Economist Pylkkänen calls for unemployment brake in Finland — YLE News

In Finland, economist Elina Pylkkänen called on political parties to agree on introducing an unemployment brake mechanism to counter structural unemployment. As YLE News reports, she believes this approach could replace the so-called debt brake.

Pylkkänen, who previously served as deputy permanent secretary at the Ministry of Economic Affairs and Employment, made the proposal on Wednesday on the political radio programme Politiikkaradio. The debt brake envisages that parties agree at the beginning of each parliamentary term on targets for reducing public debt, regardless of the composition of the government.

The cost of unemployment

The economist compared the debt brake's target of saving €8–11 billion with the costs incurred by the state due to unemployment. In her estimate, one unrealised working career lasting about 40 years costs the state approximately €2 million. If 100,000 people do not realise themselves in the labour market throughout their working lives, the total costs could amount to €200 billion, she said.

According to Pylkkänen, up to 80% of unemployment in Finland is structural, meaning that economic cycles cannot overcome it. She believes this problem is much more serious than most people assume.

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The need for a new approach

According to YLE News, during the term of Prime Minister Petteri Orpo's coalition government, unemployment has risen for three consecutive years, while the number of people in long-term unemployment reached 140,000. Pylkkänen called long-term unemployment an entrenched problem that public policy has so far been unable to solve.

In her view, policies aimed at increasing labour supply and reducing taxes on work, which have been used in Finland for decades, are not producing results. She also noted that labour markets in other Nordic countries are in considerably better condition.

The economist believes it is impossible to balance public finances without solving the problem of structural unemployment. She called on officials to apply a comprehensive approach involving the work of different ministries and questioned whether the state can afford to exclude these people from the labour market.