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Paltamo full employment experiment in 
Finland 
Project researcher Antti Alaja, Kalevi Sorsa Foundation 
20.10.2014 1
Outline 
• Local full employment experiment (2009-2013) that took 
place in a small municipality of Paltamo (around 4000 
...
Background 
• Paltamo and the surrounding Kainuu region have had 
high unemployment rates after the great financial and 
e...
• The purpose of the Paltamo experiment was to replace 
income from different social benefits and transfers with 
one wage...
• Monthly gross minimum wage 1038 euros, average 
wage 1203 euros, and maximum 2312 euros (2013) 
• Wage range is explaine...
• The House of Active Employment also provided 
extensive welfare and health services to participants 
• Finnish welfare s...
What kind of activities? 
House of Actives Employment tried to concentrate on such 
activities that would not crowd out lo...
• National Institute of Health and Welfare estimated that 
experiment had different effects on health and well-being 
in d...
Similarities between Paltamo experiment and the ELR 
proposals 
• Both see employment seen as crucial issue in promoting 
...
Public reactions 1/3: “It`s too expensive” 
• Widely shared view within the press and political elites: 
”Paltamo model is...
Public reactions 2/3: ”Let`s make people work for their 
benefits” 
• Politicians with workfarist ideas demand that the 
u...
Public reactions 3/3: Basic income and Job Guarantee 
• Debate in the progressive camp: are basic income and 
direct emplo...
Conclusion: 
• ELR type programs are discussed in Finland as a 
solution to high regional unemployment and a social 
exclu...
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Platamo Employment Experiment in Finland

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Platamo Employment Experiment in Finland

  1. 1. Paltamo full employment experiment in Finland Project researcher Antti Alaja, Kalevi Sorsa Foundation 20.10.2014 1
  2. 2. Outline • Local full employment experiment (2009-2013) that took place in a small municipality of Paltamo (around 4000 inhabitants) in eastern Finland • Main features of the Paltamo model, its public reception and debate about national adaptability in Finland • Experiment has been extensively studied by Finnish research institutes and universities • Interesting case study for employer-of-last-resort proponents: how could the ELR be applied in a small and open eurozone economy and in the context of a Nordic welfare state and high regional unemployment rates? 20.10.2014 2
  3. 3. Background • Paltamo and the surrounding Kainuu region have had high unemployment rates after the great financial and economic crisis in Finland of the early 1990s • Unemployment rates over 15 per cent are typical in Kainuu, and long-term unemployment goes from one generation to the next. • The public sector expenditure on passive social benefits (unemployment allowances, social assistance and housing assistance) in constantly on high levels • In this context local politicians and entrepreneurs started thinking radically about new solutions 20.10.2014 3
  4. 4. • The purpose of the Paltamo experiment was to replace income from different social benefits and transfers with one wage income. • In the first phase the unemployed persons would enroll to Jobseekers Club for a few weeks (career planning, analyzing own strengths and employment possibilities) • In the second phase all unemployed persons in Paltamo would be hired for the House of Active Employment – or they would be pointed out supported jobs or internships in private sector or NGOs. • Unemployment rate fell from 17% (1.1.2009) to around 4% (2011) 4
  5. 5. • Monthly gross minimum wage 1038 euros, average wage 1203 euros, and maximum 2312 euros (2013) • Wage range is explained by different work histories, and thus different earnings-based social benefits • Everyone receives an extra 120 euros a month as an incentive – wage income always exceeds prior social benefits • Wage levels were in accordance with sectoral tariff agreements – participants with smaller wages would work shorter hours • Daily work time from 4 hours 45 minutes to 8 hours 20.10.2014 5
  6. 6. • The House of Active Employment also provided extensive welfare and health services to participants • Finnish welfare state is often being criticized for being too fragmented – the socially excluded do not know about the welfare services • HAE provided all services ”under one roof” 20.10.2014 6
  7. 7. What kind of activities? House of Actives Employment tried to concentrate on such activities that would not crowd out local companies and distort competition. • Workshops (carpentry, fishing equipment, bakery) • Second hand shop, cafeteria • Traditional public works outdoors (building parks etc.) • Organizing events for the community • Hobby groups: fishing, karaoke, English speaking club • Culture and art activities 20.10.2014 7
  8. 8. • National Institute of Health and Welfare estimated that experiment had different effects on health and well-being in different age groups • Young people (18-25) experienced that wage income and ”tinkering” in the House of Active Employment was better than being passive at home. They were also eager for employment opportunities outside the house. • Half of age group between 25-50 thought that their well-being and opportunities did not improve during the experiment – no prospects for private sector jobs • Many persons over 50 thought that the experiment is be a way for them to return to employment 20.10.2014 8
  9. 9. Similarities between Paltamo experiment and the ELR proposals • Both see employment seen as crucial issue in promoting well-being, health and employability of the unemployed and fighting social exclusion – jobs not welfare • Hyman P. Minsky stated that employer of last resort policy should take people as they are. Paltamo model is trying to find right kind of job for the unemployed person, and not to find right person for the available job (definition by MP Anne Huotari) 20.10.2014 9
  10. 10. Public reactions 1/3: “It`s too expensive” • Widely shared view within the press and political elites: ”Paltamo model is too expensive to be implemented in the whole country” • It is currently difficult to argue for reforms that would not be cost neutral and Finland has a strong tradition of procyclical fiscal policy • The supporters of the Paltamo experiment argue that in the long-term costs and rewards can`t be exactly estimated – how to estimate what each socially excluded young person costs to Finnish society? 20.10.2014 10
  11. 11. Public reactions 2/3: ”Let`s make people work for their benefits” • Politicians with workfarist ideas demand that the unemployed should work for their unemployment benefits in order to create work incentives and to put pressure on real wages • There is a danger that progressive Paltamo experiment aimed at improving well-being of the unemployed is taken over by workfarists • It is clear that unemployed persons should have a right to reject to work for House of Active Employment without losing their benefits or other sanctions 20.10.2014 11
  12. 12. Public reactions 3/3: Basic income and Job Guarantee • Debate in the progressive camp: are basic income and direct employment policies competing or supplementary proposals? • Job guarantee and a sufficient social security system? 20.10.2014 12
  13. 13. Conclusion: • ELR type programs are discussed in Finland as a solution to high regional unemployment and a social exclusion • The Paltamo experiment and its effects on health and well-being have been extensively researched • Proponents of the Paltamo experiment have not presented direct job creation as a macroeconomic alternative but as a social policy one 20.10.2014 13

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