Positive financial result despite the COVID-19 crisis
The City of Helsinki’s financial result for 2020 appears to be nearly €500 million positive. Municipal tax revenues also seem to be slightly higher than in 2019, although the unemployment rate was clearly higher in 2020 than in 2019 and the total amount of wages and salaries also remained slightly lower than in the previous year.
Last year, the operating expenses of all municipalities and joint municipal authorities in Finland grew by 2.0%, tax revenues by 4.0% and central government transfers by 27.2%. In the long run, however, the additional costs caused by COVID-19 and the loss of revenue for municipalities may exceed the state aid. The surplus now generated will buffer these effects.
The worst nosedive in the national economy caused by COVID-19 seems to be over, at least temporarily. According to both the Confederation of Finnish Industries and Technology Industries of Finland, the outlook for enterprises was improving in January 2021.
Ageing of population puts pressure on municipal finances
In addition to the development of the national economy and the related tax revenues, a key issue concerns expenditure in the municipal sector. There, pressure is created by the ageing of the population, which affects public finances in two ways: the growth of the elderly population creates pressure on health, care and pension expenditure, and the shrinking of the working-age population weakens the growth potential of the economy, which is directly reflected in the development of the tax base.
The pressure created by the ageing of the population particularly affects municipal finances, as municipalities currently bear the responsibility for social and health care services. Measures to improve employment and increase the efficiency of social and health care service production can potentially improve the sustainability of public finances.
Increased work-related migration will, under certain conditions, have a faster and more beneficial impact on long-term sustainability than the birth rate. Permanently higher net immigration would strengthen public finances if the average employment and wage levels of immigrants did not differ significantly from the native population.
In the below video, immigrant youth tell about their work experience helping Finnish war veterans:
COVID-19 weakened the position of young people and people with a foreign background in the labour market
The decrease in the number of unemployed people in Helsinki faded by the end of 2019 and, at the beginning of 2020, the number of unemployed people was the same as a year earlier. The COVID-19 crisis led to a sharp increase in the number of unemployed job seekers from March 2020 onwards.
The unemployment rate (proportion of unemployed people in the labour force) in Helsinki peaked at 18.6% in May. Full-time lay-offs accounted for 41% of unemployed jobseekers.
At the end of 2020, some of the restrictions related to COVID-19 remained in place and consumers were still cautious. In December 2020, the total number of unemployed job seekers was 51,100, of whom 40,100 were fully unemployed and 11,000 laid off full-time. Unemployment has hit the tourism, restaurant, cultural and specialised retail sectors the hardest.
The COVID-19 crisis has significantly weakened the position of young people and people with a foreign background in the labour market. The number of young unemployed people has doubled from a year ago. Many young people working in the service sector have become unemployed, and many recent graduates have difficulties entering the labour market.
Number of long-term unemployed high in Helsinki
Unemployment has hit those with upper secondary and lower tertiary qualifications the hardest. Unemployment and lay-offs are also reflected in an increase in the number of recipients of basic income support and general housing allowance. Long-term unemployment may lead to an increase in inequalities in the coming years and have a significant impact on the risk of social exclusion of young people and people with a foreign background.
The number of long-term unemployed is high in Helsinki and started to grow strongly in autumn 2020. As a result of the COVID-19 crisis, those who were already unemployed did not succeed in finding employment. The risk of long-term unemployment increases with age. Half of the long-term unemployed are over 50 years old. At the end of 2020, there were 15,300 people in Helsinki who had been unemployed continuously for more than a year, which was 46% more than a year earlier.
Regionally speaking, the number of unemployed people has grown more in the Helsinki Metropolitan Area than in the rest of the country. There are also gender differences: for example, the unemployment rate of immigrant women is much higher than that of men.
Labour shortages in the high-tech and digitalisation sectors
In terms of labour demand, the trend is a decrease in the number of low-skilled jobs and increase in the number of expert and managerial positions. The share of skilled professionals in the labour force is expected to remain almost unchanged, while the share of workers with a low level of education will decrease.
The training requirements of the workforce needed for job openings by 2035 are expected to be significantly higher than those of the employed at the end of the last decade. As skills requirements increase, it is essential to improve the level of education and training of those already in employment.
Supply and demand do not properly match in the labour market, and Helsinki suffers from labour shortages, especially in the high-tech and digitalisation sectors. Helsinki must attract experts from abroad.
Helsinki participates in the local government pilot on employment, which is organised nationwide from 1 March 2021 to 30 June 2023. Part of the tasks of the Employment and Economic Development Offices will be transferred to municipalities in areas selected for the local government pilots on employment. The nationwide goal of the local government pilots on employment is to promote the employment of unemployed jobseekers and their guidance towards training and services more effectively and to create new solutions for the availability of skilled workforce.
- Growth in employment and number of enterprises before COVID-19.
- Support for employment is available, and foreign language-speakers are also actively involved.
- The employment of people with a foreign background, young people and minorities must be improved.
- An increase in unemployment and long-term unemployment, which has further increased during the COVID-19 crisis.
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