The Chief Economist’s blog: Indebtedness is not the municipal councils’ greatest challenge

As a result of the municipal election that was held recently, 293 municipalities in the continental Finland received new councils. After the election and the campaign speeches, the council members will go back to everyday life. The talk about breaking the growth in indebtedness will gain momentum but the problems in many municipalities cannot be solved with the economic policy alone. In other words, more comprehensive changes than tax increases or expense cuts are needed.

A low birth rate is a chronic challenge for many municipalities

The challenge that many municipalities face is a decreasing birth rate. The situation could even be described as baby loss. According to Statistics Finland, in over 80% of the municipalities, the number of births was lower than deaths last year. A comparison over a longer period of time paints an even more concerning picture of the situation. In every second municipality in continental Finland the number of births has been lower than the number of deaths in every year for the past 10 years.

Migration loss accelerates the change in population

At the same time as the number of births has decreased, a great number of municipalities are battling chronic migration loss. Approximately 200 municipalities suffer from migration loss annually and out of one in four municipalities, the number of people that has moved away has during every year in the past ten years exceeded the number of people that has moved back.
Birth rate and migration loss create a divide between municipalities
The increase in population in Finland as a whole has slowed down. In terms of population growth, there are clear winners and losers in the municipality field. In 225 of the municipalities in continental Finland, the population was lower in 2020 than 10 years previously. Economic activity and the endurance of the municipal economy correlate well with the population trends. Because of this, the development has for many municipalities been unsustainable for a long time.

The municipality field has been changing since the 1940's

In 1940, there were over 600 municipalities in Finland - Åland included. Since then, the number has been decreased by half and the development will most likely continue. The map of municipalities has continuously been changing for over 80 years. The largest municipality, Helsinki, had over 650 000 residents last year. Correspondingly, Luhanka with its 699 residents was the municipality with the lowest number of residents. All in all, continental Finland had 197 municipalities with under 10 000 residents.
The social welfare and health care reform has been justified with the efficiency gains in the production of these services that broader shoulders provide. Once this reform is finished, the brainwork should continue, and we should think about what other municipality services would benefit from broader shoulders.

Lasse Corin lasse.corin(at)aktia.fi
Twitter: @lassecorin

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