We need perseverance and various measures

The objective must be that under normal cyclical conditions, the debt ratio of public finances will be brought to a clearly declining path in the coming two parliamentary terms. In the 2030’s, we will seek to return the debt ratio to correspond with the regulations of the EU Stability and Growth Pact. This will, indeed, happen when we get the employment rate to rise toward the 80 percent target.

What is more significant than a single indicator, however, is that Finland’s management of finances is credible so that financing is available at a reasonable price in all circumstances.

The best way to improve public finances is ambitious structural policy that strengthens employment, productivity and economic growth in an ecologically and socially sustainable way. Raising the employment rate to 80 percent would strengthen public finances annually by around three billion euros.

However, policies supporting growth and productivity alone are not enough to ensure the sustainability of public finances.

This is why revenue and expenditure adjustments are also needed so that they, together with structural policy, build a credible pathway of several parliamentary terms toward sustainable public finances. The timetable should be set so that the pace of the adjustments will not interfere with economic development or be unreasonable for people. At the same time, necessary additional investments in, for example, skills and knowledge must be secured. We also need to be prepared to react to crises and economic conditions.

We will protect the welfare state from cutbacks

In the last decade, significant, multi-billion euro expenditure cuts have been made in Finland. In previous government terms, the targets for cutbacks have included education, research, national defence, social security, and transport investments. These expenditure cuts have been widely considered detrimental. For example cuts made in education have, for their part, worsened the current skills shortage and left Finland behind the reference countries. We must not return to this detrimental policy of cutbacks.

The focus of expenditure adjustments must be considered carefully. High-quality public services and sufficient social transfers are at the heart of the Nordic welfare state. They level out income disparities, prevent social exclusion and increase equality in society. The adjustments must not result in erosion of the welfare state. All adjustments must always be broadly considered through, e.g., income distribution measures to avoid increasing inequality as their consequence.

Raising the employment rate will strengthen public finances

Employment must be further strengthened. Raising employment from the current rate of about 74 percent to 80 percent will strengthen public finances, based on the sensitivity analysis of the sustainability gap calculations produced by the Ministry of Finance, by about three billion euros. SDP’s objective is to systematically raise the employment rate toward 80%. After that, we must rapidly proceed toward full employment, that is, a situation where unemployment is clearly below 5%. A significant increase in employment and increasing the participation of the working-age population are an important part of the target of proceeding toward the economic indicator level of other Nordic countries. Our objective is that all of the working-age population able to work is in the labour market, studying or otherwise involved in the society (for example on family leave). We aspire to abolish permanent unemployment.

The employment rate is not the only important factor, but also working hours and, ultimately, wage development – all measures that depict the work contribution in the economy. Also, measuring the employment rate should be developed, for example, by assessing it in the 20–69 age group instead of the current 15–64, as it is justifiable to extend careers at the end but invest in education and training in the early years.

In addition to the quantity of work, also its quality is important. In the Nordic countries, collective agreements safeguard working conditions and the quality of working life. A good dialogue between employers and employees and coordination of economic and labour policies has been Finland’s strength, as it improves the predictability that investments require and, on the other hand, enables rapid reactions to changing economic situations. Finland should maintain this strength.

The full effect of some of the employment reforms carried out in the current parliamentary term will only be seen later, which will support employment trends and strengthen public finances also in the coming term.

Raising employment is not a set of tricks: it is about a combination of finance, education and industrial policies. It is essential to create a favourable environment for trade and industry for investments and stable business. That is why it is important to invest, for example, in the supply of a skilled workforce and a fossil-free energy infrastructure.

We will improve wage earners’ purchasing power by returning insurance contributions to the employer

The burden of social insurance contributions (2.05%), which was transferred to wage earners in the Competitiveness Pact, will be utilised as an instrument in new cyclical policy. Under the current circumstances of inflation, part of the relative contribution can be transferred back to the employers as a means to improve the purchasing power of wage earners without damaging public finances. In the future, changes in this share would be made automatically with a mechanism that considers the price competitiveness of companies in relation to the reference countries and the development of the purchasing power of wage earners. The model must be prepared in tripartite cooperation.