Employers rule out pay increases in current crisis
The Confederation of Finnish Industries has described the current economic crisis as being so difficult that pay increases are not possible in the upcoming bargaining round. In the employers’ opinion, Finland cannot afford to raise pay levels. In April 2009, the social partners met for the first time to discuss the next collective agreements. The trade unions argue that moderate pay increases would support workers’ purchasing power and ensure economic recovery in the long term.
The Confederation of Finnish Industries (Elinkeinoelämän keskusliitto, EK) has summarised the ongoing economic recession as being so difficult that pay increases are not possible in the forthcoming bargaining round. According to the Managing Director of EK, Leif Fagernäs, the current situation in the export industry is even worse than in the early 1990s. The Chair of EK, Sakari Tamminen, stated: ‘The fact of the matter is that hours are short, wages high and the wage development breakneck thanks to the previous round of collective agreements.’ He added that Finland could not afford pay rises at the moment:
We must improve productivity and see to cost competitiveness, for wages are currently rising at a markedly faster rate here than they are in competing countries while even the exchange rates are working against us.
First tripartite meeting for next agreements
The majority of the current sectoral agreements are due to expire in the spring of 2010. During the spring of 2009, a new collective agreement is to be negotiated in the technology industry and in the financial intermediation sector; negotiations have already commenced. Prime Minister Matti Vanhanen invited the representatives of the trade union and employer confederations to the meeting for the upcoming round of discussions on pay and employment conditions.
In the tripartite meeting, Prime Minister Vanhanen indicated that tax incentives, albeit slimmed down by the recession, might be forthcoming in exchange for wage prudence in the next round of negotiations. The prime minister explained: ‘We are prepared to review taxation once the general path of collective agreements has been sketched out.’ However, he added that the economic gloom of the past few months had narrowed the tax cut margin and noted after the meeting that ‘everyone emphasised the need for great moderation’.
Employers concerned about competitiveness
Mr Fagernäs considered that the economic crisis would be ‘a long nightmare’ and repeated that pay increases were not possible. He highlighted that Finland’s price competitiveness with the other eurozone Member States has weakened the most in the past five years. Mr Fagernäs appealed to trade unions in key positions to ‘recognise their responsibility’ and urged the trade union federations to ‘recognise their roles in the implementation of a moderate pay deal’.
The Labour Market Director of the Commission for Local Authority Employers (Kunnallinen työmarkkinalaitos, KT), Markku Jalonen, spoke in a conciliatory manner about a moderate contract; however, he has stated previously that municipalities cannot afford any pay increases. Mr Jalonen also argued that the wage increments agreed in the autumn of 2007 in the context of a totally different economic situation are currently too expensive for local authority employers.
Trade unions reject zero proposal
The trade union side is ready to agree to low pay increases, but it still wants a boost in workers’ purchasing power. The President of the Central Organisation of Finnish Trade Unions (Suomen Ammattiliittojen Keskusjärjestö, SAK), Lauri Ihalainen, stated:
We all agree that for domestic demand, purchasing power is important during the contract period, and that we will not make it without pay increases.
Mr Ihalainen contended that taxes would go up rather than down; however, his prediction was rejected by the Minister of Finance, Jyrki Katainen.
Meanwhile, the Secretary-General of the Finnish Confederation of Salaried Employees (Toimihenkilökeskusjärjestö, STTK), Leila Kostiainen, also responded to the demands for zero pay increases emphasising the necessity for long-term vision in terms of pay agreements:
Pay deals do not have an effect on the overcoming of an acute economic crisis, or the deepening of it. On the contrary, moderate, long-term accords can be a tool for the securing of competitiveness when an economic upturn is in sight.
Commentary
At the beginning of May 2009, negotiations for new collective agreements started between the Federation of Finnish Technology Industries (Teknologiateollisuus) and the Metalworkers’ Union (Metallityöväen Liitto). It had been hoped that the sector would have opened the bargaining round with a three-year agreement. However, negotiations in the technology industry broke down and the talks are to be resumed in the autumn of 2009. The parties did not reveal the scale of the gap between management and labour.
The pay increase in the ongoing contract period for 2009 was agreed in strong economic conditions. Thus, the sectoral or branch-level collective bargaining round resulted in high pay rises for all employees, particularly employees in the municipal sector (FI0712049I). However, the municipalities are now facing financial difficulties.
According to figures released by Statistics Finland (Tilastokeskus), the decline in Finland’s economic output deepened in January 2009, with an output adjusted for working days decreasing by 9.8% from the same period in 2008.
Pertti Jokivuori, Statistics Finland