sou · GOB383 · 2001-01-01 00:00:00 — Percentage wise, in 1990 the young had 14,2 percent higher income than the pensioners, whereas in 1997 they had 11.3 percent lower incomes. The trend for the 35–64 years age group is provided for reference. (Figure 37.) Disposable equivalent household income for one-person households by age in 1990–97, thousand in 1997 prices Source: Uusitalo 1999. A similar age-specific pattern holds for , too (Figure 38). Between 1993 and 1997 incomes for the youngest age group (18–29 years) fell below those of pensioners (65–75 years). In 1993 the youngest age group had an income 1.3 percent higher than pensioners, but in 1997 it was 6.1 percent less. According to (2000) the young and families with children in 1997 had still not regained the income levels prevailing in 1990. Disposable equivalent household income for one-person households by age in –97, thousand SEK in 1999 prices Thousand SEK in 1999 prices Source: 2000. Measuring income distribution reveals a broad picture of the develop- ment with regard to economic resources, but it is still only one of the measures available for examining developments in economic welfare. Incomes are of course important, but from the point of view of every- day life, expenditures also matter. Although income distribution studies reveal a pattern of quite stable development and relatively change, to understand changes in economic welfare it is import to know how the income distribution remained stable. Above, it was reported that during the early 1990s almost all decile groups, socio-economic groups and households experienced a fall in their incomes during the recession years in both countries. While in terms of equality between groups this can be considered a good thing, it is still the case that the experience of falling income is very different for the least well-off compared to those in the highest decile group, for example. Therefore a decline in incomes accompanied by changes in prices, housing costs, user fees etc. may result in economic difficulties for some groups notwithstanding an even development in income distribution. Other measures are thus needed to supplement the picture of the development in economic welfare. In the absence of an accurate and commonly accepted measure of economic problems, social assistance is sometimes seen as an outcome indicator that reflects real economic problems among the population. However, research has shown that social assistance should not be taken as an indicator of real economic need, as not all of those who would qualify for social assistance actually apply for it (1990; Halleröd 1991). Moreover, it is known that not all social assistance recipients are poor in the sense of relative poverty measures; different poverty measures do not necessarily overlap (Kangas and Ritakallio 1996). While there seems to be a view that the social assistance system is rather more underused than overused, this has not been a hindrance to lively debates related to incentives. In addition to growth figures, issues such as support dependency and effects of the assistance system on incentives have become topical. The latest developments reveal that changes are occurring here, too, partly motivated by the aim of discouraging supposed abuse of the system.3 Also, as the granting of social assistance is the responsibility of municipalities, there is wide variety in practices, levels and development in both countries. There is known about the variety of practices, but according to the research available municipalities have tightened the rules for receiving social assistance in both countries (Mäntysaari and Maaniittu 1998; 2000). Here, the focus is first on development in both take-up of social assistance, and expenditures in the light of national level data. This is followed by a look at recipiency of social assistance by age and house- hold type. Finally, co-variation between unemployment and social assistance is examined. Development in social assistance: number of recipients and expenditures During the 1990s the number of social assistance recipients grew tremendously in both countries (Figure 39). In the number almost doubled: 182 000 households were receiving social assistance in 1990, with 314 000 persons in these households compared to 610 000 (11.9 percent of the population) in 1996, which was the peak year for the numbers receiving social assistance during the year. In 1997 the number of individual assistance recipients fell slightly to 594 000. The first decrease in numbers for both households and individuals thus came between 1996 and 1997 (Social assistance 1997). The latest data (Stakes, forthcoming) confirm that the decline in social assistance 3 Lately, the activation of social assistance recipients has become topical in , and the municipalities have been given the right to reduce the amount of if the assistance recipient does not accept activation measures. Since 1996 municipalities can reduce the basic amount of social assistance by 20 percent if the person refuses work or participation in almp measures. In 1998 the Finnish government implemented some changes in the basic benefit systems in order to shift some social assistance recipients out of last-resort temporary assistance. Housing allowance and unemployment benefits were improved a to ease some of the need for social assistance. The aims were to shift the balance from last-resort assistance to the primary benefit system, decrease social assistance expenditure, stop the growth in the number of assistance recipients and shorten the duration of assistance recipiency. This coincided with some tighter rules regarding the payment of social assistance. (Keskitalo & 1999). In , too, a lot has happened to link activation and social assistance (see e.g. ). recipients has continued. In 1998 there were 313 000 households and 535 000 persons; 10.4 percent of the Finns had received social assis- tance during the year. In there was a similar increase in the number of persons and households receiving social assistance. In 1990 there were 517 000 persons receiving social assistance. As in 1996 was the peak year, with 753 000 social assistance recipients (8.5 percent of the population). Numbers thereafter decreased to 692 000 persons in 1998 (7.7 percent of the Swedish population). Social assistance in and , 1990–98, recipi- ents per 100 inhabitants Persons per 100 inhabitants Source: 1998, Social assistance 1997, forthcoming data from Stakes. Gross expenditure on social assistance has reflected this increase in both countries (Figure 40). In expenditures almost tripled between 1990 and 1997: from 1 350 million in 1990 (in 1997 prices) to 3 050 million in 1997 (STM 1998:15).4 According to the statistics on municipality economy, 1998 was the first year in the decade that expenditures actually decreased: costs for social assistance 4 This is still only a small proportion (1.6 percent) of total social expenditure; in 1997 total social expenditure was 185 billion (Social assistance 1997 1998:1). Yet the growth is also marked in percentage terms, as in 1990 the expenditure on social assistance accounted for 0.8 percent of all social expenditure. in 1998 amounted to 2 767 million (Statistics ), representing a substantial decline in expenditures. Likewise, expendi- tures in increased each year until 1997, again followed by a marked decrease in 1998. Gross expenditure on social assistance in and –98, 1990=100 Source: 1998, Social assistance 1997, forthcoming data from Stakes, own calculations. Note: Calculations based on gross expenditure according to national sources, for in million SEK in 1998 prices, for in million in 1997 prices, except the figure for 1998, which is in 1998 prices. Although the main trends appear broadly similar, there are some inter- esting differences. Firstly, the increase in the number of social assistance recipients has been far more pronounced in . From a relatively equal starting point in 1990, the growth recipients in has been almost 100 percent, contrasting with 40 percent in (2000). Secondly, the proportion of social assistance recipi- ents at the end of the period (1998) is considerably higher in (10.4 percent) than in (7.7 percent). Thirdly, with 691 000 recipients during 1998 had a total expenditure of , while with 534 000 recipients spent only 2.8 billion . This major difference in expenditure calls for some explanations. Basically, costs are affected by the number of recipients, the average duration and the average sum of social assistance. As there are no major differences in the average duration of benefits (5.6 months in in 1997 and 5.8 months in according to national sources), the difference lies in the average amount paid to recipients. In the amount of social assistance paid to households has remained very stable over the period, despite the pronounced increase in total expenditures. In 1990 the average amount paid to each house- hold per month was 1 622 (in 1997 prices), and in 1997 1 658 per month (Social assistance 1997:56). From the Swedish statis- tics on social assistance (1998), it can be calculated that the monthly assistance per household in in 1997 was around . The far lower expenditures per household in could perhaps partly be explained by the fact that many social assistance recipients only receive a small amount to top up their incomes from other sources. There is unfortunately no information on how many social assistance recipients are paid the full norm (2 047 /month) and how many receive less than that. Some clues for assessing this are provided by statistics showing that 77 percent of social assistance recipients also received other benefits. If it is the case that there are more fully dependent social assis- tance receivers in than in , there is justification for looking at differences in the primary support systems. An obvious candidate here is the universality of the unemployment insurance system. In the unemployment security system covers almost 100 percent of the unemployed, offering at least some basic income even to those without a work history and no membership of an unem- ployment fund. According to statistics from the , there were 372 400 unemployed job-seekers in in 1998, and 369 600 persons receiving some form of unemployment security (earnings-related unemployment insurance, basic unemployment assistance or labour market support) (calculations based on 1–2/1999: Table 23). In contrast, about 20 percent of the unemployed in are without any compensation from unem- ployment funds or from the basic security system (KAS) (2000: table 4.1). Other explanations for the differences in expenditure could be sought in the rules for housing allowance systems, for example. Furthermore, there is certainly a difference in the ethnic composi- tion of social assistance receivers. In almost half of the expen- ditures for social assistance system are paid out to people with other than a Swedish background; refugees alone account for almost a fifth. There are no data based on the ethnic dimension for . Development according to age and household type Next we move from the broad development patterns to examine differ- ences in how social assistance recipiency is spread across the popula- tion. Table 9 shows how social assistance recipients are divided among age groups. The developments look very similar. Social assistance has especially become more common among young persons aged 18 to 24 years in both countries. On the other hand, towards the end of the decade the decrease in social assistance recipiency became more pronounced for this age group. Also, the share of recipients aged 50–64 years of age has increased in both countries. Households receiving social assistance by reference persons age in and and 1998. Percent of populations in each age group 18–24 years 25–29 years 30–39 years 40–49 years 50–64 years Source: SOU 2000:3, Social assistance 1997, forthcoming data from Stakes and own calculations. A cross-sectional comparison by age group for 1998 reveals that the division of recipients is very similar between the countries; about 20 percent of those aged 20–24 years received social assistance during the year. Overall, has a somewhat younger constituency of social assistance recipients than ; 65 percent of social assis- tance recipients are below , while in the respective share is 58 percent ( table 10 ). Households receiving social assistance by reference persons age in and , 1998, percent of age group Sources: 1998 table 14 for , forthcoming statistics from Stakes for . Looking at the development by household type in the national statistics one can see how receipt of social assistance became more common across the board. Yet the most marked growth occurred for single households in both countries (SOU 2000:3:93–94; Social assistance 1997). In there are more single-parents among recipients, whereas in the share of couples receiving social assistance is higher. (Table 11.) Households receiving social assistance by type of household in and , 1990 and 1998. Percent of all households of each type receiving social assistance Source: SOU 2000:3, Social assistance 1997 forthcoming data and own calculations. Comparing the shares of different household types receiving assistance (Table 12), some variations between and can be seen. In there are higher proportions of assistance recipients among single men without children, couples without children and couples with children. The shares for single women without children are similar. The main difference seems to be in the share of single parents. Unfortunately, due to reporting differences a breakdown by gender is not available for (share in 32.3 percent for women with children plus 12.4 percent for men with children, while the sum for both sexes is 31.3 percent in ). The share of social assistance recipients among different household types in and , 1998, percent of household types Single men without children Single women without children Single men with children Single women with children Source: SOU 2000:3, Social assistance 1997, forthcoming data and own calculations. Note: a the figure 31.3 for is for men and women. Unemployment and social assistance Unemployment has clearly been the main factor underlying social assistance benefits, and the developments of the early 1990s certainly provide ample reasons for the growth in social assistance recipiency. Both unemployment and social assistance recipiency are pronounced among the young. To contrast the co-variation of unemployment and social assistance in the two countries, developments in unemployment and social assistance are reported here in a similar to (2000). reports for that social assistance recipiency follows a similar trend pattern to unemployment. The number of social assistance recipients increases when unemployment increases, and continues to rise somewhat after unemployment stabilises. Both curves again start to fall by a similar magnitude after 1997. For social assistance also increases as unemployment rises, but less dramatically than unemployment. As in there also appears to be a time lag: recipiency of social assistance continues after an improvement in unemployment rates has occurred. Unemployment has fallen consid- erably since 1994, but the trend reversal in the share of social assistance recipients occurred only in 1997. (Figures 41 and 42 .) Unemployment rate and share of social assistance recipients in 1990–98, percent Source: Social assistance 1997, forthcoming statistics from Stakes, Labour Statistics 1997. Unemployment rate and share of social assistance recipients in –98, percent Source: , 1999, 2000. Although the co-variation in seems less obvious than in , it has been stated that unemployment as a cause of social assistance in became more important during the 1990s (Mäntysaari and Maaniittu 1997). This can be seen from the cross- sectional statistics gathered each , which list the main source of livelihood of social assistance recipients. In there were over 59 000 households receiving social assistance, of which 17.3 percent declared unemployment benefits as their main source of livelihood. By contrast, in there were over 146 000 such households, of which 52.6 percent declared unemployment benefits as their main source of livelihood. (Social assistance 1997:59.) This information appears to confirm that social assistance has become a system to supplement inadequate unemployment security (Mäntysaari and Maaniittu 1997).5 In conclusion, although the basic principles of the social assistance systems in and in terms of their status as a last-resort system, link to social work and local responsibility, for example, are quite similar, the examination shows that some major differences also exist. In both countries the social assistance system was, at least in principle, designed to be a short-term, last-resort safety net. The tremendous growth in numbers of recipients has strained this notion, as has the fact that income support has become a continuing means of support for many, especially among the unemployed. Although some co-variation between unemployment and social assistance exists in both countries, the way the social assistance system relates to the unemployment insurance system differs. The description of the development of the systems in and points to institu- tional differences concerning the role of social assistance in the totality of the income support systems. Although there are fever social assistance recipients as percentage of the population in , the overall expenditures per recipient are much higher. In other words, fewer need more in . It was suggested that some explanations could be found in the institutional differences in the unemployment insurance system and the housing 5 In there are two forms of unemployment assistance for those who are not members of unemployment funds: basic unemployment allowance and labour market support. These assistance forms provide an income which is very close to the guaranteed minimum income norm of social assistance (the norm is 2 047 /month for a single person). On top of this basic allowance, most benefit recipients probably need housing allowance. However, as the housing allowance is meant to cover only 80 percent of the housing costs, it is likely that the basic unemployment allowance or the labour market support minus 20 percent of the housing costs will result in a disposable income less than the social assistance norm, and therefore many seek additional support from social assistance. As it is less likely that those with an earnings-related unemployment benefit need to resort to social assistance, co-variation between the number of persons receiving social assistance and the number of unemployed persons not receiving earnings-related unemployment allowance was tested. As expected, co-variation was much more pronounced. On the other hand, the share of social assistance recipients in is higher, but the expenditures are significantly lower. It was suggested that compared to more Finnish people need to top up their incomes from other sources to make ends meet. Developments in social assistance may then be seen as an indicator of how the rest of the social security system is operating. From a policy perspective this assessment could be interpreted as having bigger gaps in the coverage of its social insurance system, while the shortcoming in seems more to be related to compensation rates and/or the level of minimum benefits. It is quite possible that in addition to growth in unemployment per se, cutbacks in the compensa- tion rates and coverage of cash benefits have resulted in increases in the number of social assistance recipients, but the relationship is certainly not a simple one, and very research has so far been done on it. 5.4Balance sheet on changes in economic welfare It may be concluded from this section that the way unemployment was divided between men and women and between different age groups in and shows similarities. In both countries unemploy- ment hit the young hardest. Gender-wise, men suffered more from unemployment in the early 1990s, although since unemployment began to decrease the young and men have experienced more favourable development. The overall result of the comparison of income distribution trends suggests that in both countries the years of recession passed by with surprisingly minor changes in income inequality. In both countries income inequality has increased since the mid-1990s as factor incomes have risen, unemployment has decreased and the impact of cuts has begun to show. It may be concluded here that in both countries the welfare state functioned as it should in a time of economic crisis and was able to soften its effects at the individual level. A more detailed breakdown of income distribution trends for different socio-economic groups suggests that reductions in disposable income were very evenly spread in . Perhaps because experienced a less dramatic economic slump, the consequences were less evenly spread. In a more visible dividing line is apparent between the employed and non-employed. It seems that income development for different household types was also more similar in , although comparability is not the best possible here. True, in single parents stand out, but less clearly than in . It is also less easy to identify winners in . In terms of income distribution by age the young seem to be the clear losers in both countries. While the comparison of income distribution did not reveal big differences between the countries, the examination of developments in social assistance showed in a much worse light. The number of people forced to resort to last-resort social assistance grew tremendously, and the share of the population still receiving it remains huge. In a more detailed scrutiny the young again stand out as a group, in both countries. There was variation in the distribution of social assistance between different household types; single parents were more often recipients in , while the share of couples receiving social assistance was much higher in . This report has aimed to provide the reader with comparable infor- mation about the nature of the 1990s economic crisis in and , and the consequent policy adaptations and developments in economic welfare of the two populations. This final section gives a summary of the data and findings. A broadly similar development pattern Overall, the report suggests the economic crisis of the 1990s may be divided into three phases. The economic crisis turned into an employ- ment crisis, which in the third phase transformed into problems in public financing. Generally this pattern seems to hold for both countries. Although both the economic and employment crises emerged from similar seeds and at the same time, the employment problems have turned out to be a more persistent phenomenon; by 1998 employment rates had still not recovered to the level prior to the macro-economic downturn. The consequences of the economic turmoil very soon became visible in public budgets, but policy reactions to the growing imbalances were delayed, unless one counts borrowing a policy reaction. Effects to redress the imbalance started in 1993, and by 1998 budgetary balance had been achieved in both countries. Persistently high levels of unemployment, high indebtedness and interest costs have created a more or less stagnant public sector, as exemplified by long-term commitments to self-imposed ceilings on public spending in both countries. Tight budget policy and spending limits are expected to continue in the near future, both for improving the indebtedness situation inherited from the crisis years and to prepare for future budgetary pressures. Therefore, it can be argued that the effects of the economic recession are still evident in both countries public finances and social policy programmes.