The Nordic model holds some insight into how to close South Africa’s yawning income and wealth gap. Photographer: Tomi Setala/Bloomberg via Getty Images
A snow-covered Helsinki couldn’t feel further away from Johannesburg, which is enjoying the first throes of a sun-drenched December.
Anyone writing about South Africa’s high levels of inequality will be somewhat familiar with Finland’s policy triumphs — which, like in other Nordic countries, have helped narrow the class gap and the economic void between men and women. Doing so has been in the interest of the country’s economy, counted among the most prosperous in the world.
But, as is the case in most parts of the world, Finland is staring down a new set of challenges. Its economy has stagnated and the country’s track record for equality is now under threat amid a political shift to the right.
That said, Finland’s success to this point holds a number of crucial lessons for an economy like South Africa’s, especially insofar as it is a testament to the importance of a robust and well-funded public sector. And the Nordic country’s government could probably learn a thing or two from South Africa about the perils of spending cuts.
Finland is known for having made big leaps in its economy — and for its social policy having a hand in its development.
“During the 1920s and 1930s, it was a very poor country. And then, suddenly, we had a leap. It was very rapid development,” says Mia Tammelin, a professor of social policy at Tampere University in southern Finland.
In the late 1930s, Finland adopted universal pension reform, clearing the way for the country’s approach to social policy, which would provide a minimum standard of income and services to all its citizens.
In the period that followed, Finland’s agricultural sector, which had been the backbone of the economy, collapsed, making way for rapid growth in its industrial and services sectors.
But even in the wake of this shift, households — which, under the agrarian system, had men and women working side-by-side — continued to operate on dual incomes, according to Tammelin.
Among the reasons for this is that after World War II, when Finland’s economic growth really took off, large numbers of women entered the labour market. Rapid urbanisation and industrialisation meant there were a lot of jobs to fill in Finland’s growing public service sector, which is dominated by women to this day.
Finland’s large public sector, as well as its extensive social welfare basket, have allowed women to hold on to full-time work in the face of family duties, such as taking care of children and older people. While 29% of European women said they could only do part-time work because of having to care for someone, only 11% of Finnish women gave this reason.
According to data from the World Bank, the labour force participation rate among Finns was 57.1% versus 62.8% among men in 2022 — a difference of 5.7 percentage points. Compare this to South Africa, where the gap is about 10 percentage points.
In both countries, the gap is lower among higher income groups. However, whereas Finland is among the countries where wealth and income inequality is least pronounced, South Africa is considered one of the most unequal countries in the world. Extreme inequality in South Africa means that incomes are concentrated among a smaller section of the population.
One policy that is often cited when talking about gender equality in Finland is its parental leave system, which now gives men 142 days of non-transferrable leave after a child is born. This allows men to share in otherwise unpaid care and domestic work.
Data from Statistics Finland shows that in 2021 men increased their share in domestic work compared with two decades ago — though their participation in this kind of work is still lower than among women, who spend 1.4 times as much time on unpaid domestic and care work than men. In South Africa, women spend 2.4 times as much time on this work than their male counterparts.
But another important aspect of Finnish society that seems to have added to the country’s gender equality gains is the quality of its public sector, which simultaneously relieves households of the burden of care while also creating gainful employment for many women.
Education is widely regarded as the key to achieving economic advancement in Finland, a view that has been backed up by large public investments in the schooling system — which is free to everyone.
In 2018, the Finnish state spent $11 766 per full-time student in primary to tertiary educational institutions, markedly higher than the $10 000 average across Organisation for Economic Co-operation and Development (OECD) member countries.
Finland’s commitment to schooling comes through from early childhood education, where enrolment rates are in line with the OECD average at about 90%.
Among the OECD countries, South Africa has some of the lowest enrolment rates. Data from Statistics South Africa suggests that the majority of children between the ages of 0 and four years instead receive care at home from a parent or a guardian.
A 2021 study found that the presence of at least one economically inactive adult in the household was negatively associated with enrolment rates at early childhood development centres. The study flagged the country’s chronically high unemployment rates as a risk to enrolments.
Higher levels of employment in Finland, specifically among women, probably explains a large reliance on early childhood education centres. Teachers and academics also cited a high level of trust and respect for public sector schooling and educators — a fact that has curbed growth in the private sector, viewed as a source of unequal education outcomes in countries like South Africa.
“That is the core of the Finnish model,” says Tammelin.
“Public funding is so good and the education of the professionals is so high that, in general, the quality is the same compared to the private sector. Really the core of society and the welfare state is that there is a strong belief that this is the Finnish way — that we want to invest money in the welfare society and pay taxes so that we have these services.”
But even in Finland, the social safety net has been clawed at.
Earlier this year, the Nordic country’s left-wing and youngest-ever prime minister, Sanna Marin, conceded defeat in parliamentary elections. Her loss gave way to a National Coalition Party-led pact with the Finns (a right-wing populist party), the Swedish People’s Party and the Christian Democrats.
The new government quickly put into motion an austerity programme aimed at restoring Finland’s pandemic-hit public purse and buoying the country’s economy, which its finance ministry has said will contract 0.5% this year.
Austerity has only added to South Africa’s inequality crisis.
Last year, Wits University’s Public Economy Project (PEP) noted that while government spending has been curbed, there is evidence that demand for public services has increased substantially, in line with rising unemployment and poverty.
Meanwhile, private education, health and security have flourished, implying a significant deterioration in the distribution of income in South Africa, and a redistribution of consumption from the poor to affluent households. With pay inequality more pronounced in the private sector, a smaller civil service also stands to exacerbate income inequality, the PEP warned.
Finnish trade unions, historically at the coalface of the country’s development agenda, have come head-to-head with the new government, which is angling to implement a raft of regressive labour reforms. Unions have also denounced social security cuts.
On my last day in Helsinki, there was a national public transport strike, which had the effect of making me feel more at home than I had been during my four-day stay.
The journalist’s flights and accommodation were paid for by Finland’s ministry of foreign affairs.