Social Security and Social Insurance in Finland (Research Paper Sample)

Economics
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Social Security and Social Insurance in Finland
Introduction
Finland has implemented various policies on social security and insurances. The main objectives of these policies are to improve the social life of the citizens through improving their health, provision of basic requirements and create strong family background. The policies on social security benefits are dictated by the career advancement and earning. There are two types of social security pensions, which include private funded and national government pensions. Both private and public servants enjoy massive benefits through social security and social insurance. This is because the pensions cover the primary and other forms of healthcare (Haanes-Olsen, 2010, p. 1). In addition, the citizens of Finland enjoy various social benefits such as retirement benefits, access to palliative care units and multidisciplinary medical services. The social benefits of the working population are legally covered in the employees’ pension act. Research indicates that approximately sixty five percent of private workers in Finland are under this act. However, personal businesses and public servants are covered on different pension act. The reason behind the formulation of social security and social insurance is to eliminate the aspect of poverty among the people of Finland. This is because the settlement process of the pensions is directly dependent on the total income of the beneficiary (Kela, 2012). This is because low income earners are provided with slightly higher benefit as compared to higher earning individuals. The state recognized firm that provides social insurance services is known as Kela. This organization offers residence based insurance pensions. The beneficiary of resident based pensions is required to be married with children, injured or registered for basic pensions. In addition, the beneficiary must be independent, unemployed, disabled or have social problems such as housing.
Social Security Expenditures: A Historical Perspective
The ministry of social affairs and health manages social security in Finland. It is through the ministry that beneficiaries receive their pensions. The funding process of the pensions is done by the government. The social security reforms in Finland started in the mid twentieth century through the formulation of national pensions act. The total expenditure in social security in the year 2011 stood at forty five billion Euros with thirty six percent on healthcare services, thirty four percent on general public services and thirty percent on education (NORDIC, 2013). The total expenditure in social security has increased over the last twenty years to twenty one billion Euros to forty five billion Euros.
Social Security Payment System (Pay-As-You Go or Fully Funded or A Mixture)
The social security payment system is divided into various parts. National pension entails covers the retirement benefactors, disabled people and health related survivors. The payment is dictated by age and residence. The eligible Finland citizen must fall in the age of between sixteen to sixty five years. The citizens enjoy progressive increase in benefits as dictated by the duration of stay and form of employment (Gov., 2012). On the other hand, pay-as-you-go is provided to all employed people. The payment is calculated depending on age and duration of stay in an organization. This constitutes seventy six percent of finances that cover unemployment, disability, old age and survivors’ pensions.
Dependency Ratio (Demographic): Changes over Time
The dependency ratio in Finland differs with regard to the age and social status. This is because low income earners are the principal beneficiaries of the scheme. This is because they require housing facilities, primary health care and access to general social services. The dependency ratio at the age of eighteen to fifty five years stands at 1.6 percent while age of fifty five years to sixty years stands at 1.9 percent (Niemelä & Salminen, 2006, p. 25). In addition, the dependency ratio of Finland citizens above sixty years of age stands at 4.6 percent. This indicates that there is two percent increase in the dependency ratio of social security pension per year in Finland.
Income Distribution among the Aged Population
The retirement age of majority of citizens starts at fifty five years of age. Research indicates that eight percent of Finland population have retired. This indicates that they depend on social security and social insurance pensions. Total income settlement among the eligible aged citizens in Finland stands at twenty percent of the gross domestic product. Part time benefits are eligible to people above fifty five to sixty five years while disability pensions covers aged people at sixty two years. In addition, unemployment pension is provided to the aged people at the age of sixty three years (Health, 2007, p. 5). Employees above the age of fifty four years of age receive higher pensions at a rate of six percent of total benefits.
Structure of Social Security Tax, Employers and Employees Contributions
Finland policies on social security stipulate that the employer must contribute almost eighteen percent of the total wages. In addition, three percent is paid by the employee to the insurance company. This is dictated by the employment act that was formulated in 1993. The insurance company in Finland mainly contributes approximately twenty two percent of pay-as-you-go pensions (Union, 2012). The rest of the funds settlement is conducted by the national government that constitute seventy percent of the gross domestic product. The employee must also pay extra tax of three percent of total income. The taxation policy stipulates that each employer must pay thirty five percent of their wages per month to cover various premiums.
Structure of Social Security Benefits
The structure is divided in to residence based benefits, employment pensions, retirement benefits and survivor pensions. The residence based benefits incorporate children, disabilities, housing and unemployment (Storgårds, 2013). The eligible people are on the age gap of eighteen years and above. Employment benefits are dependent on total rewards offered by the company such as retirement age.
Retirement Age and Benefits
The retirement age of majority of citizens starts at fifty five years of age. Research indicates that eight percent of Finland population have retired. Total income settlement among the eligible retired citizens in Finland stands at twenty percent of the gross domestic product. Part time benefits are eligible to people above fifty five to sixty five years while disability pensions covers retired people at sixty two years (Haanes-Olsen, 2010, p. 3). In addition, unemployment pension is provided to the retired people at the age of sixty three years. Employees above the age of fifty four years of age receive higher pensions at a rate of six percent of total benefits
Family Relations: Spouses, Dependent Children’s And Widowers Benefits
Maternity and paternity benefits are provided to all citizens and foreigners who are working in Finland for more than six months. The benefits cover the healthcare bill and allowances. In addition, deceased spouses and dependent children are eligible to survivors’ pension (Ministry, 2006, p. 6). The deceased family is eligible to the benefits if he or she does not remarry. The spouse must be fifty years of age with a child in time of the beneficiary death. Furthermore, the widow is entitled to national pensions if the deceased is at age of sixty five and three years of stay in Finland.
Unemployment Insurance
The eligible citizens in Finland range from eighteen years to fifty seven years. This is provided through allowances with an aim of improving the labour market. The objective of these benefits is to encourage unemployed citizens to join the labour market. This is because the unemployed citizens are provided ‘with basic allowances’ to act as business capital.
Health care coverage for recipients
The scheme covers seventy five percent of the healthcare bills of the beneficiary. The coverage covers accidents, primary health care and occasional health checkups. The settlement process of the benefits takes a period of six months (Vero, 2012). The coverage is eligible to all citizens of Finland. In addition, sickness cash benefits are provided to citizens of sixteen years to sixty eight years of age. The policy on health postulates that the beneficiary must be paid fifty percent of the salary if the duration of rehabilitation exceeds one month.
Executive Summary
In the introduction section, the study provides a general overview of Finland social security and insurance structures. The section states that employment act dictates the settlement of pensions among the private employees. In addition, civil servants have personal and government funded insurance schemes that cover various areas of social life. These include health, aged population, retirement and survivors’ benefits. The other section expounds on total expenditure in social security that stands at forty five billion Euros. The payment system is dependent on age, retirement, total income earned and duration of stay in Finland. Research indicates that dependency ratio is high among the aged population. In addition, income distribution among th...