Finland’s unemployment rate among worst in EU

Brussels: The employment situation in Finland is among the weakest in the European Union, according to a report published on Tuesday by Statistics Finland.

While the unemployment rate is on average about 6 percent across the EU, it is as high as 8.4 percent in Finland, based on the latest figures.

Only Spain (11.5) and Greece (9.6) have higher rates of unemployment.

However, Statistic Finland’s report also noted that both Spain and Greece have seen slight improvements in their employment figures over the past year, while Finland’s rate has deteriorated further — with the short-term outlook looking even gloomier.

Janne Huovari of the Ministry of Finance told Yle that the government’s austerity measures — announced earlier this year — could lead to a further increase in the number of people out of work.

A number of reforms aimed at encouraging people to seek employment, such as cuts to housing allowance and the staggering of earnings-related unemployment benefits, may in fact have the opposite effect in the short term as the Finnish economy is in a period of sluggish growth.

“It may increase unemployment if there is not enough demand [for labour],” Huovari said.

The government has set a goal of creating 100,000 new jobs during its term in office, but Huovari acknowledged achieving this aim will be “challenging”.

“There has been a setback here, and it is now taking longer to reach the employment target. But employment will also grow quite quickly if the economy picks up,” he said.

He added that the impact of many of the government’s reforms will only begin to be felt at the turn of the year, while others may not have a tangible effect for years.

According to Huovari, there are a few reasons to explain why Finland is lagging behind most other EU countries.

First, economic growth in Finland has been slower compared to other countries, partly because Finland is more sensitive to interest rate changes.

This means that rising interest rates will have more of a negative impact on the Finnish economy compared to other EU member states, especially as variable rates are more common in Finland for both housing and corporate loans.

However, on the flip side, a drop in interest rates will stimulate economic growth in Finland quicker than it would elsewhere.

Huovari also noted that Finland has suffered more in economic terms from Russia’s invasion of Ukraine compared to most other EU countries.

The third reason, according to Huovari, is that immigration has remained strong in Finland even while the employment situation has deteriorated.