Minister of Finance Riikka Purra (PS) spoke to reporters ahead of a meeting of the Parliament’s Finance Committee in Helsinki on 11 December 2024. Purra has accused the media of distorting the debate surrounding the government’s cost-cutting measures, saying the media is to blame for public misunderstandings of income differences. (Markku Ulander – Lehtikuva)
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MINISTER of Finance Riikka Purra (PS) has set off a debate with a blog post in which she indicated that the criticism levelled at spending cuts stems from public ignorance and blamed the media for public misconceptions about income differences.
Purra published the blog post in response to a survey commissioned by Ilta-Sanomat, which showed that growing income inequalities are the single largest concern for Finns.
“Income differences are definitely not a problem in Finland. They are small relative to our peer countries – some of the smallest in the entire EU and world – because incomes are strongly balanced with both taxes and income transfers,” she wrote.
She implied that larger income differences could be beneficial for the national economy, adding that “too small” differences are indicative of incentive traps.
“According to Statistics Finland, income differences are presently at the same level as at the start of the millennium – that is, 25 years ago. If the economy was growing and we had the necessary dynamism in Finland, it would also be reflected in income differences,” said Purra.
Niku Määttänen, a professor of macroeconomics at the University of Helsinki, confirmed to Helsingin Sanomat that robust economic growth often correlates with the widening of income differences.
“The Gini coefficient typically grows with the economic situation. It’s indeed true that the widening of income differences doesn’t necessarily mean that low-income people are worse off. Sometimes the widening of income differences can be a signal of economic growth that’s benefiting everyone. The economy isn’t a zero-sum game,” he reminded.
He added that questions about the interrelationship between employment incentives and income differences, as well as that between income differences and economic growth, are complex and do not have an unambiguous answer.
“For example, strongly progressive income taxation can reduce incentives to pursue a very high income. But on the other hand you can imagine a society where the economy and political power are intertwined so that income differences are based on completely other things than working or taking on risks as an entrepreneur. Income differences can be caused by a variety of things.”
Purra also argued that the media has created a false impression of the number of people affected by the spending cuts and tax hikes implemented by the right-wing ruling coalition.
“Only seven per cent of the population are faced with income losses exceeding five per cent,” she wrote. “Does this in your view correspond with the picture that you can get from the public debate and the criticism of opposition parties?”
It is “natural,” she added, that the effects are concentrated on low-income people because the government is slashing social security benefits.
“The greatest impacts in 2024 and 2025 will be faced by students and the unemployed, meaning groups who in principle have the ability to improve their situation by seeking employment,” she commented.
On X, she also argued that the static impact of the social security cuts and tax increases on income inequality and low-income households will be smaller this year than last year.
Jussi Tervola, a researcher who has assessed the impacts of the policy decisions at the Finnish Institute for Health and Welfare (THL), said to YLE that Purra is understating the effects on low-income earners.
He viewed that it is difficult to describe the impacts as small. The impacts are considerable particularly on the ratio of low-income earners, with previous estimates indicating that the ratio will increase by 1.7 percentage points as a consequence of the measures. Almost 100,000 Finns will consequently fall below the poverty line, meaning they will earn less than 60 per cent of the national median income.
“Purra’s interpretation is baseless at least if you look at previous electoral terms and the history of Finland,” Tervola said to the public broadcasting company.
Purra also wrote that the impressions do not match reality.
“Citizens who brought up growing income disparities as their greatest concern don’t necessarily know the aforementioned facts. Generally speaking awareness of things like these is weak. It’s not the citizens’ fault,” she said.
She also described the media as the most vocal opposition force in the country, accusing it of treating right-wing governments more harshly than left-wing ones.
“Finland’s media environment is if not outright socialist, then at least social-democratic.”
Aleksi Teivainen – HT
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Source: www.helsinkitimes.fi
