What are the strategic dimensions of Ministry of Social Affairs and Health on 2016?

Strategic Dimensions: -0,2, 1631, 2519, 1,373 and 0,9680

For 2016 Ministry of Social Affairs and the Health has a budget of 13.0 billion EUR so 24 % of all government spending. It’s a huge amount and it has impact to our everyday life. Every year is counted wage coefficient, the life expectancy factor and indexes such as consumer price index, national pension and employment pension index. The thing whit these figures are that they might increase, decrease or be freeze. Have you ever thought that which indexes and calculations have impact on budget or what do the numbers behind it mean?

-0,2  

Consumer Price Index describes the price development of the households resident in Finland owned goods and services. It’s calculated by the method in which the prices of different commodities are weighted together their shares of consumption. The inflation was in end of the year 2015 -0,2 %. Why the figure has remained negative? The reasons for this are for example average housing loan rates, fuel compared to consumer prices, etc. are lower than year ago. 

1631

The National pension Index is determined by the change of consumer price index. The Social Insurance Institution establishes the index every year and in 2016, the national pension index value was 1631. It’s used for review large part of the Kela benefits. The year 2016 brings among other things these changes: 

•  50€ initial deductible for pharmaceutical product benefit
• Travel allowances deductible rises
• Sickness allowance is reduced from 24.02€ to 23.93€
• Celiac sufferers diet allowance is removed
• Maintenance support is reduced

2519

Earnings-related pension index pensions in payment are reviewed. Earnings-related pension change in the share of wages in calculating the index is 20 per cent and the change in prices 80 per cent. In 2016, earnings-relatedpension index is 2519, the same as in 2015. This means that benefits linked to earnings-related pension index do not rise this year. 

1,373

Wage coefficient adjusted pensionable merit, in accordance with the laws of pension income limits and amounts. In the wage weight change in earnings is 80 per cent and 20 per cent of the price. In 2016 the wage coefficient is 1.373. For what is this used for? This is used eg. Sickness, maternity, paternity and parental benefits, special care allowance, as well as the definition of the rehabilitation allowance income limits.

0,96800

In 2016, the life expectancy coefficient is 0.96800. The life expectancy coefficient is intended to limit the lifetime pension spending growth and encourages the continuation of work resulting from the lengthening. When the average life expectancy rises, the life expectancy coefficient will reduce the monthly pensions. If you retire transferring wants to maintain the level of the pension to which he would have earned in accordance with the retirement age without a life expectancy coefficient, he will have to work longer. So how long we should work before we are in the pension age? Time will tell. 

What will the strategic dimension be after 2016?

To maintain the well-being of society we need to work harder and cut some of our services to survive. Let's hope that Finland is now in the bottom and the only direction is to go up! What will the strategic dimension be after 2016?

Positive of Things

The economic indicators does not look good in Finland,  it has been mired in recession for as long as four years, The Bank of Finland forecasts that the national economy will begin a slow recovery in 2016,  The economic growth rate of Finland is nevertheless expected fall short of the euro zone average in the years to come,  The unemployment rate will improve to 9.2 per cent in 2016 after creeping up to 9.4 per cent in 2015, according to the Bank of Finland.

Regarding to Torgeir Hoien The Norwegian macroeconomist and investment professional right now Finland is one of the weakest economy to invest in Europe.

Also the Bloomberg the news agency who specialized on economic issues has an article in same direction than Hoien.

But let`s think the "positive of things"

Finns have always been among the first to adapt new technology – whether bicycles or Computers.

Game industry is one of the fastest growing industry in Finland. One of the latest mega hits is the city-building game Cities: Skylines, a million-seller right from the start. But that’s only one of the latest games to join the growing list of successes. Despite its tiny population of 5.5 million people, Finland is one of the global forerunner in the game industry.

Technology industries are use up about half of all of Finland’s energy. The main energy-dominated technology industries are metals industry, chemical industry, and forest industry, with 80­-90% of their produce exported. Approximately 40% of Finland’s energy consumption is tied to export. Finland produces steel for 30 million people and paper and wood products for 100 million people.

Finland is engaged in becoming the digital hub of Northern Europe based on its know-how in digital healthcare, next-generation wireless networks, the industrial internet, sustainable energy and clean tech.

Although Finland is a smallish country, it has plenty of unique strengths and advantages that are boosting its digital transformation.

We should not forgot to mention about  the world-class education which is provided for all in Finland. Globally speaking, Finns are exceptionally well educated, so much so that every now and then foreign visitors come to see the Finnish education system in action. Well-educated people are a mighty talent pool – you can’t always be sure what they’ll come up with, but you always know that, whatever it is, it will be interesting. And as nobody else speaks Finnish, we’ve all had to learn English.

Finland was a forerunner in rolling out 3G networks and still has a strong communications infrastructure. We also have some surprising infrastructure advantages, such as a stable rock foundation and cool weather – ideal when establishing data centers.

In general, Finland is a country where things work. Some even consider us the most functional country in the world.

Maybe it’s the harsh weather conditions in wintertime, but the Finns have always appreciated anything that helps them to get things done more efficiently. Here, people, businesses and society as a whole generally view technology as a possibility, not a threat.

Let´s keep the flag up and concentrate on our strengths which we have a lot..

http://toolbox.finland.fi/presentations/finland-as-the-leader-of-digitalisation/

 

http://www.helsinkitimes.fi/finland/finland-news/domestic/13657-finnish-economy-is-still-paralysed.html

http://teknologiateollisuus.fi/en/competitiveness/industrial-policy/energy-and-environment-issues-increasingly-important#sthash.qn7s2V5X.dpuf

http://uusisuomi.fi/aiheet/suomen-talous

Price Awareness of Finnish customer

Economic situation in the world is uncertain and we can read from news on daily basis mainly sad and pessimistic forecast about future of our country.  Latest news this week has been about oil barrel price decreasing dramatically, which we can see also as benefit for our economy on short term period, but for long term plans it makes our country’s export very difficult to one of our main export country – Russia.

Of course decreasing of oil barrel price and decreasing of Russian currency ruble are linked to each other, because crude oil is the most important source of income to Russia.  And low value of ruble makes business vulnerable between Finnish and Russian companies.  But this is more an export issue and effects to our economy and more to companies in first hand, not mainly to private consumers. 

For Finnish retail business ruble situation has been very bad because tourism of Russian travelers has decreased and tax free sales has fallen dramatically, for example in South Carelia almost 40 percent from last year.  But then there is one big and interesting consumer group – the Finnish. Our government makes decisions which affect the amount of money what we as private consumers can use for products and services. And yes, we are one of the most expensive countries in Europe.  

I want to point out how digitalization and global business has changed especially retail markets in Finland and how private consumer’s everyday decisions affect the Finnish economy more than we have been aware of. Everyone knows someone who has ordered consumer goods or services abroad or should I say everyone has done that at some point. Ordering abroad started growing rapidly after digitalization and when retail business went online. The whole world is on your laptop or mobile screen in few seconds and comparison of prices for products or services is fast and easy. And cheap price, who dare to defend? 

I can say from my own experience that in these uncertain times price is one key indicator what drives consumers to make decisions and yes - we are still one of the most expensive countries in Europe.

But why is it a problem to Finnish economy that we order online abroad and try to find the cheapest prices for consumer products? We export our currency abroad and that increases unemployment in Finland. Finnish trade sector is around ten percent of GDP and biggest corporate tax payer among business sector.  

And in this situation in trade sector involving high taxes in Finland (especially VAT which has an effect on prices), digitalization and global e-commerce markets, decreasing amount of travelers from Russia, rising amount of unemployment  it’s not easy to find optimistic forecast for future…. or have we seriously tried to see all opportunities? E-commerce business is growing every year  , 2015 Q3 and Q4 were very good for e-commerce business in Finland  and we have breathtaking market possibility in Russia.

Now it's our time to show the world that we are still one of the pioneer countries in the world when talking about technology development, and we can solve our economic crisis with possibilities that digitalization has given to us! Let’s conquer global markets together and show what we are made of. First let’s make changes to our tax rates - we don’t want to destroy our price competiveness with one of highest VAT in Europe!

What’s up, Finland?

Surely there is not a literate person in Finland who could have avoided the words ‘Finnish economy’, ‘poor competitiveness’, ‘high labour costs’ during the past year or so. It seems Finland is buzzing with these grim readings and it is hard to see any light at the end of the tunnel. So where exactly are we and is there any light at the end of the tunnel?

A good few reasons for the current (worsening) economic situation can be identified. Richard Milne mentioned some in March 2015 in his blog post for Financial Times. First of all, as we have heard from so many sources, labour costs have spiralled. One main thing to remember here is that when looking at the actual labour costs, they are not significantly higher than the rest of Europe, for example. In fact labour costs in Finland are the seventh highest in Europe, same level with Germany. But what makes the difference is the labour productivity, i.e. GDP per hour worked. Here we fall behind the European average and this certainly is causing problems.

The other problem is the age distribution of the population, we are ageing quite rapidly. UN estimates that the proportion of Finnish population that is of working age may fall as low as 58 % of the total population by 2030.

Another significant reason in the woes of Finnish economy is that we are playing with too few cards. The mainstays of our economy are public sector (58 % of our GDP in 2014!), forestry industry and electronics sector. The public sector is not exactly an export engine, and the two latter have been in sharp decline lately. And talking about export, our card hand is very limited there, too. Our main cards are raw materials and production supplies, in which the profit margin is limited.

So, is Finland a lost cause, heading for nothing but more doom and gloom? How can we change the course and start heading towards that little spark of light there at the end of a long and dark tunnel?

There are some cure-promising pills that we can take, although some of them have a very bitter taste. For example, relative labour costs can be decreased either by decreasing the cost itself, i.e. salaries, or keeping the salaries the same but increasing the hours worked. Both options are very unappealing for employees but it may very well be that they are unavoidable.

Changing the age distribution is not an easy task, either. There is no escaping the fact that the Finnish people are reproducing less and less, and upcoming significant baby booms are quite unlikely. We need more people who are in working age, and if we cannot produce them ourselves, we need to bring them in from elsewhere.

But people coming in are no help in our situation unless they will be able to work and therefore pay their taxes. And since one of our evident problems is that there doesn’t seem to be enough work around, where do we find work for these people?

The odd thing about work is that the need for it is actually unlimited. There is absolutely no limit to how much demand there is for work, but the trick is to identify, satisfy and maintain the demand. And to keep the economy flowing, all this work should also somehow be paid for. It is true that there is always a portion of work on the brink of becoming obsolete, but there is also always demand for completely new type of work.  

At the moment, the most promising area in creating new work is digitalisation. Its potential is generally seen enormous, and it could very well be one of our trump cards in the future, if we play our cards right.  Even European Commission has hopped on this particular bandwagon and identified areas where digitalisation is affecting, for example eHealth, smart living, public services, cloud computing. Our IT knowledge is among the top of the world, so this is certainly something we could benefit from.

So let’s take the digi-train and head for that spark of light at the end of the tunnel!