In this text we try to shed light on Finnish PES (Public Employment Services) reform and its impact on markets. The idea stems from relatively frequent international enquiries on the matter.
The text is our take on the situation and is not an official statement, but rather our interpretation of what is going on with the PES reform. The basic idea is to transfer the PES responsibility to municipalities like in Denmark. However, in the Finnish case there are certain conditions and the transfer is done to organisers which meet those conditions (i.e. 20 000 working age population). There is quite a lot of information in English about the transfer on the website of the Ministry of Economic Affairs and Employment.
Based on our earlier studies and exercises the current quasi-market (publicly procured) for PES services is somewhere around 300 to 400 million euros per year. This is procured out by 15 regional entities which are part of the state administration. Around 250-300 of this has been state procured services and this moneybag is transferred to the municipalities as a general funding, not earmarked. The municipal funding model includes a lot of incentives for e.g. rapid employment outcomes. Please note that the training and competence development is partly funded through state-subsidy under non-market conditions (labour market training leading to qualifications).
Municipalities have time until the end of October 2023 to submit plans for organising services. The future organisers will be defined by the end of this year if the schedule holds. However, it could be estimated, that there will be more organisers in the future than the current 15 state-led regions. The estimations propose the number to be somewhere around 25 to 40. Different municipalities have different traditions of service procurement. Bigger cities work more closely with the private sector and have long experience of trialing different schemes for different target groups, whereas some municipalities have little or no experience on public private partnerships. In total this would mean, that in the future PES procured services will shrink quite significantly, even though the current government programme places emphasis on utilizing market as part of the service delivery. To what extent there will be market-based service provision, is difficult to say until the future organisers are established. There are lot of uncertainties, even though the amount of political steering of these actors. We will continue monitoring the development and provide more accurate estimates when the actually responsible organisers will be known.