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The Finnish central social partners - except AKAVA, the trade union confederation representing professionals with a high level of education - successfully concluded negotiations over a new centralised incomes policy agreement on 17 November 2000. The two-year wage agreement will mean an increase in labour costs of 3.1% in 2001 and 2.3% in 2002. The deal, which is by nature a recommendation, will now be implemented in sector-level bargaining.
On 17 November 2000, the Finnish central social partners approved a proposed new centralised incomes policy agreement (FI0010164F). The organisations involved are: the Central Organisation of Finnish Trade Unions (Suomen Ammattiliittojen Keskusjärjestö, SAK); the Finnish Confederation of Salaried Employees (Toimihenkilökeskusjärjestö, STTK); the Confederation of Finnish Industry and Employers (Teollisuuden ja Työnantajain Keskusliitto, TT); the Employers' Confederation of Service Industries (Palvelutyönantajat, PT); the Commission for Local Authority Employers (Kunnallinen Työmarkkinalaitos, KT); and the State Employer's Office (Valtion Työmarkkinalaitos, VTML). The proposal is essentially a recommendation, which will be left to the signatories' member organisations to apply in forthcoming sectoral negotiations.
The Confederation of Unions for Academic Professionals (Akateemisten Toimihenkilöiden Keskusjärjestö, AKAVA) decided to remain outside the agreement, because it aims to improve the salaries of some groups of highly-educated but low-paid members (such as kindergarten teachers) by means of a special "education increment" of 0.2%, which could not be realised by a centralised deal. AKAVA will now seek such improved wage increases in forthcoming sectoral negotiations. However, many individual AKAVA member unions may still approve the agreement. Beyond AKAVA, the SAK-affiliated Air Transport Union (Ilmailualan Unioni, IAU) has rejected the agreement, and there are no guarantees as to whether the Paper Workers' Union (Paperiliitto), also affiliated to SAK, will sign up or not (FI0011166N).
Main provisions
The main points of the two-year central agreement, which will run until January 2003, 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 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 shiftworkers;
- 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; and
- 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 healthcare services will be reformed.
However, the government's measures for 2002 concerning tax cuts, the indexation clause, the increase in income-related unemployment benefit, continuation of the job rotation scheme and reform of occupational healthcare services have been made conditional. In the event that the centralised incomes policy agreement is not adopted or is not applied widely enough, then these measures will be dropped.
Social partner views
The managing director of PT, Arto Ojala, is pleased that the deal could be concluded despite all the difficulties. He considers AKAVA's refusal to participate as a serious setback to the coverage of the agreement, and hopes that the confederation will reconsider its decision. He believes that the signatory organisations should concentrate all their efforts on ensuring that the agreement is accepted at sectoral level and that the concomitant two-year industrial peace will be achieved in the labour market: "The two-year incomes policy agreement will bring stability, predictability and longer-range sustainability to the economy. However, it was disappointing that the agreement was not reached at the best possible level from the standpoint of the national economy and employment. The wage agreement is expensive and will lead to a worse employment development than a more moderate alternative would have done. The solution is exceptionally expensive for the low-productivity sectors, which have the least resources for paying wages." In Mr Ojala's view, a key issue for the centralised agreement is the reform of wage structures, which was rejected by the trade unions. He commends the programme promoting ability to cope at work and the extensive training package, which coincides largely with the goals of PT's training policy.
The labour market manager of TT, Seppo Riski, believes that the agreement means that labour costs will increase more in Finland than in competitor countries - "however, the agreement will bring predictability to the labour market and make it possible for the wage taxation cuts to be continued into 2002. Also, the agreement includes programmes for the positive development of working life and training. In the second year of the agreement, the wage increase is more moderate and will enable labour costs to be brought down closer to those of competing countries." Mr Riski criticises AKAVA's demand for a special increase for employees with a higher level of education, asserting that "the centralised negotiation process is not an appropriate way to rectify possible wage disorders in the municipal sector." He demands that, in order for the agreement to be implemented in practice, it should (apart from AKAVA) be approved widely - implying the importance of the Paper Workers' Union joining in the agreement. The Paper Workers' Union has refused to relinquish the existing schedule for negotiations in its sector, which are due in January 2001 (FI0004145N).
KT, for local authority employers, accepted the result, and is awaiting the results of sector-level negotiations over new collective agreements. Concerning the "education increment" sought by AKAVA, KT tried up to the last minute to formulate a proposition acceptable to all, but its proposal was nevertheless rejected by AKAVA.
VTML also accepted the outcome of negotiations, and will aim to renew the collective agreements in the state sector by 13 December 2000, in accordance with the general schedule.
On the trade union side, the chair of SAK, Lauri Ihalainen, was satisfied with the result, which he described as being characterised by justice and security: "This was not an agreement tailored to the old structures - instead, it fits the EMU era well." He laid particular emphasis on the increase in unemployment benefit levels, and also considered the "qualitative" reforms as important. He was not particularly worried about AKAVA's rejection, stating that this organisations' affiliates can still sign up. However, "no new 'education increment round' must come of this", he warned.
The board of STTK considers the agreement as important for the development of employment - "wage increases in line with the centralised incomes policy will guarantee improvements in employment and in the purchasing power of wage earners, stable economic growth, and a slowing of inflation." STTK sees as especially positive the fact that, besides wage provisions, the deal includes measures that promote adjustments in working time and the development of working life and lifelong learning, as well as some issues that are part of a continuing negotiation process.
AKAVA rejects the agreement
AKAVA, which represents professional staff with a high level of education, was in danger of upsetting the whole negotiation result. Its principal demand was a separate "education increment" of 0.2% to provide an extra wage increase for employees with a high level of education but earning less than the average. If centrally agreed, the increase would have applied to about 100,000 people, of whom about half are members of AKAVA.
Now, that the negotiations are moving to the sectoral level, it is believed that many AKAVA member organisations will join the central agreement. Some of the unions that were behind the "education increment" will evidently try to push their demands in sectoral bargaining, perhaps through strikes.
Commentary
The agreement can be considered as an expression of solidarity, guaranteeing a stable wage development for the majority of wage earners. Significant support for the development of purchasing power came from the government, when it promised to cut taxes by nearly FIM 10 billion. The Ministry of Finance has stated that such tax cuts will never happen again. Such a substantial contribution by the government helped persuade both the employers and unions to accept the agreement. It also made the employers' role in the negotiations easier, even if it turned out that they had to increase their wage offer considerably. The employers nevertheless see the value of labour market peace as so high that it is worth paying for.
The outcome of the negotiations is a sign that the Finnish industrial relations model is still viable under changed circumstances, though it will be subject to increasing pressure as wage differentials become greater. AKAVA's decision to remain outside the agreement can be seen as indicating that highly-educated employees - in many cases, those who work in the public sector - are demanding better wages more vociferously than before. Educated groups working in jobs with high levels of responsibility are not watching from the sidelines as wage differentials develop. It is evident that some AKAVA members, such as teachers, may strike in spring 2001 for better wages. However, it is realistic to suppose that public sector employees will not get their way, even through industrial action. Against this background, a majority of AKAVA member organisations are likely to accept the centralised agreement. In the long run, these developments will mean that people seeking jobs will tend to avoid these sectors, resulting in a weakening of public sector services.
The new centralised agreement will come into effect if its coverage proves to be wide enough. However, it is possible that it may still fail - if, for example, the insistence of the Paper Workers' Union on having its own agreement is seen as an attempt to depart from the wage increases agreed in the central talks. (Juha Hietanen, Ministry of Labour)