International review of approaches to tackling child poverty: Finland

The historical trajectory of key metrics

Finland is a Nordic country in northern Europe with a population of 5.6 million.^[9] After gaining independence from Russia in 1917 and a period of civil war, Finland was established as a parliamentary republic. Its neighbour Sweden has been a major political influence in Finland throughout its history. Most of Finland was part of the Swedish Empire from the 13^th Century until 1809. Post-independence, Sweden has been highly regarded as an example of Nordic idealism, which influenced the development of Finland’s own welfare state. The key characteristic of a Nordic welfare system is its comprehensiveness – which sees social welfare provision covering the entire population and not limited to specific groups deemed unable to care for themselves.^[10] More recently, Finland’s geo-political influences have broadened, joining the EU in 1995 and drawing greater influence from neo-liberal ideas in other Western democracies.

This section presents key statistical metrics for Finland today, and relevant historical trajectories of economic, demographic, poverty and labour market trends since the 1970s.

Economic and demographic data

Finland’s Gross Domestic Product (GDP) per capita is among the highest in the world. Finland’s GDP per capita is US$52,926, a similar level to the UK based on the most recent data available (the UK’s GDP per capita in 2023 was US$49,464).^[11] However, Finland is considered to have been a late industrialiser compared to other Nordic and Western countries.^[12] It was only after joining the OECD in 1969 and the global economic crisis in 1973 when international competition from low-cost countries forced Finland to diversify its economy.^[13] Prior to this, Finland’s economy had been dominated by agriculture. The shift to manufacturing and industrialisation brought an economic boom accompanied by migration from the countryside to Finnish cities.^[14]

During the economic boom in the 1970s there was a notable increase in GDP per capita, which contributed directly to a decline in poverty rates as well as an expansion of social expenditure that further contributed to lower poverty levels.

Following the collapse of the Soviet Union in 1991, Finland experienced a deep domestic depression because of the resulting sudden loss of a key trading partner. This was a turning point from which child poverty began a sustained rise until the late-2000s. During this period, interest rates were high and bankruptcies rose.^[15] The economy returned to a boom period from 2000, with strong economic growth supported by international trade, globalisation and the growth of the IT sector in Finland.^[16] However, there was also a rise in demand for high- and low-skilled jobs relative to the demand of middle-skilled jobs, which created greater polarisation in the Finnish labour market.^[17]

Source: GDP per capita from World Bank indicator code NY.GDP.PCAP.CD, child poverty rate from Statistics Finland income distribution statistics table 016 (1966-2017) and Eurostat ilc_li02 dataset (2018-23)

From 2015, Finland has maintained a more stable economy. However, it faces many of the same challenges as other Western economies, notably an ageing population, high public debt and a decline in traditional manufacturing sectors. In Finland’s context, there is concern from economic commentators and the current Finnish Government about whether its high taxation and large public sector as a share of the economy contribute to sluggish growth.

Between 1970 and 2023 there was slight population growth from 4.6 million people in 1970 to 5.6 million in 2023.^[18] Like other Western countries, Finland has an ageing population. The share of the population aged 0-14 years old declined from 27% in 1965 to 15% in 2023, a similar level to Scotland where 15.3% of the population were children under 15 in 2022.^[19] This trend has lowered the working-age to young people dependency ratio in Finland to 24% in 2023.^[20]

Source: World Bank^[21]

Poverty trends

The most recent data from 2024 shows that just over one in 10 (11.6% of under-18s) in Finland live in relative poverty.^[22] This means they are living in a household with equivalised household income below 60% of the median income before taking account of housing costs. Finnish children are also less likely to live in poverty than adults (12.8% of adults in Finland are in relative poverty), making Finland one of only three EU countries where people of working-age are at highest risk of poverty and social exclusion.^[23]

Overall poverty in Finland dramatically reduced during the 1970s and 1980s, falling from 18.6% in 1966 of the population living in a household with below 60% of the median household income to just 9.2% by 1986.^[24] The data for child poverty is less complete, but sources using the 50% of median income threshold suggest it followed a similar pattern.^[25] As shown in Figure 3, child poverty measured at the 60% threshold was lowest in 1994, when 4.2% of children in Finland lived in poverty, before following an upward trend during the 1990s and 2000s. In recent years, child poverty levels have fluctuated between 10% and 12%.^[26] Material deprivation has been very low in Finland (5.4% of under-18s experienced material or social deprivation^[27] in 2023), although in 2024 there was a two percentage point increase to 7.5% of under-18s.^[28] In Scotland, 9% of households with children lived in households with low income and material deprivation in 2023-24.^[29]

Source: Statistics Finland income distribution statistics table 016 (1966-2017) and Eurostat ilc_li02 dataset (2018-24)

Finland’s comprehensive system of financial assistance payments is one of the biggest contributing factors to low child poverty rates. This is demonstrated by a before-transfers relative child poverty rate that is two and a half times higher than the after-transfer rate (29.5% before-transfers, compared to 11.6% after-transfers in 2024).^[30] Comparable data is not available for Scotland. In the UK, relative child poverty declines by a similar level of percentage points after-transfers as in Finland, but the proportionate reduction is smaller (41.1% before-transfers compared to 23.5% after-transfers).

The groups most at risk of poverty and social exclusion in Finland are single parent families, large families and the children of migrants. For example, a 2020 research paper found that poverty rates for immigrant children peaked in 2011 at 39.8%, more than three times the rate for Finnish-born children (12.8%).^[31] There has also been a stark difference in poverty rates between single parent households and couples with children. In 2024, 18.9% of single adult households with dependent children lived in poverty compared to only 7.3% of households with two or more adults with dependent children.^[32]

Income inequality measures

Measures of income equality are illustrated in Figures 4 and 5 below. There are different ways of assessing inequality in the population. The most common measure, the Gini coefficient, calculates the degree of inequality in the distribution of income or wealth within a population. A score of zero indicates perfect equality. The pre-transfers Gini coefficient of 0.27 in Finland signals a relatively high income equality by international standards, and that equality is further increased by tax and transfers.^[33] This compares to an after-transfers Gini coefficient of 0.32 in Scotland (before housing costs).^[34]

Another measure of income inequality is the Palma index. The Palma index measures income inequality by comparing the income share of the richest 10% to the income share of the poorest 40%. The Palma index for Finland (shown in purple) records an upward trend, indicating that pre-tax income inequality between the top 10% and bottom 40% of the population has increased over time. Nonetheless, income inequality measured by the Palma ratio is still higher in Scotland. In 2021-24, the top 10% of the population in Scotland had 24% more income than the bottom 40% combined (a Palma ratio of 1.24), whereas the top 10% and bottom 40% in Finland had the same combined income (a Palma ratio of 1).^[35]

Source: OECD DSD_WISE_IDD@DF_IDD database

Source: OECD DSD_WISE_IDD@DF_IDD database

Labour market trends

As of January 2025, Finland’s employment rate is 70.8% (compared to 74.2% in Scotland), and the country has a low in-work at-risk-of-poverty rate at 5.7% of workers.^[36] Directly comparable data is not available for Scotland; the latest available data for the UK shows an in-work-at-risk-of-poverty rate of 10.3%.^[37]

During the 1990s recession, unemployment in Finland peaked at 17% in 1995, and since then it has not returned to the low levels of the early 1970s when unemployment was just 2.5%, instead fluctuating at around 8% of the workforce.^[38] This is around twice as high as for Scotland, where the estimated unemployment rate is 3.8%.^[39] However, fewer children live in workless households in Finland compared to Scotland. Based on the latest available data for each country, only 5.8% of children in Finland lived in a workless household, compared to 9.8% in Scotland.^[40]

Source: World Bank (national estimate) indicator code SL.UEM.TOTL.NE.ZS

Finland does not have a national minimum wage. Instead, there is a strong tradition of collective bargaining, and these agreements are often extended to the whole sector, not only workers covered by the union. In 2019, 88.8% of workers in Finland were covered by collective agreements.^[41]

There is a cultural norm of full-time work in Finland, which is reinforced by policies such as individual income taxation and childcare provision. Alongside the setting of wages through collective agreements, this is a key part of providing sufficient income for families. A similar number of children live in households where all adults are working in Finland and Scotland (64.9% in Finland and 63.1% in Scotland).^[42] Comparable data for Scotland is not available, however comparisons between Finland and UK-level data shows that full-time work is more common among both single parents and couple families in Finland:

• 53% of single parent households in Finland work full-time and 4% are in part-time work.^[43] In the UK, 33% work full-time and 33.7% work part-time.^[44]
• 48% of couples with children are dual full-time breadwinner households in Finland, compared to 39% in the UK.^[45]

Single parents are at higher risk of poverty in both countries. However, Finland has fewer single parent families than Scotland. 13% of families with children are single parent households in Finland, compared to 25% in Scotland.^[46]

Employment rates between women and men in Finland are more equal than in the UK (with a gender employment gap of 2.1 percentage points in Finland, compared to 6.5 in the UK).^[47] However, it remains more common for women to work part-time or in temporary/fixed-term employment in Finland compared to men, with part-time work accounting for 21.1% of women’s employment in Finland in 2021, compared to 13.3% of men’s employment.^[48]

Furthermore, despite political focus on gender equality, differential outcomes for women in the labour market still exist, alongside conflicting incentives in Finland’s family policies, such as child home care allowance which was introduced as a political compromise and encourages more mothers to stay at home until their child is three years old. Finland therefore has a gender pay gap of 17.5% for the median full-time worker. Only 36.5% of managers were women in 2021.^[49] Comparable data is not available for Scotland, but the UK has a gender pay gap of 13.3% for median full-time workers and 36.8% of managers are women.^[50] Other analysis finds the gender pay gap in Scotland is notably lower than for the UK as a whole.^[51]