Voima Weekly #47 (EN) – The €5,700 Problem

Finland ranks last among the 22 countries included in the comparison. The median net wealth of households whose reference person is aged 16–34 is €5,700 in Finland, compared with €24,600 in the euro area. The table has been shortened for readability. The full comparison has been published by, among others, Taloussanomat. Source: ECB, HFCS 2023.

That is the median net wealth of a Finnish household whose reference person is aged 16–34. The corresponding figure is €24,600 in the euro area, €62,200 in Estonia, €59,600 in Lithuania and €74,600 in Slovakia. Finland ranks last in the comparison¹.

The figure looks so extraordinary that the first reaction is understandable: there must be something wrong with the statistics. To some extent, there is.

Finns tend to move out of their parents’ homes at a relatively young age and form their own households. In many of the comparison countries, young adults live with their parents for longer. Homeownership explains even more. In several Eastern European countries, for example, homes have been transferred across generations through systemic transitions, privatisations and inheritances. In this dataset, owning a debt-free home can quickly make a household appear “wealthy”, even if it has little money in the bank. Data collection methods and approaches to valuing residential property also differ across countries. All of this needs to be taken into account.

However, the same ECB dataset contains a figure that is much harder to explain away: 32.9%. Nearly one in three Finnish households whose reference person is aged 16–34 has negative net wealth. The corresponding figure for the euro area is approximately 7.9%. This is considerably harder to explain through statistical or methodological differences alone. Young Finnish households therefore have, surprisingly often, more measured liabilities than assets.

To me, this raises a much more interesting question than whether a young Finn is truly poorer than a young Lithuanian: Why do ordinary young people in Finland accumulate so little capital of their own?

Wealth is created from surplus, and the basic mechanism of building wealth is brutally simple: work → income → surplus → savings → investment → wealth. No political decision can bypass this sequence. Without a surplus, there can be no savings. Without savings, there can be no capital. And without capital, you are not financially free — you remain dependent on employment income, transfers and/or services provided by the system.

This is where Finland’s model deserves a more critical look. Work is heavily taxed. Hiring another person is expensive. And when already-taxed income is spent, consumption is generally subject to a 25.5% value-added tax².

Finland’s current system directs a large share of an individual’s economic surplus toward financing the system itself. In return, people receive collectively determined services, benefits and future entitlements whose scope, quality and terms they do not control. As these deteriorate³ at the same time, the trade-off becomes increasingly difficult to justify.

For high earners and highly productive individuals, this trade-off can become particularly poor: they contribute heavily to the system, receive little or nothing from many transfers, and at the same time give up capital they could otherwise have saved and invested themselves.

Wealth is different. It is cash, gold, shares, business assets, debt-free housing wealth or other capital that the individual actually owns. This may be a blind spot in Finnish economic thinking: we talk extensively about what is collectively provided to people, but far less about what they are actually left with.

The more fundamental question should therefore be: How much of the value created by an individual’s own work is left for them to build their own balance sheet?

This requires turning the prevailing logic around. The purpose of an economy should not be to build the largest possible system that collects, redistributes and ultimately takes care of the individual. It should give people as much freedom as possible to work, produce and build wealth — and, with that freedom, to take responsibility for themselves and those close to them. The first place we turn for responsibility should not automatically be the state, but the individual, the family and the local community.

Personal capital means more than a higher net-worth figure. It means independence. A person with savings and assets can withstand uncertainty, change jobs, start a business, take risks and care for those close to them without every setback sending them to the government for help. They can also leave the next generation more than they themselves received.

The stronger an individual’s balance sheet, the less their life depends on transfers, government-provided services and political decisions.

The ECB statistics are not perfect. Lithuania’s €59,600 versus Finland’s €5,700 does not mean that the average young Lithuanian is ten times financially stronger than the average young Finn. Nor does it need to. It is enough to look at Finland itself: €5,700 in median net wealth. 32.9% of young households with negative net wealth.

These are not the numbers of strong private balance sheets. Finland’s next major economic project should therefore not be limited to employment, GDP growth or balancing the public finances. Alongside them, there should be a much simpler objective: Give as many Finns as possible the opportunity to build wealth.

People should keep more of what they earn through work and entrepreneurship. Less should be taken when one person employs another. Benefit traps that make accepting work or earning additional income a bad deal should be dismantled. Simply put: More for people. Less for the state.

Real prosperity is not a high gross salary or the ability to consume more. It is a strong balance sheet: assets that preserve or increase purchasing power and reduce dependence on the next paycheck, government transfers and political decisions.

A successful society is not built by giving people more to consume. It is built when as many people as possible can turn the fruits of their work into lasting wealth.

The system can help. Wealth gives you the freedom to choose.

–Marko Viinikka
Founder, CEO
Voima Gold Oy