSE Situation Room as the source with a link to www.helsinkigse.fi website.
  • Suggested citation in academic publications:please contact otto.toivanen [at] aalto.fi