June 3, 2020
This week’s report from the Helsinki GSE situation room considers the development of applications for basic security benefits, furloughs and applications for the unemployment benefit of Kela (the Social Insurance Institution of Finland) by income class, changes in the characteristics of those applying for said benefit, and the effects of the state of emergency on families. Currently, the observation period reaches the last half of May.
In many figures, we use the spring of 2019 as a comparison period. The background information used for the figures is from the end of 2018 as that is the most recent data available in the registries of Statistics Finland.
Development of the number of applications for Kela’s benefits
- The first figure shows that the number of beginning furlough spells has continued to increase quickly compared to last year. However, the growth has slowed down compared to March and April. For unemployment spells, there’s not much difference between the years.
- The next four figures compare the number of applications arriving at Kela for four types of benefit between 2019 and 2020. According to the figures, this year’s numbers were roughly the same or slightly lower than last year before the start of the coronavirus crisis. After the establishment of the state of emergency, applications for unemployment and housing benefits started to grow. At the end of the observation period, around 100 000 more applications of both types have arrived at Kela compared to last year. The state of emergency has not changed the numbers of applications for sick pay, and income support – the aid of last resort – has actually been applied for less than last year.
Furloughs and applications for Kela’s unemployment benefit by disposable income
- The next two figures describe where those who have been furloughed or applied for the unemployment benefit of Kela place on the income distribution. The analysis is based on the 2018 income deciles calculated by Statistics Finland, which use the equivalised household disposable money income to divide the population into ten equally sized classes. The 10% of the population with the lowest income belongs to the first, and the 10% with the highest to the last decile.
- In the comparison between furloughs and applications for Kela’s unemployment benefits, one has to take into account differences in how the variables are defined. The applications for Kela’s unemployment benefit may come from people running out of earnings-related benefits or coming to unemployment from outside of the labor force or from wage-supported employment.
- The left panel of the first figure reveals that the highest income deciles have faced the most furloughs during the coronavirus crisis. This observation is not surprising in the group of people who have previously been employed, as the panel on the right shows. One can, however, also observe some slight polarization to the edges of the income deciles. The shares of the lowest and the highest deciles among all furloughed people have increased compared to 2019.
- The second figure shows the income deciles of those applying for Kela’s unemployment benefit. As in the previous figure, the left panel shows the absolute numbers of people, while the right panel now presents the change between spring 2019 and 2020 within the income deciles.
- The unemployment benefit applicants clearly differ from the furloughed, placing mostly in the lower deciles. however, while the number of applications has grown in all income deciles, the growth has been sharpest in the higher deciles. This shows that the crisis has created new groups of applicants, something we will focus on more in the next figures.
Changes in the characteristics of people applying for Kela’s unemployment benefit during the coronavirus crisis
- The below figure divides the highest and lowest three deciles by level of education. In both groups we see growth in the number of applicants for all levels of education. however, the growth has been the highest for those with more than a basic education. Hence there are more people with degrees applying for Kela’s unemployment benefit. In part, this observation is likely explained by the possibility opened to entrepreneurs to apply for the unemployment benefit. However, this is only a partial explanation, as the share of people who have acted as entrepreneurs among all the applicants is around 16 percent for the lowest and 30 percent for the highest three deciles. The level of education of the applicants has also risen in other groups.
- As the second figure describing the change in the characteristics, we present the share of the top three deciles among all applicants by county. In 2019 this share varied from 4 to 8 percent depending on the county. During the coronavirus crisis the share has at least doubled in all counties. Between counties the share ranges from 10 percent in North Karelia (Pohjois-Karjala) to 23 percent in Uusimaa.
Reflection of the state of emergency on families
- Finally, we will look at furloughs and applications for Kela’s unemployment benefits on the household level. The analysis is based on the 2018 household data of Statistics Finland. In the classifications used, a family includes one-family households, single-person households include those living alone, and all other types of families have been classified as other.
- The below figure shows the number of furloughed households. During the corona crisis, almost 200 000 households have faced a furlough. Out of these, two thirds are families where one person has been furloughed. Around 45 000 single dwellers have been furloughed, and there are less than 8 800 families in which two members have been furloughed. In all types of household, the growth from last year has been strong, as the number of furloughs in spring 2019 was low.
- The corona era has seen an increase in applications for Kela’s unemployment benefits across all household types. The applications have increased more for families than single-person households.
- Next, we will look at the incidence of the increased furloughs among families with children. With these figures, it’s good to keep in mind the context of the actual number of families with children. With the definition used in this analysis, there were 547 603 families with children in Finland in 2018. For families with children under the school age this number was 264 520.
- The below figure reports the number of families facing furloughs by the number of children. Around half of the families facing furloughs do not have children. Within families facing one furlough, more than 27 000 have either one or two children. More than three children are found in over 10 000 families with one furlough. The families in the most difficult position are those facing two furloughs. There are less than 9 000 of these families, less than 4 000 of which have children.
- All in all, a bit over 12 percent of families with underage children have faced a furlough during the corona crisis. This number includes all furlough spells, regardless of how long they last.
- The below figure reports the same information as the above, except now we consider families with children under the school age (less than 7 years old).
- Again, a bit over 12 percent of these families have faced a furlough during the corona crisis. The figure again includes all furloughs regardless of length.
- Less than 9 percent of families with children have applied for Kela’s unemployment benefits during the corona crisis.
- There are around 3 000 families with children in which two people have applied for the benefit. For children under the school age, this number is below 1 400.
- Additional information about the Helsinki GSE Situation Room consisting of researchers from Helsinki GSE, 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 media: Cite 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