On March 20, the UN’s International Day of Happiness, the Wellbeing Research Centre at the University of Oxford publishes the global ranking of happiness. From 2017 to 2025, Finland ranked first for eight consecutive years. The happiness ranking is calculated by asking residents to rate their current life satisfaction on a scale of 0 to 10, then averaging the results over three years. The top places are occupied by Nordic welfare states such as Finland and Denmark. Finland’s high level of happiness is largely due to the institutions that support its generous welfare services.

In the Petteri Orpo administration that took office in June 2023, the right-wing Finns Party, which advocates exclusionary policies, joined the coalition. Party leader Riikka Purra, who serves as Minister of Finance, has been wielding a big axe over social security and health and welfare systems. In the background lies an expanding fiscal deficit due to such factors as increased defense spending. Economic growth has also been lagging, and in November 2025 the unemployment rate was 10.6 percent, the worst among European Union (EU) member states. Having overcome many difficulties to build a high-welfare state, Finland now faces yet another major trial.

Parliament of Finland (Photo: Ilari Nackel / Shutterstock.com)

Successive cuts to social security and medical expenses

In the little more than two years since the Orpo administration took office, spending cuts have been directed at social security and health and welfare.

On 1 February 2026, an amendment to the last safety net, the basic social assistance (income support) scheme, came into force. As a result, benefits for all recipients aged 18 and over were cut by 2–3 percent, and income from part-time work is no longer disregarded. The purpose is to tighten eligibility for social assistance, reduce dependence on it, and encourage full-time employment. Kela, the Social Insurance Institution of Finland, which manages social security benefits such as pensions, unemployment insurance, and child benefits, says the reform is expected to reduce benefit payments by 70 million euros.

According to public broadcaster Yle, over roughly two years up to September 2025, the government achieved about 10 billion euros in fiscal consolidation through tax increases and spending cuts. On the other hand, cuts in social security benefits have been “hitting the same people over and over again,” dealing a particularly severe blow to low-income groups.

Kela’s budget will be cut by 50 million euros by the end of 2027. This amounts to nearly 10 percent of Kela’s annual budget of 650 million euros and is the largest reduction in several decades. The number of employees, which stood at 8,600 in 2022, will be reduced by 150 each year, and a review of service locations is also under way.

According to the Ministry of Finance of Finland, during the current government’s term through 2027, a further 1.4 billion euros in fiscal consolidation will be needed through tax increases and spending cuts. Social security and health-care spending may again become targets for further reductions.

Tram in Helsinki (Photo: City Clock Magazine / Flickr [CC BY-NC-SA 2.0])

The path taken by the welfare state

Finland has a population of about 5.6 million. It is a frigid country, two-thirds of whose land is covered by forest. How did generous welfare become so firmly rooted here? Let us look back at its history.

Present-day Finland was part of Sweden from the 12th century until 1809, after which it came under the rule of the Grand Duchy of Moscow. After the Russian Revolution, Finland declared independence in December 1917. It then experienced two wars with the former Soviet Union: the Winter War (1939–1940) and the Continuation War (1941–1944), losing 10 percent of its territory. It also had to pay huge reparations and accept some 300,000 refugees from the ceded areas. Even so, the Finnish economy recovered rapidly after World War II. The metal and shipbuilding industries flourished, and timber exports boomed.

Economic stability is indispensable for achieving a high-welfare state. The Nordic model of welfare state took shape in the 1970s and 1980s. Sweden and Denmark led the way. Some researchers define a welfare state as one “characterized by excellent social security, a strong income redistribution function with a small gap between rich and poor, and stable employment with low unemployment rates.” In the late 1980s, Finland leveraged its strong trade relations with both Eastern and Western Europe to achieve high economic growth, joining the ranks of Nordic welfare states.

The road thereafter was not a smooth one. The collapse of the Soviet Union in 1991 deprived Finland of its main trading partner, plunging the country into a severe economic recession. Through industrial restructuring and other measures, the economy gradually began to recover, and Finland joined the EU in 1995. In 2009, however, the country was hit by the eurozone debt crisis. That year, GDP shrank by as much as 8.5 percent, and thereafter the economy repeatedly recovered and deteriorated. With the population aging, social security costs increased, placing great pressure on public finances. From 2015 onward, Finland strengthened fiscal austerity measures and put its economy back on a recovery track.

Yet war again cast a shadow. In February 2022, Russia invaded Ukraine. For Finland, which shares a 1,300-kilometer border with Russia, this posed a direct threat. Abandoning its military neutrality maintained since its founding, Finland joined the North Atlantic Treaty Organization (NATO) in 2023. Under pressure from U.S. President Donald Trump, NATO has been calling on member states to increase defense spending, and this burden is weighing heavily on Finland as well.

The “most important ever” health and social reform

Finland’s generous welfare was by no means achieved under favorable conditions. The country has reached its current status by overcoming hardships one by one, such as economic crises and wars. Just before the current coalition government took office, another major reform was carried out.

As of 2026, Finland consists of 308 local municipalities. However, health care, social welfare, and emergency medical services are provided by 21 wellbeing services counties (except for the capital city Helsinki, which is separate) that divide the country. The county concept was discussed for more than 15 years, and the previous center-left government led by the Social Democratic Party introduced it in January 2023.

Each wellbeing services county has an assembly and its own budget. As municipal mergers have not progressed, the aim is to broaden the scale and improve the efficiency of services at the county level and thereby contain public expenditure. In Finland, the three actors of national bodies such as Kela, the wellbeing services counties, and local municipalities each share responsibilities and cooperate to provide necessary services to residents.

In an interim evaluation of the wellbeing services counties published at the end of 2025, the Ministry of Social Affairs and Health of Finland gave a certain level of recognition, stating that at the national level services have generally been provided at the same standard as before the reform. However, it pointed out large disparities between counties and the need for corrections, such as strengthening control at the national level.

The introduction of the wellbeing services counties is positioned as “one of the most important administrative reforms in Finnish history, changing the way public health and social services are organized, provided, and financed” (Permanent Secretary Veli-Mikko Niemi of the Ministry of Social Affairs and Health). At this major turning point for the welfare state, the current government has taken a step toward reducing spending on social security and health and welfare.

Hospital waiting room, Helsinki (Photo: Jori Samonen / PxHere [PxHere License])

Deteriorating public finances in the background

Behind the Finnish government’s rush to cut social security and other expenditures lies a deterioration in public finances due to slowing economic growth.

According to Eurostat, Finland’s fiscal deficit in 2024 was 4.4 percent of GDP, a worsening of 1.5 percentage points from the previous year. Under EU treaties, member states are obliged to keep their deficit ratio within 3 percent. However, taking into account increased defense spending requested by NATO, deficits above 3 percent are temporarily permitted until 2028.

In January 2026, the International Monetary Fund (IMF) released its annual report on the Finnish economy, recommending that Finland consolidate its public finances. Specifically, it called for greater efficiency in social security, pension reform, and raising reduced VAT rates on items such as food.

The coalition government had already raised value-added tax, the equivalent of consumption tax, from 24 percent to 25.5 percent in September 2024. According to the economic outlook released by the Ministry of Finance in December 2025, GDP in 2025 grew only 0.2 percent year-on-year. Weak domestic demand is cited as the reason: even though incomes are rising, household consumption is not increasing. The ministry lamented the difficult situation, stating, “We are currently experiencing a prolonged economic downturn. Due to low economic growth, the widening of the fiscal deficit and the pace of debt increase are exceeding our projections.”

The Ministry of Finance forecasts that the fiscal deficit in 2025 will recover to 3.9 percent of GDP (compared to 4.4 percent in 2024, as noted above). However, in 2026 it is expected to widen again to 4.5 percent, because the cost of fighter jets initially scheduled for purchase in 2025 will be recorded as a loss in the following year. In 2027, with economic recovery and a slowdown in defense spending, the deficit is projected to shrink to 4.0 percent. Over the long term, however, the deficit is not expected to narrow substantially and is projected to still exceed 3.5 percent in 2030. This is because economic growth will be moderate compared with the increase in defense and interest expenditures. As mentioned earlier, the EU obliges member states to keep deficits within 3 percent, and the special allowance for exceeding 3 percent in light of increased defense spending will end in 2028.

The Three Smiths statue, Helsinki (Photo: Tuomo Lindfors / Flickr [CC BY-NC-SA 2.0])

Uncontrolled rise in unemployment

The delay in economic recovery is reflected in the high unemployment rate. In November 2025, Finland’s unemployment rate reached 10.6 percent, the worst level since the eurozone debt crisis of 2009. According to Eurostat, in that month Finland had the highest unemployment rate in the EU, surpassing even the countries that are usually at the bottom, such as Spain and Greece.

Some observers argue that the increase in immigration has swelled the number of job seekers, thereby raising the unemployment rate. According to a statement by the Ministry of Finance in December 2025, unemployment deteriorated sharply over the previous year. The ministry pointed out that “this is no longer due to a decline in the employment rate but rather to an increase in the labor force. The increase in the labor force is driven by immigration and government employment promotion measures.” Since 2022, many people fleeing Ukraine have also been living in Finland.

The worsening unemployment rate is also being used as a pretext to inflame domestic divisions, with claims that immigrants are taking jobs from Finns. In August 2025, a Member of Parliament from the coalition partner Finns Party made inflammatory remarks about immigrants in a public talk show, calling them “low quality” and asserting that the “great replacement conspiracy,” a theory that white people in Europe and the United States are being replaced by immigrants, was “a fact”, stirring controversy.

Growing backlash and falling government approval

Within Finland, as a little over a year remains in the coalition government’s term, criticism of its social security and health and welfare policies is growing stronger. According to a report released in May 2025 by the government agency, the Finnish Institute for Health and Welfare (THL), public trust in health care and social welfare services has fallen sharply. As of 2024, only about half of respondents said they trusted the health-care system, and just 42 percent said they trusted social welfare. In 2020, the respective figures had been 76 percent and 60 percent. The report also noted that in 2024, one in four people who needed to see a doctor felt they had not received adequate treatment.

Election posters, 2024 (Photo: Mikko Suhonen / Shutterstock.com)

There are also claims that cuts to social security are widening the gap between rich and poor. In September 2025, public broadcaster Yle, drawing on a report by the Ministry of Social Affairs and Health, reported that the share of people with low incomes (those with a monthly income below 60 percent of the median—less than 1,470 euros for single persons as of 2023) had risen from 13.4 percent when the current government took office to 15.6 percent. The impact was particularly severe on households with children and on the unemployed. According to Yle, the ministry’s report states that while the worsening economic situation can be seen as a legitimate reason for reducing social security benefits, from the perspective of fundamental human rights, the cuts are “not entirely unproblematic.”

Criticism of the Orpo government, which is at the helm of policy, is also mounting. In the local elections in April 2025, the Social Democratic Party, which had led the previous government, won a landslide victory, taking nearly a quarter of the vote nationwide. The support rate for Prime Minister Orpo’s National Coalition Party was limited to 20 percent, while Finance Minister Purra’s Finns Party stagnated at 8 percent. The Finns Party lost seats in several towns where hospital services had been cut as part of fiscal austerity measures.

In an opinion poll conducted by Yle in November–December 2025, the Social Democratic Party again topped the list with a support rate of 24.7 percent, followed by the National Coalition Party with 18.7 percent, while the Finns Party lagged behind at 14.2 percent. These figures are the reverse of the relative support of ruling and opposition parties at the time of the previous general election in 2023, and the cuts to social security and health and welfare are believed to be a factor.

On March 20, 2026, as in every year, the global happiness ranking will be announced. As dissatisfaction and backlash mount at home, will Finland be able to maintain its position as the happiest country in the world?

Writer: Kuroda Osamu

Graphics: A. Ishida

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