Minimum Parental Allowance Payments Received by Finnish Mothers

In Finland, the number and the proportion of women receiving minimum maternity or parental allowance increased dramatically in the 1990s. Their share increased to a high point of 30 percent in 1996 and remained at over 25 percent to the end of the decade. The aim of this study was to describe some of the characteristics typical of these women, and to analyse how often and in what circumstances they had to rely on last-resort income support (social assistance and housing allowance). The material comprises data on the total working-aged population, retrieved from the income security registers maintained by the Social Insurance Institution and from the social assistance register maintained by Stakes (National Research and Development Centre for Welfare and Health). Both cross sectional and longitudinal data were analysed by means of cross tabulations and means as well as logistic regression. We could differentiate two groups of mothers receiving minimum benefi t: young mothers and middle-aged mothers with many children. Twenty percent of women on the minimum allowance also received social assistance and 38 percent received housing allowance. Reliance on social assistance was particularly common among mothers who had delivered their fi rst baby and among young mothers who had delivered more than one baby.


Introduction
Finland's residence-based subsistence security system has so far kept pace with international standards of social provision.During the 1990s, however, certain minimum benefi ts lagged behind general economic development, leading to a decrease in their real value.At the same time, the need for income security remains high due to widespread unemployment.Unemployment, together with a combination of cuts in social welfare benefi ts, has increased reliance on last-resort income support (social assistance).(Sosiaalimenojen kehitys … 2002, 124.)Also during the 1990s, poverty increased in population groups most vulnerable to risks of income security.Although, in general, the poverty rate in Finland is still very Yearbook of Population Research in Finland 41 (2005), pp. 47-60 low, poverty has increased since the 1990s.Studies have shown that the rate of child poverty doubled over the second half of the decade and poverty risk increased especially among the families with small children (Sauli et al. 2004).Cuts in minimum family benefi ts and a decrease in their real value have been proposed as reasons for this unfavorable development.Besides the minimum parental allowance, minimum family benefi ts also include the child home care allowance, which is an alternative to the use of public day care services.
Public debate on the minimum family benefi ts has focused also on their appropriate structure and level, which were addressed in a government report on the future (Finland for people … 2004).The report outlined goals for turning social security and family policy in a direction that would allow parents to start a family sooner and make them better able to choose the number of children they wish to have.This would require changes in the minimum family benefi ts, which are available independent of family income.Otherwise, the possibilities of young and low-income parents, such as students nearing the end of their formal education, to have more children would be limited.
According to the programme of the current Finnish government, means-tested minimum income security is to be strengthened to ensure that the minimum benefi ts, when combined with housing allowances and general family benefi ts, provide a reasonable income without the need to resort to income support.It is essential from the point of view of social policy to secure the real value of minimum benefi ts and their adaptability to changes in the general standard of living over time.Adjustments in the level of minimum benefi ts can also ensure a reasonable level of consumption even when people are forced to depend on these benefi ts for a longer period of time.(See also Sosiaalimenojen kehitys … 2002, 124.)In this article, we concentrate on the receipt of minimum parental allowance by women, which underwent a dramatic increase during the 1990s.Of the minimum family benefi ts, the minimum parental allowance has also been shown to be more problematic than the child home care allowance, which is refl ected in the fact that recipients of minimum parental allowance are more likely to have to rely on social assistance than recipients of home care allowance (Hiilamo et al. 2005).
The minimum parental allowance is a problem mainly for women.In 2003, one in fi ve women on parental leave received parental allowance at the minimum rate, compared to just three percent of men.Men's share of all days paid at the minimum rate was under one percent.Even though in the mid-1990s nearly seven percent of men on parental leave were paid at the minimum rate, their share of all days paid at the minimum rate was then as it is now.Therefore, there is good reason to focus this article exclusively on women.

Development of the minimum parental allowance
In Finland, as in the other Nordic countries, loss of income in connection with childbirth is compensated during the last few weeks prior to and the fi rst months following childbirth.The benefi t payable -maternity and parental allowance -is based on previous earnings.Also, in all Nordic countries except Denmark, people who are not active in the labor market qualify for a minimum parental allowance .1 .In Finland, the minimum allowance is payable to recipients with no or low income.The earnings-related parental allowance is equal to 70 percent of annual earnings up to 26,124 €.On earnings exceeding this limit, the allowance will be less than 70 percent of earnings.There is no ceiling on the amount that may be awarded.
The proportion of women receiving minimum maternity or parental allowances increased dramatically in the 1990s.Until 1993, only fi ve or six percent of parental allowances were awarded at the minimum rate.From 1994 on, this share increased to a high point of 30 percent in 1996 and remained at over 25 percent to the end of the decade.Different reasons have been presented for the change, including the fi nding that unemployment and fi xed-term employment relationships became more common among women (Keinänen et al. 1999).It has also been argued that child home care allowances have increased the use of minimum per diem allowances.Recipients of minimum per diem allowances include women who have, after the birth of their previous child and before a new pregnancy, remained at home to care for their child while drawing child home care allowance.In such cases, the benefi ts for any subsequent maternity and parental leave are not based on earned income (Hiilamo 2002a, 253).
These explanations tell only part of the story.The increase in minimum parental allowances re ceived by women is also due to changes in the criteria used to calculate the allowances.Figure 1 shows the days on minimum allowance as a proportion of the total number of days covered, and the recipients with no income as a proportion of the total number of women receiving parental allow ance.Originally, only persons with no income qualifi ed for the minimum parental allowance, and earning-related allowances were accumulated on the top of the minimum allowance.In 1994 and 1995, there were more women on the minimum allowance because the amount of allowance was determined by reference to the basic amount of the home care allowance.This implies that some low-income persons no longer received any earnings-based allowance but rather were paid parental allowance at the minimum rate.However, some of them received less money before 1994 in earnings-related benefi ts than what was payable as the minimum allowance in 1994 and 1995.In 1996, the system was again changed, the income limit to qualify for the minimum allowance being nearly doubled (from 2,215 € to 4,324 €), and the minimum allowance being reduced considerably (from 13,35 € per diem to 10,09 € per diem).It was again fi xed at the rate of the basic home care allowance -now signifi cantly lower than before.As seen in Figure 1, the pro portion of women with no income increased by only 10 percentage points from 1993 to 1996 while the proportion of women on minimum allowance rose by 23 percentage points over the same period.These changes meant that in terms of the value of benefi ts, low-income persons fared worse than other recipients of parental allowance because their low income no longer guaranteed them any earnings-related allowance.Moreover, the gap between the real values of the minimum allowance and the earnings-related allowance began to open up due to the minimum allowance not being ad justed for changes in the cost-of-living index.From January 1995 to December 2002, the gross value of the minimum parental allowance decreased by as much as 34.4 percent (Hiilamo 2002b, 219).
Until now, the recipients of the minimum parental allowance have been understudied.What is known is that women on minimum allowance differ from women on earningsbased allowance in terms of educational attainment and age.Fifty-seven percent of mothers under 25 years of age, compared with 22 percent of older mothers, receive minimum parental allowance (Sosiaalimenojen kehitys … 2002, 126).According to one survey, 60 percent of women with primary and secondary school qualifi cation 0 5 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Days on minimum allowance as % of total number of days covered

Recipients with no income as % of total number of recipients
Source: Statistics of the Social Insurance Institution received minimum parental allowance, while only 15 percent of women with a university degree did so (Takala 2000, 34).One purpose of this article is to attempt to fi ll this gap in knowledge.

Aim and material
The aim of this study is to describe some of the characteristics typical of women receiving minimum parental allowance in contrast to women on earnings-related parental allowance.We also analyse how often and in what circumstances this minimum benefi t fails to provide the recipients and their households with a necessary subsistence, forcing them to rely on last-resort income support.We will attempt to discover the degree of overlap between the minimum allowance, social assistance and housing allowance, and determine the effect of the duration of minimum allowance receipt on the need for last-resort income support.After an analysis of the research data, a review of the development of the minimum parental allowance and of the numbers of recipients after the research period will be presented.
The material comprises data on the total working-aged population (N=3,453,842), retrieved from the income security registers maintained by the Social Insurance Institution and from the social assistance register maintained by Stakes (National Research and Development Centre for Welfare and Health).The unit of analysis is the individual recipient.Cross sectional data about the use of benefi ts as of 30 November 2000 and longitudinal data about the duration of benefi ts from 1997 to 2000 were compiled.
The data on social assistance and housing allowance were organized by households.In our data, this was converted to individual-level characteristics, and so the data on household structure have been changed to background information describing an individual.The data also include other demographic information and details about eligibility factors available in the Social Insurance Institution's registers.However, socio-economic background information was not available.

Results
According to our data, maternity and parental allowances were paid to 47,100 women in November 2000.Of these women, 34,000 received earning-related parental allowance and 13,100 minimum parental allowance.This means that the proportion of women on the minimum allowance was 27.9 percent.This is about the same fi gure as the proportion of minimum allowance days of total days covered in 2000, namely 27.3 percent (Statistical Yearbook … 2002, 132).
Age was clearly linked to the probability to receive parental allowance at the minimum rate (Figure 2).Ninety percent of women under 20 years of age received the minimum allowance.After age 20, the proportion of women who received the earning-related allowance increased rapidly with age.The midpoint was at age 22, after which more women received earnings-related allowance than re ceived minimum allowance.The proportion of women on minimum allowance decreased up to the age of 29 years, and thereafter remained at 20 percent.The median ages of women receiving minimum allowance and those receiving earnings-related allowance were 27 and 31 years, respectively.
Figure 2. The number of women receiving parental allowances, by age of recipient, in November, 2000.
The number of children, too, was linked to the probability to receive the minimum allowance.Twenty-four percent of women with one or two children received the parental allowance at the minimum rate, compared to one third of women with three children, nearly half of women with four children and more than 60 percent among women with fi ve or more children.
The probability to receive the minimum allowance increased along with the number of children regardless of the mother's age, but less dramatically in the older age groups.For example, 82 percent of women under 25 years of age with three children received parental allowance at the minimum rate, while the proportions among women aged 25-29 years and over 30 years were 52 and 23 percent, respectively.Younger women were less likely to have been employed for the requisite six months, and therefore, more likely to be on the minimum allowance.The more births a women had delivered, the more often they had been outside the labor market even at older ages, and therefore, the more often they were on the minimum allowance.Our data allowed us to identify which other benefi ts mothers had received before the parental leave.These preceding benefi ts could shed light on the reasons behind their receipt of parental allowance at the minimum rate.Figures from the year 2000 showed that prior to receiving minimum parental al lowance, mothers had most often received child home care allowance (over 50 percent of mothers on the minimum allowance), means-tested labor market subsidy (20 percent) or study grant (nearly 20 percent)2 .These were the most important reasons for not having income and thus ending up on the minimum allowance.However, the reasons varied considerably according to the number of chil dren.When a mother only had one new-born child, the chief reasons were studying (one third of mothers on the minimum allowance) and unemployment (also one third).Starting from the second child, the most important reason by far was the desire to take a child care leave (about 80 percent), while unemployment (10-15 percent) and studying (3-10 percent) played a much smaller role.
How well did the minimum parental allowance meet the recipients' fi nancial needs?How many women had to supplement their minimum benefi ts with last-resort income support?Our data showed that there was a surprisingly large overlap between social assistance, housing allowance and minimum allowance.In November 2000, 20.4 percent of women on the minimum allowance received social assistance and 37.8 percent received housing allowance.
Who received social assistance?Table 1 (on next page) shows that mothers with one child had the highest proportion of social assistance recipients regardless of mother's age.Among mothers under 25 years of age and on the minimum parental allowance, social assistance was received by 33 percent of mothers who had delivered their fi rst baby, and by 23-24 percent of mothers who had delivered their second or third baby.Among mothers 25 years of age or over, about one in fi ve primiparas on minimum parental allowance received social assistance, compared to 10-16 percent of other mothers of the same age on the minimum allowance.A corresponding analysis was performed on the simultaneous receipt of social assistance and housing allowance among mothers on the minimum allowance according to the age of the mother and the number of children.No clear relationships between these variables were observed.
Table 1.Recipients of social assistance as a percentage of women receiving the minimum parental allowance, by age of recipient and number of children (number of recipients in brackets).
Next, we considered the overlapping of social assistance and housing allowance with minimum parental allowance (in 2000) according to the duration of parental allowance in 1997-2000 (Figure 3).On the horizontal axis, recipients of minimum parental allowance are grouped according to how long the allowance was paid during the two and half years preceding the research period.The number of persons belonging to each group is shown above the columns.On the vertical axis we see the proportion of those receiving not only minimum parental allowance but also social assistance, housing allowance or both.
We can see that the effect of the duration of minimum parental allowance on the probability to receive social assistance is different from its effect on the probability to receive housing allowance.The shorter the period on minimum parental allowance, the more likely the women were to have received social assistance.With the housing allowance, the reverse was true.The longer the women had received parental allowance the more likely they were to have received housing allowance.Interpreting the result, we have to remember that the women who had been on parental allowance for over a year had given birth to at least two children during the research period, and therefore, this group differs from those who delivered only one child.Among those who had received parental allowance for a brief time only, there are many young and low-income families.We may assume that where parental allowance has been paid for several successive births, the family's fi nancial situation may be better.The fi nding that the receipt of housing allowance becomes more widespread the longer the period on parental allowance may be explained by bigger family size.Finally, we considered the relationships between social assistance and a number of background vari ables as logistic regressions among women on the minimum parental allowance (Table 2).This analysis allowed us to identify the independent effects of different variables on the receipt of social assistance and on the simultaneous receipt of social assistance and housing allowance.Women re ceiv ing maternity or parental allowance at the minimum rate were distributed rather evenly by age.One third were under 25 years of age and 38 percent over 35.Young mothers were particularly likely to have to rely on the last-resort income support.Their odds ratio -showing the need for social assistance -was nearly double compared to the older age groups.The odds ratio for the simul taneous receipt of social assistance and housing allowance tripled from the oldest to the youngest age group.Table 2. Overlapping of social assistance and social assistance paid alongside housing allowance among women who received minimum parental allowance in 2000 (odds ratios, logistic regression).
The risk of having to supplement the minimum benefi t with last-resort income support was especially high among single parents.However, it must be noted that this group was small (1,200 persons) compared to recipients of the minimum benefi t in two-parent households (11,000).
When we added the duration of parental leaves and child care leaves (on home care allowance) into the models, the picture changed a little bit due to the number of children.However, we have to remember that women who had received parental allowance for over a year had given birth to at least two children during the last four years.As Table 2 shows, the connection between the number of children and receiving social assistance disappeared when the durations of family benefi ts (minimum parental allowance and home care allowance) were adjusted by turns.However, the risk to receive social assistance diminished in relation to how long family benefi ts had been paid to the mother during the last four years.Therefore, we can argue that the negative relationship between the number of children and the need for social assistance -presented in Table 1 -among women on minimum allowance still remains, but this effect is now seen only in duration variables due to the strong correlation of explaining variables.

Recent developments
Following the period represented by our material, a number of reforms of the minimum parental allowance provisions have been implemented.At the beginning of 2003, the amount of the min i mum payment was increased from 252.25 € per month to 286.25 € per month, and the annual income limit to 4,906 €.This reform also made it possible to calculate the amount of parental allow ance due by reference to the amount of a preceding unemployment allowance.This meant that the large number of women who earlier would have received the parental allowance at the minimum rate now qualifi ed for a higher allowance.The proportion of mothers on the minimum allowances dropped remarkably from 25.2 percent in 2002 to 21.3 percent in 2003 and to 18.5 percent in 2004 (Figure 1).The decrease in the number of women with no income was less dramatic (2.5 percentage points from 2002 to 2004).
In the beginning of 2005, the amount of the minimum benefi t was increased again, this time more noticeably, to 380.00 € per month, which amount is payable to lowincome individuals with annual earnings of less than 6,513 €.This was a relatively big improvement, and together with the increase that preceded it meant that the amount of the minimum allowance increased by 40.5 percent in real value between 2000 and 2005 (Hiilamo et al. 2005, 32).While this increase is a positive development, it must also be recognized that the number and proportion of mothers on the minimum allowance is again edging upward.During the fi rst three months of 2005, the proportion was 19.6 percent.
The uprating of the minimum benefi t allowed Finland to keep pace with the other Nordic countries.In Norway, the benefi t comparable to our minimum parental allowance is the maternity grant.It is paid for the non active3 as a lump sum of 33,584 NOK (4,090 €) (MISSOC 2004, 421).If we multiply the amount of the daily amount of the Finnish minimum parental allowance (15,20 €) by the number of days of maternity and parental leave mothers are entitled to, we get almost the same value (3,998 €).However, the benefi t is subject to taxation in Finland but not in Norway.
Traditionally, the amount of the minimum parental allowance has been higher in Finland than in Sweden.Heikki Hiilamo (2002a, 253) has made calculations based on a cost-of-living index comparison about the real minimum pre-tax value of parental allowance in both countries.The re sults are expressed as 1999 USD purchasing power parities per month.The analysis shows that the minimum per diem allowances remained higher in Finland than in Sweden throughout the 1990s.However, this is no longer the case.The minimum guaranteed benefi t (grundbelopp) was increased to 20 € (180 SEK) per day in 2004 (MISSOC 2004, 703), which is more than 30 percent higher than the minimum daily amount in Finland.In Denmark, there is no minimum parental allowance.
In a forthcoming reform, which will become effective in October 2005, the calculation criteria of the Finnish parental allowances will be changed so that an entitlement to earnings-related allowance is retained if a new child is born within three years of the previous birth.This will probably decrease the number of women on the minimum allowance.It will be interesting to see how large the effect is going to be.In Sweden, a similar reform was carried out as early as in 1980, when a 'speed premium' on childbearing was introduced to allow parents to retain the parental benefi ts due to them until the next birth if it arrived within two years (in 1986 extended to thirty months).For longer birth intervals, benefi t rights must be re-established by earning a work-related income.During the 1980s -a period of a general rise in fertility in Sweden -parents reacted by increasing their fertility particularly strongly before the end of the eligibility interval (Hoem 1993;Hoem and Hoem 1996).However, the 'speed premium' had an effect mainly on the timing of births, and its effect on fertility disappeared in the 1990s without any changes being made to the determination criteria (Hiilamo 2002a, 247).

Summary
The results of this study indicate a clear need for social assistance and housing allowance among the women receiving minimum parental allowance.In the research period, minimum maternity or parental allowance was paid to 13,100 women, most of them young mothers.Sixty-four percent of the women on minimum allowance were under 30 years of age and 36 percent of them were under 25.Also the number of children was linked to receiving parental allowance at the minimum rate.The more children they had, the more likely women were to be on the minimum benefi t -regardless of their age.We can differentiate two groups of mothers receiving minimum benefi t: young mothers and middle-aged mothers with many children.
Twenty percent of all women on the minimum allowance received also social assistance and 38 percent received housing allowance.Reliance on social assistance was particularly common among mothers who had delivered their fi rst baby and among young mothers who had delivered more than one baby.Women over 25 years of age with two or three children had less need for social assistance.The result confi rms the hypothesis that problems of income security or fi nancial instability can be a considerable obstacle to lowering the age of primaparas and generally making it possible to start a family earlier than is now the case.
The reforms implemented after the research period and those yet to be implemented in 2005 will improve the fi nancial position of people receiving minimum family benefi ts over the situation shown in this study.Their fi nancial well-being has improved due to the increase of the minimum parental allowance.Moreover, the proportion of women receiving parental allowance at the minimum rate has already decreased (because of the linkage with the rate of the preceding unemployment allowance).It will probably decrease more after October 2005 once the right to earnings-related allowance can be retained if a new child is born within three years of the previous one.These reforms will probably decrease the need for last-resort income support and clearly also serve the family policy goal of allowing parents to choose to have their fi rst child earlier.
Figure 3. Overlapping of social assistance and housing allowance among women on the minimum parental allowance by duration of benefi t, 30 November 2000 (%).*The number of allowance recipients in thousands is shown above the columns.