November 29, 2018 / 1:57 PM / 13 days ago

Record-low birth rate threatens Finland's welfare system: Finance Minister

HELSINKI (Reuters) - A rapid decline in the birth rate is threatening Finland’s welfare system and public finances, the Nordic country’s finance minister Petteri Orpo told Reuters in an interview.

Finland's Finance Minister Petteri Orpo speaks to the media in Helsinki, Finland, November 29, 2017. REUTERS/Tuomas Forsell

Finland’s birth rate, or expected number of babies per woman, is forecast to fall to an all-time-low level of 1.43 this year from 1.87 as recently as in 2010, according to Statistics Finland.

“(It invokes) major concern over the sustainability of our welfare state,” Orpo said, referring to a declining number of future taxpayers to finance generous public services for an ageing population.

The average birthrate in the European Union was 1.6 in 2016 while in the Organization for Economic Cooperation and Development (OECD) group of mostly developed countries it was 1.7, according to the OECD.

The number of Finns of working age is expected by the statistics office to fall by around 200,000 by 2050, out of a current population of around 5.5 million. Almost every third Finn would be over 65 by 2070.

Orpo warned that this would eventually lead to higher tax rates, higher retirement age and increased fees for services that are now heavily subsidized by the state, such as health care or daycare.

“It is clear that those in working life will bear a growing responsibility for those who are not working,” he said.

Finland was earlier this year ranked in an U.N report as the happiest country on earth, although it has only recently returned to growth after a long period of stagnation.

Orpo said that nowadays, people in developed countries tend to postpone their baby plans and the weakness in the economy may have been one reason behind the trend in Finland.

“It is striking in a way... Finland is ranked as one of the happiest and most equal country on earth, so that part shouldn’t be the problem.”

“Working life is changing, it has become more insecure, with more uncertainty about the permanence of one’s job and with more temporary contracts.”

In the decade following the global financial crisis, Finland’s economy struggled due to a string of external and internal problems, including a decline of Nokia’s former mobile phone business and recession in neighboring Russia.

While the economy is expected to grow around 3 percent this year, Finland’s employment rate lags at around 72 percent, compared to 75 percent in neighboring Nordic countries.

Orpo said the next government, to be formed after elections in April, must address the population problem with policies that boost employment and help parents with young children.

He said Finland should earmark more parental leave for fathers in order to encourage women to resume work more quickly after having children - a reform that was recently blocked by other ruling parties.

Latest opinion polls rank Orpo’s right-leaning NCP party second after the Social Democrats, which is currently in opposition. Prime Minister Juha Sipila’s Center Party followed in third place.

Reporting by Anne Kauranen and Jussi Rosendahl

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