Finland: Finnish household income is dropping in contrast to Nordic neighbours

Key findings show that the average household disposable income has fallen in almost half of the municipalities in Finland and Åland due to recession and out-migration from rural areas. The report also highlights a number of negative demographic developments: Along with Åland, Finland has surpassed Sweden in having the oldest age structure in the Nordics, its fertility rates are the lowest in the Region, and it also has the smallest share of foreign-born inhabitants. On a positive note, Finland is showing clear leadership in climate policies.

Finland has seen a rapid decrease in birth rates, dropping from 1.9 children per woman in 1990 to 1.4 today. The current rate is the lowest ever recorded nationally, and also the lowest in the Nordic countries. In fact, the report says, if fertility rates remain at this level, in 15 years’ time, there will be no regions in Finland where births exceed deaths.

In addition, Finland has the lowest share of foreign-born people, only 7%, compared to Sweden’s 19%. This is a noteworthy statistic, especially in light of the fact that immigration has accounted for two-thirds of the Nordic population increase since 1990.

Between 2011 and 2017, the average disposable income of households has fallen in almost half of the municipalities in Finland and Åland, while it has increased in all other Nordic municipalities. This negative trend is largely the consequence of a prolonged recession in Finland in the early 2010’s when the manufacturing sector was hit by a structural crisis. The situation was exacerbated by out-migration to urban areas and a rise in the unemployment rate, which peaked in 2015.

The Nordic comparison shows that high incomes are concentrated around the metropolitan areas and that the inequality between rural and urban areas is increasing. Income inequality in Finland is lower than in the neighbouring countries, where the income gap has grown in recent years.

Furthermore, technology is expected to profoundly change the labour market, such as in Pyhäntä, Kyyjärvi and Lestijärvi, where nearly 60% of all jobs are considered at high risk of being automated by 2040. 35% of all Finnish jobs belong to the ‘high-risk’ category and the risk is highest in intermediate and rural regions. In Denmark, the share is even higher, or 37% of all jobs.

Finnish regions in the lower half of the Regional Potential Index

As part of the State of the Nordic Region report, the Regional Potential Index compares all Nordic regions on their performance on a range of demographic, economic and labour force indicators.

Helsinki-Uusimaa is the highest-ranked region in Finland, ranking slightly lower than the other capital regions, with demography as its strongest dimension. Compared to the other Nordic metropolitan areas, the region is lagging behind on employment, even though unemployment figures have improved in recent years. The Oslo region takes the top spot in this year’s RPI.

As in the 2018 edition, the majority of the Finnish regions are ranked in the bottom half of the index, and the lowest scores this year are for rural regions in Finland and Greenland. Etelä-Savo occupies the bottom spot, due to the largest net out-migration of all Nordic regions, the highest demographic dependency ratio and a weak economic performance. In general, the scores obtained by regions in the Finnish countryside are negatively affected by relatively high unemployment rates.

On a more positive note, Varsinais-Suomi made the biggest upward move of the intermediate regions, six spots, mainly due to higher employment and lower youth employment rates. Österbotten and Åland also perform well in comparison to other Nordic rural regions due to good demographic structure and high employment figures. Åland has a relatively high GRP but very little R&D investment, while Österbotten scores particularly well on R&D investments.

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