The Orpo-Purra government’s social security cuts would disproportionately affect service sector workers

The Orpo-Purra government is planning major cuts to social security, which, if implemented, would reduce the monthly income of service sector workers by several hundred euros. The cuts would hit the incomes of part-time family workers worst. 

According to PAM’s Chief Economist Olli Toivanen,for a part-time single parent in Helsinki, for example, the combined effect of the cuts could be over 500 euros a month. 

– The staggering of unemployment benefits, the abolition of child benefit increases and the protected amount for employment income and the various reductions in housing benefit all hit the same households. The combined impact on incomes will then be enormous, Toivanen says. 

The government’s cuts will increase the number of low-income earners by tens of thousands

Part-time work is common in the service sector, so service sector workers will also be affected by the cuts. The share of permanent full-time employment has declined further in recent years in the retail and hospitality sectors. 

SOSTE, the umbrella organisation of social and health organisations, has estimated that the government’s cuts will increase the number of people on low incomes in Finland by 40,000 next year. Almost 13,000 of these are children 

The Orpo-Purra government has a long list of cuts to unemployment benefits. Child increases and the protected amount that incentivises working are abolished, waiting periods are extended and holiday compensation paid at the end of employment would further extend the waiting period. 

List of cuts to earnings-related unemployment benefits

Child increases removed

Earnings-related allowances cut already after two months

Protected amount (300 €/month) that incentivises working removed

Waiting period extended

Index increases not applied

Holiday compensation prevents getting earnings-related benefits for periodisation term

Work requirement for right to earnings-related benefits doubled

Euro amount placed on work requirement

The length of earnings-related benefits will be reduced with the staggered cuts

In PAM’s agreement sectors, it is significant that for many people the length of earnings-related benefits will be reduced due to so-called “staggering”. The staggered cuts could bring many service sector workers’ unemployment benefits down to the level of the basic unemployment allowance after just two months of unemployment. Government Finance Minister Riikka Purra (Finns Party) promised that the duration of earnings-related benefits will not be reduced, but in practice this will happen if the government’s plans go ahead. 

Deep cuts to unemployment benefits mean a significant reduction in income for the unemployed and part-time workers. 

– Unemployment benefits are being cut most for families and people in part-time work. The staggering will reduce the amount of earnings-related allowances in these situations by up to 40 per cent compared to current legislation. Many will also drop out of earnings-related benefits altogether, Toivanen says.

Deep cuts to housing allowance 

Deep cuts are also being made to housing allowance. The basic deductible is being increased and the level of support is being cut.  Index increases will not be applied at the turn of the year and the 300 euro earned income deduction for employment will be removed. In addition, an asset ceiling is being planned for housing benefit. Owner-occupiers will be denied housing allowance completely.

– Housing allowance has been essential for livelihoods, especially for part-time workers in areas with high housing costs. Now it is being cut by 200 euros a month or more for single people and by 400 euros a month or more for families and other multi-person households, Toivanen says. 

List of cuts to general housing allowance

Deductible increased in housing allowance

Level of benefits cut

Helsinki supplement ended

Index increases not applied

Asset ceiling introduced to housing allowance

Owner-occupiers denied housing allowance completely

Assumption of continuous full-time work is out of date 

The government and Labour Minister Arto Satonen (Coalition Party) have repeatedly justified the cuts on the grounds that the aim is to increase the number of full-time jobs. Johanna Harjunpää, a sales assistant from Vaasa, thinks the government’s assumption of permanent full-time work is wrong. Harjunpää, who worked as a hairdresser for 15 years and now as a sales assistant for 10 years, feels that decision-makers do not understand the work in the service sector, and for example how stressful it is. 

I feel that the government is really far removed from our daily lives. It’s easy to make decisions if working hours are from eight to four, with weekends off.

– In the commerce sector, the work is so intermittent that if you work a full week, in practice that often means one day off a week. If you have aches and pains and you’re getting older, you can’t recover from work in one day, Harjunpää says.

– I feel that the government is really far removed from our daily lives. It’s easy to make decisions if working hours are from eight to four, with weekends off.

Example of cuts: Single parent working part-time
Housing allowance	– 144 €/mth
Adjusted allowance	– 278 €/mth
Total	– 422 €/mth

Less flexibility in working life

In PAM’s agreement sectors there are many people who work part-time involuntarily. Full hours are simply not available.

With its cutback decisions, the government is undermining incentives to work and the flexibility of working life by fitting all workers, regardless of background, into the same mould. According to Chief Economist Toivanen, there are about 50,000 involuntary part-time workers in PAM’s agreement sectors, and the government is not helping the situation. 

– In the middle of a recession, the government is cutting spending on trade and services in Finland. Tax cuts for the wealthier do not increase demand in the same way.  

– These cuts will not create more full-time jobs and at the same time they will weaken incentives and opportunities for part-time work, Toivanen wonders. 

Example of cuts: Part-time worker	
Housing allowance	– 151 €/mth
Adjusted allowance	– 174 €/mth
Total	– 325 €/mth

Cuts being made to those who are already low-income earners

The section of the Orpo-Purra government programme on well-being at work states that the government will “promote equality and equity in working life.” Women are more often in atypical jobs than men, so the government’s cuts will increase inequality in working life and the gender pay gap. Harjunpää says the cuts target the wrong people – those already on precarious incomes.

If you make cuts to part-time workers, it no longer pays to work. They should encourage part-time work rather than take away the last incentive for it.

– If you make cuts to part-time workers, it no longer pays to work. They should encourage part-time work rather than take away the last incentive for it, Harjunpää says. 

Instead of cuts, Harjunpää calls for investments in well-being at work and improvements in, for example, shift planning to support people’s ability to cope at work. 

– If you have to run to do your work, something is wrong. The pace of work should be such that you can do it calmly. If you can’t, enough people should be taken on to even out the workload. Shift planning and targets set by management play a very important role here, Harjunpää concludes. 

Author: Pauli Unkuri