Mahmoud Afsmartous is concerned about Finland discouraging unemployed people with debt from finding work.
“Even highly-educated people that are unemployed are saying it doesn’t make any sense for them to return to work. There’s no incentive, because they owe so much debt that they wouldn’t have anything left to show from their salaries after they pay remittance to their creditors,” he says.
“I don’t have any problems with paying back my debts myself, but I am surrounded by people who have no credit history or have accrued a lot of debt. Their debt spiral could have started with something unexpected, like a sick pet or a broken appliance. Things like this are hard on a limited budget, so people take a quick payday loan to pay the bill. Soon they have to take another loan just to pay off the high interest rates on the first one - plus food and rent. It is very convoluted,” he says.
Being offered a new job, whether short or long-term, is not necessarily a way out, either. Debt enforcement payments take a huge slice out of wages, once housing and income subsidies are lowered.
“If you go to work, you should be able to earn more than you would get on social assistance. But in Finland today, you can be left with 480 euros from your monthly social assistance payment after paying your rent, but if you are earning a salary, you would be left with even less because of what you owe creditors. If you owe several thousand euros, you need to get work that will last for a least a couple of years if you want to stand a chance of paying some of it off,” says Afsmartous.
Trapped in a bind
Ministry of Employment and Economy official Pekka Tiainen has calculated that debtors in Finland earning a salary between 700 and 1,400 are trapped in a debt repayment bind.
“The cutoff amount for protection is just over 700 euros. Creditors are entitled to take two-thirds of the earnings from everyone earning more than that, and taxes take their share as well. In practice, three-quarters of the wage is already accounted for,” he says.
In other words, in this income bracket, debtors losing a part of their housing or social assistance benefit because they are earning more actually earn less money than if they were unemployed, says Tiainen.
If people with debt earn a larger monthly salary between 1 400 and 2 800 euros, the enforcement is not so severe, with half of the money earned usually kept.
Finnish law dictates that income received as unemployment benefits or housing allowances is outside creditor reach.
The Ministry’s Pekka Tiainen says Finland’s current system must be changed, and soon.
“First we could raise the lowest protection limit from 700 euros to 800 or 900 euros. That would remove part of the problem. I have also thought that if an unemployed person starts a new job, then they should be granted a half-year grace period from their creditors,” he says.
Finland’s National Administrative Office for Enforcement says tens of thousands of unemployed are currently subject to debt liability. Their unpaid bills and other forms of debt usually stem from a period of long-term unemployment.
20 years of paying off creditors
Anne-Maria Kantola, Executive Director of the Helsinki branch of the Finnish National Organisation of the Unemployed, says she dug herself out a debt hole she fell into in the 1990s Finnish recession by paying off her creditors regularly over the course of 20 years.
“I was a small business owner in the 90s and we owned three housing units simultaneously. My husband had one flat, I owned another, and we were renting a third in a different city. Of course housing prices plummeted and I had to pay rent on not just the flat but also my workplace. After everything collapsed, it was total chaos. It took me 20 years to pay it all back.”
“Yes, it was hard. I got a pretty good-paying steady job, but most of it went to paying off my creditors. Fortunately, those years are behind me,” Kantola says.
