Orpo government policies widen income gap, THL finds

Social security and tax changes under Finnish Prime Minister Petteri Orpo’s government are widening income differences, with the poorest tenth seeing disposable income fall by about 8 percent and the richest tenth gaining about 1 percent, a new estimate by the Finnish Institute for Health and Welfare (THL) shows. Yle reported the findings.

The estimate is the first to assess the direct effects of the government’s social security and tax changes across its full 2023–2027 term. It draws on monthly wage and benefit data from the Finnish Tax Administration, making it more detailed than previous estimates.

Households in the poorest tenth are expected to lose an average of about 80 euros a month per adult, while those in the richest tenth are expected to gain about 50 euros. THL’s lead researcher Jussi Tervola said the overall effect was that low-income households lose income while high-income households gain.

The largest income reductions stem from cuts to housing support and unemployment benefits introduced in 2024 and 2025. The government removed, among other measures, child supplements and the earnings disregard that had allowed unemployed people to earn up to 300 euros without their benefits being reduced.

Tax cuts, particularly increases to the earned income tax credit, have raised incomes for people in work. The changes hit students hardest in relative terms: their annual incomes have fallen by just over 8 percent on average, THL estimated. Including the maximum state guarantee for student loans would make students’ average incomes slightly higher.

In euro terms, the biggest losses are among unemployed people who work part-time while receiving benefits, or receive unemployment benefits from Kela, Finland’s social insurance institution. The changes also significantly reduce incomes for people receiving social assistance or rehabilitation allowance.

THL estimates that the number of people on low incomes will rise by 102,000 during the government’s term, including 22,000 children. Its previous estimate put the increases at 110,000 people, including 27,000 children. The institute said the removal of child supplements means more families with children are falling below the low-income threshold than the population overall.

The estimate measures the effects of legislation compared with a scenario in which the changes had not been made. It does not account for effects on employment, housing or household spending. THL said the combined income total across households is expected to remain broadly unchanged, as the changes offset one another. Poverty is also expected to deepen among people already on low incomes.