Incomes policy agreement signed

Finland's new comprehensive incomes policy agreement was signed formally on 15 December 2000. The two-year wage agreement will mean an increase in labour costs of 3.1% in 2001 and 2.3% in 2002. The agreement covers about 2 million wage earners, or some 90% of Finnish employees.

A new comprehensive incomes policy agreement was signed on Friday 15 December 2000, after most member organisations of the signatory confederations signed agreements in line with the text agreed in November (FI0011167F).The agreement thus covers about 2 million wage-earners, comprising some 90% of Finnish employees. The new agreement was signed by all the central employer and trade union confederations except the Confederation of Unions for Academic Professionals (Akateemisten Toimihenkilöiden Keskusjärjestö, AKAVA). Despite the failure of their confederation to sign, however, individual unions representing a large proportion of AKAVA's membership have negotiated collective agreements that are in line with the overall agreement.

The general impact on costs will be about 3.1% in 2001 and 2.3% in 2002. More than 10,000 employees in unions belonging to the Central Organisation of Finnish Trade Unions (Suomen Ammattiliittojen Keskusjärjestö, SAK) - dockworkers, electricians in the energy sector, and train drivers - will remain outside the new accord for one year. The aviation and food sectors also remain outside the new deal, but these employees are covered by existing long-term agreements of broadly similar content. The coverage of the new agreement in the industries organised by SAK is as high as 97%.

Of AKAVA member unions, those representing nursery school teachers, librarians, psychologists, social workers and doctors declined to sign up to the new agreement. The airline pilots' union, which does not belong to any confederation, also remained outside the deal. With the exception of its insurance workers' union, the Finnish Confederation of Salaried Employees (Toimihenkilökeskusjärjestö, STTK) was broadly behind the new package.

Social partners mainly satisfied

The Confederation of Finnish Industry and Employers (Teollisuuden ja Työnantajain Keskusliitto, TT) expressed concern that the dockworkers and some key energy sector workers will remain outside the agreement for one year. These workers are crucial to the smooth operation of Finnish industry. The willingness of the dockworkers to sign up to the agreement was undermined by news of redundancies in the ports of Hamina and Kotka, where the jobs of some 30 employees are in jeopardy. However, as existing agreements covering the dockworkers and energy sector electricians will continue to ensure freedom from industrial unrest until the beginning of 2002, the industrial employers' representatives were finally persuaded to sign the exceptionally broadly-based incomes policy agreement.

The Employers' Confederation of Service Industries (Palvelutyönantajat, PT) was somewhat worried about the expense of the agreement for low-productivity sector, and feared adverse effects on the development of employment. PT would like to start negotiations on incomes policy reform.

SAK considers the new sectoral accords to be quite solidly based. While their general impact on costs will be about 3.1% in 2001 and 2.3% in 2002, the structure of the central agreement ensures significantly higher increases in low-pay sectors with a majority of women workers. In general, the employee camp welcomed the agreement as beneficial for purchasing power and employment.

Main provisions

The main points of the two-year central agreement, which will run until January 2003, and has now been implemented at sector level, are as follows.

• In 2001, there will be a general pay rise of FIM 1.20 per hour or FIM 200 per month, with a minimum increase of 2.1%. There will also be an additional amount of 0.5% to be distributed in subsequent negotiations within sectors in line with particular circumstances, and an "equality allowance" of 0.4% to be used to improve the position of women and lower-paid workers in sectors. The overall effect will be a 3.1% increase in labour costs (including a paid holiday on Ascension Day).

• In 2002, there will be a general pay rise of FIM 1.07 per hour or FIM 179 per month, with a minimum increase of 1.9%. There will be an additional 0.3% for sector-level distribution. The overall effect will be a 2.3% increase in labour costs.

• An indexation clause has been introduced whereby if inflation exceeds 2.6% over the period from January 2001 to December 2001, pay will be increased by the corresponding percentage. However, minor increases in prices of up to 0.4 points over 2.6% will not result in pay increases. Thus, in practice, if inflation reaches 3.1%, this will trigger a pay increase of 0.5%.

• An incomes progression clause has been introduced, aimed at ensuring that there is an equal wage development for those sectors that fall behind the average wage development for all workers. A special committee, consisting of the national conciliator and one representative each from a sector's employer and trade union organisations, will monitor developments over the period April 2000-April 2002 and decide on any possible additional pay increase by 30 August 2002.

• Ascension Day will become a national paid public holiday in 2002, for those employees who do not already have a holiday on this day. This does not include shift workers.

• The earnings-related element of unemployment benefit will be increased from 1 March 2002.

• Shop stewards will receive greater compensation for performing their duties.

• The "job rotation" sabbatical leave scheme (FI9704110F) will be continued for two years.

• Working groups will examine employment law reforms and conduct fact-finding studies.

• Measures will be taken to promote employees' "ability to cope" at work (FI9911127F) and to promote training.

Government measures

As its contribution to the agreement, the government has decided on tax cuts worth FIM 6 billion in 2001. For 2002, it has promised tax cuts of FIM 4 billion. The tax cuts will be directed towards low- and middle-income earners. The government is also prepared to initiate measures to implement the agreement's provisions on increasing unemployment benefits, training and employment law reforms. Further education allowances will be increased by FIM 80 million in the coming year. The government will also legislate to prolong the job rotation scheme for two more years, and to implement the pay indexation clause. Further, the provision of occupational health care services will be reformed.

Commentary

Like its predecessor (FI9801145F), the centralised incomes policy agreement attained a wide coverage, at over 90% of Finnish employees. The agreement can be considered a "solidaristic" one which supports both wage earners' purchasing power and employment. Despite the centralised nature of the agreement, there has been a continuing incorporation of flexible elements, which take sectoral and workplace-level needs into consideration. An odd feature of this incomes policy round was AKAVA's decision to remain outside the agreement as a confederation. However, almost all its member unions signed up to the agreement. Some of the unions that remained outside the deal will most likely take some sort of industrial action to press their demands, with the problems focused on low-paid groups such as kindergarten teachers working for the municipalities. The Prime Minister, Paavo Lipponen, has already promised to support the idea that also the municipalities should launch a study of wage structure.

After this bargaining round, it can be concluded that the Finnish industrial relations model seems to be functioning even in the new environment of EU Economic and Monetary Union (EMU). Finland's competitiveness is so high at the moment that the agreed wage increases will presumably not represent any threat to the predicted strong continuation of economic growth. (Juha Hietanen, Ministry of Labour)