The study first deals with the incidence of working poverty in Finland, describes who the working poor are, and how poverty risks vary by the individual's personal, household and labour market status characteristics.

The study then moves on to investigate the dynamics of poverty and poverty persistence of this group. Thereafter, the reseacher studied the probability of exit from working poverty by estimating probit models conditional on the individual being employed in the open labour market after transition. In particular, she focused on the effect of a change in the entitlement rule for unemployment allowance and the effect of participation in active labour market policy measures on the working poor's economic situation and working months.

The study also examines the magnitude of changes in household's disposable income and changes in the composition of household disposable income associated with exit from working poverty.

The study was conducted by the Labour Institute for Economic Research and financed by the Ministry of Labour and Ministry of Social Affairs and Health.

In the analyses the researcher utilized a data set from Statistics Finland. It consists of information on 350 000 individuals from the years 1993-2000 from various separate registers. 

According to the results obtained, both individual and household factors (e.g. household size, number of earners, working intensity) contribute to working poverty. The quality of employment and changes in the transfers received and taxes paid by the household may also influence working poverty.

Exit from working poverty is simultaneously influenced by several factors. Of different factors, the greatest influence is exerted by the individual's age and the level of education. Young age and a higher level of education increase the propensity to exit from working poverty.

Of policy measures, labour market training helped the working poor out of poverty in both recession and upswing years and increased the number of working months in the open labour market. Subsidized employment did not have similar positive effects. The tightening of the entitlement rule of unemployment allowance 1997 onwards increased working months of those who fulfilled the previous entitlement condition, but not the new one. However, one also has to take into account the good labour demand situation of the late 1990s.

Labour Institute for Economic Research
Pitkänsillanranta 3 A
FIN-00530 Helsinki
Finland
Ms. Merja Kauhanen (Senior Economist), tel. +358 9 2535 7345

01/05/2005

Merja Kauhanen

research

Urban Policy > Economy knowledge & employment > Urban economy

Employment