Skill shortages and long-term unemployment in Finland

In 1997, skill shortages in Finland are having an impact not only on the labour market but also on the economy as a whole. Despite the recent improvement in the economy, the problems of putting unemployed people into work remain and there is still a shortage of qualified labour in many sectors of the economy. This feature outlines the reasons for these skill shortages, outlines the measures taken to help solve this problem, and looks at the views of the social partners.

Even though GNP growing by nearly 5% a year in Finland, there is still a shortage of qualified labour despite the high level of unemployment. The Confederation of Finnish Industry and Employers (TT) has stated that the recruitment problems of companies are real, and predicts that the situation could worsen sooner rather than later. The problems of skill shortages and a lack of available qualified labour is regional and sector-specific and relates to certain occupations and particular skills.

The basic precondition for competitiveness and growth of industrial production is the availability of qualified personnel. This is particularly true in the growing sectors, which have an urgent need for highly-educated key staff. TT estimates that in the future about 50% of those recruited into the industrial labour force will be university graduates or graduates from institutions of professional higher education. The greatest need is for computer technology engineers and data communications and electronics specialists, and there is a risk that these particular sectors, which are of critical importance for Finnish exports, will lose their growth potential.

According to an inquiry into personnel and training needs conducted by TT in 1997, most companies have difficulties to different degrees in finding qualified employees. Every fifth company had difficulties in finding qualified personnel for production work. Companies also experienced difficulties in finding employees for jobs requiring knowledge of languages, product development and marketing skills.

Do labour shortages hinder growth?

According to TT, the lack of qualified labour is also hindering production growth. In April 1997, the problem was clearly most severe in the metalworking industry, where the lack of a competent labour force was hindering production growth in 14% of the companies surveyed.

In the field of electronics, the recruitment of new personnel consisted mainly of jobs requiring special expertise or research and product development skills. At the moment, the number of new students and university graduates in this field does not meet the future demand for educated personnel. The Ministry of Education has already made plans for the tripling of student places in relevant subjects.

In the construction industry, the biggest problem is considered to be the lack of professional skills. According to the labour force survey undertaken by the Central Union of the Construction Industry in October 1996, 29% of the companies which responded to the survey had jobs for which it was difficult to find qualified workers. The most common occupations were masons and carpenters. At the same time, the most important reason for difficulties in recruitment was the lack of professional skills, training or work experience. Another important reason cited by respondents was related to the perceived easy availability of generous social security provisions.

According to the Central Organisation of Finnish Trade Unions (SAK), the problems related to the availability of labour in the construction industry are in fact concerned with the inadequate provision of services by the employment offices. Central Organisation for Private Services (PT) predicts that the recruitment problems will continue to grow. Other occupations where it is sometimes difficult to recruit personnel are the hotel and restaurant business and banking.

SAK fears that there is a risk that the whole of restaurant business is turning into a "fast-food" industry where those who are seeking better jobs work only for a short time. In this industry, jobs which offered good career opportunities at one time no longer exist, and contracts of employment are becoming increasingly short term and are less secure. Training in this industry also leaves much to be desired.

In contrast, in small and medium-sized enterprises recruitment is a minor problem. According to an inquiry conducted by the Finnish Entrepreneurs in April 1997, only 7% of the companies thought that the problems of obtaining qualified labour was the most significant obstacle to company development.

The special problems of Helsinki

In some districts of Helsinki, labour shortages are a real problem. New jobs are being created almost at the same rate as in the boom years. The number of vacancies currently stands at nearly 10,000. However, only a quarter of these vacancies are registered at the employment offices. For example, the fast-food business is growing quickly but the jobs are difficult to fill. The employers put the blame on the "generous" social security system. The unions on the other hand, are critical of the poor terms and conditions of employment on offer and emphasise that the fast-food sector hires many part-time workers in order to avoid paying the full entitlements of a full-time worker. As a result, this kind of work does not guarantee a reasonable living wage. One explanation for this may be the fact that there has been a tightening of the regulations for receiving income support. Those under 25 who lack an adequate level of education are particularly affected.

The feedback from the employment offices is similar

Many employers require special skills which are company-specific. This poses a problem for the employment offices because many job applicants often have the required basic education and some special skills, but they do not have the necessary training or work experience for the job in question. Employers are not very interested in training new personnel themselves because they believe that it is the responsibility of society generally.

According to the employment offices, the reason for more than a third of all the recruitment problems in spring 1997 was related to the qualities or qualifications of job applicants. The main issues that surfaced were insufficient professional basic training or the lack of work experience. The nature of the workplace was cited in every fourth case.

The need for training

Training is seen as the most important means to overcome the skills shortage. The employment service has concentrated on providing vocational and apprentice-based training leading to vocational diploma qualifications, both at the workplace and in association with educational institutions. Such apprenticeship training has been welcomed both by employers and unions and initial indications are encouraging. The success of this kind of training is in contrast to broader-based employment training courses which are conducted for a large number of people. The success rate of the trainees for the two types of course reflects their popularity. Those who have taken the more focused vocational courses which are geared to imparting company-specific skills are much more likely to obtain jobs.

According to SAK, the courses which are geared to the particular needs of employers are most effective when the trainees already have the basic professional training required in the sector concerned. However, SAK stresses that this kind of approach is only effective in a small number of sectors.

It now seems to be generally accepted that it is no longer possible for everyone to find work. The employment service is increasingly selecting applicants for training courses who stand more chance of obtaining employment because they have the necessary attributes and qualifications.

Local bargaining increasing employment

Local collective bargaining is also related to labour market changes. The Ministry of Labour has discovered that local bargaining on working hours and work organisation obviates the need for overtime working, and that the employer can train additional staff partly in cooperation with the authorities. This arrangement does not replace basic training as such, but it can be the answer to ensuring that the acute need for professional skills is satisfied. Flexibility at workplace level might also create more jobs, which could help to overcome critical skill shortages. The two sides of industry have come closer to one another on local bargaining. SAK now accepts that the development of local bargaining should not necessarily be covered by new restrictions.

Commentary

Skill shortages and a lack of adequately qualified labour are clearly becoming a problem in certain sectors. At present, high growth is largely taking place in the electronics industry, where the lack of qualified labour is becoming evident. Product market changes are now occurring so rapidly that it is increasingly difficult to anticipate where skill shortages are likely to occur and consequently it is difficult to adapt training courses to cope with these rapid changes. Much of Finnish industry is capital-intensive and thus it has little job-creating potential. The so-called "jobless growth" phenomenon is very much in evidence in Finland.

New training arrangements and customised on-the-job training (eg apprenticeship training) is targeted to provide the necessary trained labour for those employers which are faced with the worst skill shortages. Initial indications suggest that they are successful. It is clear that future success will depend on tripartite cooperation between the government, employers and trade unions. (Juha Hietanen, Ministry of Labour)