Climbing to the top income bracket becoming increasingly difficult in Finland, new report finds

By admin On Aug 16, 2024

A person watches stock market prices on a phone and computer screen in Helsinki on August 5, 2024. LEHTIKUVA

A new report from the Kalevi Sorsa Foundation highlights a growing challenge for low- and middle-income Finns: it’s becoming harder than ever to reach the highest income brackets. This trend is particularly pronounced in Eastern and Northern Finland, where economic opportunities are more limited.

The report, titled Inequality in Finland 2024, draws on research conducted by senior researcher Marja Riihelä of the Finnish Institute for Economic Research (VATT)

and emeritus professor of economics Matti Tuomala. Their analysis of income mobility data from 1995 to 2022 reveals that individuals in both the lowest and highest income deciles are more likely to remain in the same income bracket year after year, compared to those in the middle-income brackets. This persistence has notably increased at the top end of the income spectrum.

“Comparing the periods 1995–2008 and 2009–2022, the likelihood of staying in the top income decile has risen by over five percentage points, with the most significant increase seen among the top 1%. It’s clear that moving into the upper-income groups has become more difficult, even over long periods,” Tuomala explains.

Riihelä adds that this growing economic polarization has been ongoing since the 1990s, with wealth becoming increasingly concentrated among a smaller portion of the population. “As the share of total income held by the highest earners grows, the share for low- and middle-income groups has diminished. The increased stability among the top income groups also makes annual income-based inequality measures less reflective of the true disparity.”

Regional and Gender Disparities in Income Mobility

The report also explores how income mobility varies across regions and between genders. Sociology professor Jani Erola and senior researcher Esa Karonen of the University of Turku examined the intergenerational transmission of income levels, focusing on those who were raised in the top income decile. Their findings reveal a stark divide between prosperous Southern and Western Finland and the less affluent Eastern and Northern regions.

“In Eastern Finland, fewer than half of the men reach the income level of their fathers who were in the top decile, compared to 60% or more in growth centers like Helsinki,” Erola notes. “This concentration of high incomes in urban centers reflects better economic opportunities in these areas.”

Erola and Karonen’s study also highlights significant gender disparities in intergenerational income mobility. “Among those in the top income decile, men are 81% likely to match their father’s income level, whereas daughters are only 39% as likely to achieve their mother’s income level,” Karonen points out. “This perpetuates gender inequality and shows that it’s becoming generally harder for low- and middle-income earners to reach the income levels of their parents, indicating a decline in equal opportunities.”

Broader Implications and Ongoing Discussions

Inequality in Finland 2024 is the third installment in a series that examines various aspects of inequality in the country. The report includes contributions from 15 leading scholars who explore topics such as perceived well-being, family policy, and the socio-economic inclusion of immigrant youth. The publication, edited by Anna Rajavuori and funded by the Wage Earners’ Foundation and the Consumer Cooperative Foundation, aims to spark public debate on these critical issues.

The Kalevi Sorsa Foundation will host a discussion event based on the report on Tuesday, August 20, 2024, at the University of Helsinki’s Tiedekulma STAGE. The event will feature presentations on the report’s findings and provide a platform for broader discussions on how to address growing inequality in Finland. Interested participants can register on the event’s webpage.

Source: www.helsinkitimes.fi