Slow economic growth and growing unemployment during the first months of the year have also been reflected in the finances of Employment Fund. As a result, we revised our forecast for change in net position for the current year by projecting higher deficit than previously anticipated.
The level of unemployment insurance contributions collected by Employment Fund was substantially lowered for the year 2024. This was primarily a result of the good financial position of the Fund, accumulation of the business cycle buffer to its maximum amount and the economic and employment outlook. We also took into account the impacts of the cuts made in unemployment security and the abolition of the adult education benefits.
Despite growing unemployment, our liquidity remained good throughout the first half of the year and we have successfully managed all our unemployment security and other social security financing tasks. The employment situation is expected to start improving during the second half of 2024.
As Parliament was discussing the Government’s proposal to abolish the adult education allowance, individuals eligible for the benefit made extensive use of their right to apply for it. During the first half of 2024, the number of applicants was about 1.5 times higher than during the same period in 2023. However, the decision that no adult education allowance would be granted to studies starting on or after 1 August 2024 led to a dramatic drop in the number of applicants in the autumn. Increase in the number of applicants and huge interest in the allowance as well as the uncertainty accompanying the abolition were not reflected in customer satisfaction with the adult education allowance services. It remained at extremely high level.
Abolition of the adult education allowance also means dismissals. Change negotiations took place at Employment Fund and the personnel reductions will be carried out in tandem with the abolition process. At most, Employment Fund will terminate 73 tasks. This means that the abolition of the benefits will lead to major changes in staff numbers in the Fund even though the allowance scheme only accounts for about 10% of our total expenditure.
The abolition of the adult education benefits was extensively discussed in the public and in Parliament throughout the legislative amendment process. We produced a large amount of information on the use and content of the benefits to support the debate and decision-making. A model replacing the scheme was one of the topics discussed. Two schemes are being implemented: a model based on student loans and a subsidy scheme managed by the Service Centre for Continuous Learning and Employment. However, the latter scheme would be available to employers instead of persons participating in education.
As expected, lower unemployment insurance contributions pushed the Fund’s result for 2024 into deficit though the deficit was further deepened by higher unemployment expenditure. The spending cuts based on the Government Programme had only slight impact on unemployment security expenditure. There were few changes in the collection of the unemployment insurance contributions and the funding of unemployment security and other social security managed by the Fund during 2024.
The Finnish Government decided to channel the savings in unemployment security and other social security in the state budget, and the channelling will be carried out through health insurance and
health care insurance. From Employment Fund’s perspective, the solution adopted by the Government is workable because the level of unemployment insurance contributions will be allowed to vary in a normal manner. The Government also decided that the channelling based on changes in unemployment security will be abolished as from 1 January 2025. The scheme has been in effect since 2014.
We proposed a further reduction for the unemployment insurance contributions for 2025. In the proposal, we took into account the economic and employment forecasts for 2025, an estimate of the impact of the cuts in unemployment security on the expenditure of Employment Fund and the high level of the business cycle buffer. With the second consecutive year of lower contributions, unemployment insurance contributions will be less than half of the 2023 levels in 2025. Despite the reductions, the liquidity of Employment Fund is secured.
In our sustainability work, we highlight themes of social responsibility as our key goals, which is in line with our core tasks. We promote the sustainable development goals set out in the UN 2030 Agenda, in particular by ensuring sustainable funding of unemployment security, by effective implementation of adult education benefits, and by observing and developing the principles of good governance in the Fund. In 2024, we focused on defining the indicators for sustainable reporting and planning measures so that we can build a solid foundation for systematic sustainability work and reporting.
The activities of Employment Fund are based on the work input of skilled and competent personnel capable of change. Working together is our key resource. De- spite the change, we were able to provide our customers with an excellent customer experience, perform all our statutory tasks impeccably and set our sights to the future.
Janne Metsämäki
Managing Direktor
