Income gaps between genders reduce slightly

Income differences between genders have narrowed slightly in Finland during the regime of present five-party alliance government, according to a report commissioned by the Ministry of Finance.

Women’s average annual income has increased EUR 25 more than men’s due to reforms of social benefits and taxation carried out this parliamentary term, said the Ministry of Finance in a press release on Friday, referring to the report.

Prime Minister Sanna Marin’s Government committed to promoting gender equality, for example, in budget preparation and in all key reforms.

“The report indicates that economic policy has promoted gender equality this parliamentary term. However, on the whole the changes are very small,” said Jonna Berghäll, Senior Ministerial Adviser at the Ministry of Finance.

The report is divided into two parts. In the first part, researches used microsimulation to examine changes to benefits and taxation of citizens that were decided in the 2019–2023 parliamentary term.

The second part used research literature and statistics to assess the gender effects of three key reforms implemented during the parliamentary term.

The assessment looked at the reform of family leave, the extension of compulsory education and the adoption of a Nordic employment service model.

The report sought to cover all of the active decisions made during the parliamentary term, such as general increases to the smallest pensions, the single-parent increment, the indexation of study grants and discounts to fees for early childhood education and care.

Changes to taxation of personal income, such as inflation adjustments to the taxation of earned income and the removal of the deduction for interest expenses of mortgages, were also taken into account.

“Changes to social benefits and taxation of personal income had a very limited direct effect on income and income differences between men and women. The changes to benefits and taxation increased the income of 86 per cent of women and 82 per cent of men,” said Eugen Koev, Labour Market Economist at Akava Works.

The changes resulted in the annual income of women being an average of EUR 412 higher than without the changes. The corresponding benefit for men was EUR 387. In other words, the changes to benefits and taxation led to women’s average annual income increasing EUR 25 more than that of men.

Women have also benefited from policy changes slightly more than men when the changes are examined based on family type, age group and socioeconomic status. Families with two parents and single-parent families with only underage children benefitted the most from the assessed package of benefits and tax policy.

The results of the microsimulation are not directly comparable to the corresponding report on the 2015–2019 parliamentary term, which examined the effects of benefit and tax policy on income distribution between genders.

The researchers looked separately at the gender effects of the family leave reform, the extension of compulsory education and the adoption of a Nordic employment service model. This assessment was based on previous research and statistics. At this stage, it is difficult to quantify the effects, because the reforms were only implemented a short time ago.

The researchers estimate that the family leave reform will likely increase the use of family leave by non-birthing parents, usually men, and will slightly even out the division of the responsibility for care in families. The reform will likely be indirectly reflected as increased equality in working life, as the use of family leave will likely become less gendered.

The study indicates that the extension of compulsory education will mainly improve gender equality. In the future, fewer men will be left without an upper secondary qualification, which will even out differences in education between genders. Improved guidance will also make it possible to mitigate gender segregation in vocational education and in the further studies chosen by general upper secondary students.

The Nordic employment service model improves the employment of men and women quite evenly. According to the report, the reform may slightly improve the situation for long-term unemployed men, which would reduce gender inequality. However, this assessment involves significant uncertainties.

“The assessed reforms may together reduce social exclusion and long-term unemployment, which are problems that disproportionately affect men. At the same time, efforts should be made to reverse gender segregation in working life and education and to narrow gender pay gaps, so that income differences between men and women do not start to increase,” said Juho-Matti Paavola, Research Manager at Innolink.