Finland’s welfare areas and municipalities laid off nearly 1,640 employees last year, a figure that doubles the estimated number from the previous year and reaches levels not seen since the 1990s recession. The data comes from a major survey by the employer organization for municipalities and welfare areas, KT, which shows the public sector is undergoing a dramatic and painful restructuring driven by severe financial strain.
KT's survey, conducted between late November 2025 and January 2026, received responses from 205 municipalities and municipal federations and 24 welfare areas or federations. These respondents represent about 96 percent of all welfare area staff and 79 percent of municipal staff, providing a comprehensive picture of the sector's labor market adjustments. The layoffs, totaling roughly 1,300 in welfare areas and 340 in municipalities, were primarily for production-related and economic reasons, which KT notes have traditionally been rare in this sector.
A Return to 1990s-Level Disruption
The scale of the terminations is exceptional for Finland's public sector. KT stated that such high numbers of layoffs for economic reasons were last witnessed during the deep recession of the 1990s. This historical comparison underscores the severity of the current fiscal crisis facing local and regional government. While the largest waves of layoffs were concentrated in a few specific welfare areas, with one area's process still ongoing, the trend is nationwide.
"The layoffs were expected, as the difficult financial situation of the welfare areas has been known. In municipalities, changes in population structure, among other things, are forcing a reduction in the service network," said KT's chief economist Juho Ruskoaho in the organization's press release. His statement directly links demographic pressures, particularly an aging population, to the cuts in services and personnel.
The Financial Pressure Behind the Cuts
The driving force behind the layoffs is a profound financial shortfall. According to the KT survey, insufficient funding is complicating service provision in practically all welfare areas and nearly 40 percent of municipalities. To address this, welfare areas implemented personnel cost adjustments worth approximately 403 million euros last year, more than double the amount from the year before. For the current year, these areas plan even larger adjustments, targeting savings of around 475 million euros in personnel costs. Municipalities adjusted their personnel costs by about 161 million euros last year.
These financial adjustments translate directly into reduced services and job losses. Ruskoaho confirmed the widespread nature of the cutbacks, stating, "About half of the municipalities and all welfare areas intend to reduce personnel costs and the purchasing of services." The survey also revealed that temporary layoffs are a significant tool, affecting about 12,200 people in welfare areas and 600 in municipalities for the year 2025.
| Sector | Layoffs (2024) | Temp. Layoffs (2025) | Personnel Cost Adjustments (2024) | Planned Adjustments (2025) |
|---|---|---|---|---|
| Welfare Areas | ~1,300 | ~12,200 | ~403M € | ~475M € |
| Municipalities | ~340 | ~600 | ~161M € | Data not specified |
| Table: Comparative data on workforce reductions in Finnish public sector (Source: KT Survey) |
A Diverging Outlook for Municipalities and Welfare Areas
The forecast for the current year shows a diverging path between municipalities and welfare areas. Municipalities anticipate significantly fewer layoffs this year, a shift KT associates with an easing in labor availability. However, many still struggle with strict qualification requirements and staffing level regulations. In contrast, layoffs in welfare areas are estimated to increase further, indicating the crisis in healthcare and social services is deepening.
This planned increase is supported by separate reporting, which indicates welfare areas are planning to reduce staff by the equivalent of over 1,700 full-time work years this year. The final figure is likely higher, as many areas have set significant savings targets for their personnel this year but have not yet specified how those savings will be achieved. This uncertainty creates significant anxiety for employees across the sector.