Situation room report 21.1.2020 – latest developments in the labor market, households and firms

January 21, 2021

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.

As the year has changed, the contents of the report will undergo some changes. However, in today’s report we still mainly focus on the situation at the end of 2020. 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 monthly earnings in 2019 and 2020 based on the Income Register. 2020 started at a higher level than the previous year but since April the wage sum was lower than 2019, apart from a few exceptions, with the greatest fall happening in May. In October, the wage sum again clearly exceeded 2019 but the increase was short-lived with the November wage sum already dropping below 2019.

When examining earnings figures, please 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 earnings of December must be considered as preliminary information.

The following figure represents average earnings of those who started an employment, furlough or unemployment spell in May 2020. The figure shows that most of the drop in the wage sum happened among those who were furloughed. The wage sum of those who were laid of also fell, but it was much smaller to begin with. The wage sum of those furloughed in May returned to the same trend as the wage sum of those who staid employed in July, but it seems to have been stuck permanently at a lower level, which suggests that some part of those furloughed have not been able to return to work, at least not full time. The wage sum of those laid off has also recovered slightly, but was still lagging behind 2019 in November.

The figure below compares the industry level earnings in November 2019 and 2020 (a place is reserved for 2021 – hence the legend entry – but it is empty for now). In contrast to October, manufacturing and construction have fallen below last year’s levels, while earnings in trade are just above last year’s level. All of 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 earnings in November 2020 than in November 2019, which was also the case for October.

Labor market – furloughs and layoffs

The figure below shows the weekly new furlough and unemployment spells in 2019 and 2020. Amount of new spells increased more in the beginning of the crisis, but have declined after that. Throughout the year new furlough spells have been above last year’s new furlough spells.

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

Households

Households – salary development of Kela benefits applicants

The following picture shows monthly average wages for those who have, for the first time in May, applied for unemployment benefit. Wages decreased in May compared to beginning of the year, 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 for housing allowance in May for the first time. For them, the wages during the rest of the year are even higher than during the first months. Note that unemployment benefit applicants in this section are those who are furloughed or laid off whereas in the previous section furloughed and laid off employees are considered separately. Here we consider unemployed who are not eligible to apply for earnings-related unemployment benefit but have applied for unemployed benefit from Kela instead. Numbers under bars denote 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 number of applications has followed last year’s trend. Numbers under bars denote months.

The growth in the number of applications for housing allowance has increased most in Uusimaa with about 14% 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 application growth is Etelä-Pohjanmaa. No more than 5% growth in benefit applications has been observed in Pohjois-Karjala, Pohjois-Savo and Keski-Suomi.

Households – unemployment benefit

The number of applications for Kela’s unemployment benefits exceeded 2019 from March to June. After this, there were less applications than in 2019. By far the biggest spike happened in April.

The COVID-19 pandemic has taken its toll on the labor markets across the nation. Uusimaa, the largest region , has experienced nearly 80% 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 20%.

The restrictions during the state of emergency and social distancing affected service industries the most. The characteristics of service industry employees are reflected in gender and occupation distributions of those applying for Kela’s unemployment benefits. Higher application numbers received by younger workers reflect their lower rates of belonging to unemployment funds and fulfilling employment conditions to receive union unemployment benefits.

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 – furloughs and lay-offs

Th first figure below shows the share of employees furloughed on average among firms that furloughed at least one employee. In March and April the furloughs rose to above 30% of the employees, while during the other months the share has staid around 20%. In fact, apart from March and April, the corona crisis saw smaller shares of employees furloughed per month than the first months of the year all the way up to November, although in December the shares have reached those of January and February.

The lower figure shows that more than 80% of the largest firms furloughed at least one employee during the corona crisis in 2020, while only around 10% of the smallest firms furloughed someone. Furloughs were a much more common practice among large firms already before the crisis.

The trend is quite similar when it comes to lay-offs, although the shares of employees laid off was the highest during April whereas for furloughs the highest share was during March. The shares of employees laid off were also lower than the shares furloughed throughout 2020.

Before the crisis, lay-offs were much more common than furloughs, especially among the largest firms. For the very smallest firms, the incidence of lay-offs and furloughs grew by roughly similar amounts.

Firms – turnover

The turnover of firms was slightly smaller than the previous year in January, but overtook it February and March. However, from April to September, turnovers were smaller for 2020 than 2019. The largest drops again took place in April and May. Turnover data is currently reliably available only up to September.

  • 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