Causes of Poverty and Inequality

When it comes to homelessness, Finland is doing well in supporting its homeless population as homelessness is on the decline, however, it wasn’t always like this (Glösel). There are two main factors that contributed to homelessness and poverty in Finland.

One of the primary reasons for poverty and homelessness in Finland is the expensive housing (Thelwell). There is slow growth in the housing industry and with a shortage of housing, prices have risen dramatically. In addition to that, there is not much competition in the housing market to drive down prices, so prices remain relatively stable but high (Bank of Finland). The shortage of affordable housing contributes to poverty and homelessness as low-income people may not be able to afford the rising housing prices and the homeless are not able to afford to purchase housing.

Another factor that contributed to homelessness in Finland was the vicious cycle of homelessness that homeless people were trapped in. Without a housing address, a homeless person could not apply for any jobs; without a job, the homeless person could not apply for any housing. This was a vicious cycle that kept homeless people on the streets. Luckily, Finland has addressed this issue and provided more resources for their homeless population with, for example, the “Housing First” policy (Glösel).

Looking at income inequality in Finland between the 1990s and 2010, we see it is on the rise. The income distribution shifted to the high-income groups as their income increased- mainly through capital income. The highest income group had increased their financial assets thus increasing their wealth through capital income. This also caused a higher net wealth inequality as the high-income groups continued to increase their net wealth through attaining more capital and capital income (Blomgren).

Works Cited

Bank of Finland. “Rise in Services Prices Has Made Finland an Expensive Country.” Bank of Finland Bulletin, Bank of Finland, 30 June 2015, www.bofbulletin.fi/en/2015/3/rise-in-services-prices-has-made-finland-an-expensive-country/.

Blomgren, Jenni, et al. “Growing Inequalities and Their Impacts in Finland.” GINI Growing Inequlaities' Impacts, Nov. 2012.

Glösel, Kathrin. “Finland Ends Homelessness and Provides Shelter for All in Need.” Pressenza, 13 July 2020, www.pressenza.com/2020/07/finland-ends-homelessness-and-provides-shelter-for-all-in-need/.

Thelwell, Kim. “Top 10 Facts About Poverty in Finland: Issues & Solutions.” The Borgen Project, Kim Thelwell Https://Borgenproject.org/Wp-Content/Uploads/The_Borgen_Project_Logo_small.Jpg, 17 Dec. 2019, borgenproject.org/top-10-facts-about-poverty-in-finland/. 

Inequality and Poverty

2006 Gini Index: 28

2016 Gini Index: 27.1   

    Above is a Lorenz curve for Finland that reflects the distribution of income within the economy. The blue line represents perfect equality, where 20% of the population earns 20% of the income and 40% of the population earns 40% of the income, and so on and so forth. The red line represents Finland's distribution of income in 2016 and the orange line represents Finland's distribution of income in 2006. As you can see, both curves are below the perfect equality line meaning that Finland has an unequal distribution of income. The further the curve is away from the line of perfect equality, the more unequal the distribution of income is. As you can see, the 2016 red line is above the orange 2006 line and is closer to the line of perfect equality; this means that in 2016, Finland had a better distribution of income than in 2006. 

    Another factor we can look at to compare inequality of income distribution is the Gini index. The lower the Gini index number, the less income inequality the country has. In 2006, Finland's Gini Index was 28 on a scale of 100, which is already relatively low compared to other countries around the world. Then we can see that in 2016, the Gini index fell to 27.1 which means that there was less income inequality in 2016 than in 2006. We came to this conclusion also by using the Lorenz curve, so using the Gini index is just another way to look at income inequality within a country and compare it over time or to other countries. So far, from the data, Finland is heading in the right direction and becoming more equal in income distribution!