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In September 2001, the Finnish social partners debated a number of proposed pension and unemployment benefit reforms, which are at present being examined in tripartite working groups. The trade unions consider that benefits should be left untouched, while the employers would like to introduce a decreasing system of unemployment benefit and abolish completely some types of pension. Meanwhile, the social partners have criticised a recent European Commission Communication on EU coordination on pensions as an interference with national pension schemes.
Syyskuussa 2001 suomalaisia työmarkkinajärjestöjä keskusteluttivat eläke- ja työttömyysturvauudistukset, joita käsitellään parhaillaan työryhmissä. Työntekijäpuoli katsoo, ettei etuuksiin saisi koskea kun taas työnantajat haluaisivat porrastaa työttömyysturvaa ja poistaa kokonaan joitakin eläkemuotoja. Järjestöt eivät halua komission puuttuvan kansallisiin eläkejärjestelmiin.
Reforms of the Finnish unemployment insurance and state pension schemes are currently being considered in tripartite working groups, and the imminent decisions of these groups were the subject of debate among the social partners in September 2001. The purpose of the reforms is to increase incentives to work and influence future pension costs, which will rise drastically when large age cohorts retire in the coming years. The working groups should, it is planned, achieve results during autumn 2001.
Unemployment benefit reform
With regard to unemployment benefit, the changes being considered relate to its level and duration. The specific tripartite working group dealing with this issue had a deadline of the end of September 2001 for announcing its recommendations. The key issues considered have been a gradation of the level of unemployment benefit and a reduction of the period of employment required for entitlement.
The Ministry of Finance has put forward a proposal for 'scaling' the unemployment benefit in such a way that the level of compensation would be higher at the beginning of the unemployment period than is currently the case, but decrease correspondingly as the unemployment continued. By this means, active job-seeking would be encouraged. In 2000, a majority of unemployment periods ended after three months of unemployment.
The Employers' Confederation of Service Industries (Palvelutyönantajat, PT) and the Confederation of Finnish Industry and Employers (Teollisuuden ja Työnantajain Keskusliitto, TT) support the idea of cutting unemployment benefit after a certain period of unemployment. However, increasing the initial benefit from the present level is not justified, in their view.
Another central reform concerns the definition of the employment history required as a condition for receiving unemployment benefit. Formerly, the employee had to work full time for six months in order to obtain the right to benefit. A few years ago, this period of employment was lengthened to 10 months. According to the trade unions, this condition should be changed back to half a year. PT and TT oppose a shortening of the required employment period.
Pension reform
The most central and disputed issue in the state pension reform being considered by another tripartite working group concerns the method of calculating pensions. At present, the pension of an employee is calculated on the basis of earnings in the last 10 years in each employment. The scheme is more advantageous in the case of one long employment relationship. An employee who has changed jobs a few times may receive a considerably smaller pension than one who has worked in one steady employment relationship with an increasing wage level until retirement
Opinions on the calculation method exist between the social partners and within the trade union movement. The Central Organisation of Finnish Trade Unions (Suomen Ammattiliittojen Keskusjärjestö, SAK), and also the employers - PT and TT - would like the pension to be calculated on the basis of all wages earned during the employee's entire career. Due to the upward trend in the development of more highly educated employees' wages towards the end of their careers, the Finnish Confederation of Salaried Employees (Toimihenkilökeskusjärjestö, STTK) and the Confederation of Unions for Academic Professionals (Akateemisten Toimihenkilöiden Keskusjärjestö, AKAVA) wish to retain the present method, whereby the last years of work determine the amount of the pension. However, among the mainly blue-collar workers covered by SAK, employees may have a fragmented working career, which may include fixed-term contracts, and this does not favour the basing of pension calculations on the last 10 years of work.
In the near future, Finland will face a situation where large age cohorts will retire. The prospective labour supply will not be able to meet the demand. Employers and unions share the same view that the length of the working period should be lengthened - also in order to safeguard the accumulation of pensions.
With regard to old age pensions, the managing director of TT, Johannes Koroma, has proposed a move toward a flexible retirement age of 63-67 years. According to him, early retirement pensions, part-time pensions (whereby employees can combine part-time work with a partial pension) and unemployment pensions (allowing early retirement for long-term unemployed people - FI0104183N) should be abolished completely in the long run. PT holds the same view.
Further, PT believes that the decisions on pensions and unemployment benefits should be coordinated with each other. Its director, Markku Koponen, claims that the decisions on pension and unemployment benefits are so closely linked that they cannot be made separately.
According to the employers, early retirement and part-time pensions have become too attractive. The shift toward earlier retirement has been increased by the fact that, among other changes, the age limit for part-time pensions has been dropped to 56 years.
The generally agreed goal of the government and the social partners is that the actual average retirement age, currently 59, should be raised by several years. This would help to cope with the upcoming labour shortage and increasing pension costs. The pension and unemployment issues will be resolved in the working groups during the autumn.
In April 2001, the Ministry of Social Affairs and Health published a proposal for a gradual abolition of unemployment pensions and early retirement. This proposal drew heavy opposition from the unions (FI0104183N).
European Commission 'interference' on pensions
Pension reform is a sensitive area, in which the Finnish social partners wish to retain their own influence and do not want advice from the European Commission. In July 2001, the Commission issued a Communication (COM(2001) 362 final) to the other EU institutions on Supporting national strategies for safe and sustainable pensions through an integrated approach, in which it proposed that European cooperation would be widened to cover pension policy issues to a greater extent.
According to the Commission, 'the appropriate approach at EU level is to combine the existing policy processes that are relevant for the future of pension systems with the open method of coordination in a way that does not change the respective responsibilities of policy makers at European and national level.' The aim is to 'offer an integrated framework for the exchange of information on national strategies for securing adequate and sustainable pension provision in the long run'. The 'open method of coordination' involves 'setting common objectives, translating these objectives into national policy strategies and, finally, as part of a mutual learning process, periodic monitoring on the basis inter alia of commonly agreed and defined indicators.'
PT and TT consider the Commission's policy definition to be a bad one. They state that application of the 'open method of coordination' in pensions policy would change the division of internal decision-making between the EU and its Member States. The setting of binding, Europe-wide goals in the area of pensions would, in the view of PT and TT, mean a partial moving of authority from the national level to the EU. Employers have proposed that the 'open method of coordination' should not be taken as a model for European cooperation on pensions. Nevertheless, PT and TT see that European cooperation is necessary and should be continued, because the challenges of the future of pensions systems are common to the Member States.
Through its Communication - which is seen as suggesting cuts in pension levels and an active move toward private pension schemes - the European Commission is, according to SAK and STTK, interfering with national decision-making. From the unions' standpoint, the Commission has no authority in this field.
Commentary
The Finnish unemployment insurance and pension schemes have been under discussion in tripartite working groups involving the social partners for some time. Many of the acquired rights of employees are under discussion.
Early retirement and unemployment pensions were largely used during the depression at the beginning of 1990s as a restructuring method, which was beneficial to both employers and employees. It is now being proposed that these benefits be abolished, while an attempt is also being made to weaken unemployment benefits. The aim of cutting benefits is creating tension in industrial relations. The part-time pension was introduced on the grounds that the employees involved would be able to continue in working life for longer. According to the employers, there are people who are completely able-bodied and could still continue full time working, but are retiring to part-time work. This issue has not been studied reliably. However, the social partners are unanimous that pension schemes should be made more clear-cut. The nature of the tripartite working groups is such that the decisions will be postponed to the future if the threat of conflict is apparent. However, the decisions have to made at some stage, and the political bodies will have an important role in this. (Juha Hietanen, Ministry of Labour)