1997 Annual Review for Finland

This record reviews 1997's main developments in industrial relations in Finland.


Following the severe economic recession of the early 1990s, the Finnish economy has more recently been characterised by a period of economic growth and relative stability. In 1997, economic growth rates amounted to 5.9%. This improved economic position also led to a reduction in unemployment, from a rate of 15.6% in 1996 to 14.5% in 1997. However, employment opportunities were primarily generated for young and highly-skilled people, while older workers and the low-skilled continued to suffer from long-term unemployment. Inflation decreased to 1.3% and the public deficit was reduced to 0.9% of GDP.

The Government is made up of a "rainbow coalition" of left- and right-wing parties - the Social Democratic Party (Suomen Sosialidemokraattinen Puolue), the conservative National Coalition Party (Kansallinen Kokoomus), the Left-Wing Alliance (Vasemmistoliito), the Greens (Vihreä liito) and the Swedish People's Party (Svenska folkpartiet). Elections are due in 1999.

The main event in the industrial relations sphere in 1997 was the conclusion of the central incomes policy agreement for 1998-2000. A number of disputes, especially in the paper industry, focused on the impact of "outsourcing" and contracting-out. The political debate centred around the issues of employment creation, the balancing of public finances and preparations for EMU.

Key trends in collective bargaining and industrial action

In December 1997, the Finnish social partners signed a central, two-year incomes policy agreement (FI9801145F) covering the period from January 1998 to January 2000. The agreement covers 98% of wage earners and provides for wage increases which will raise average labour costs by about 2.6% in 1998 and 1.7% in 1999. The accord also includes measures to enable older employees to combine part-time work with a partial pension, designed not only to ease the transition from work to retirement, but also to create employment opportunities.

Despite the relatively smooth conclusion of the central agreement, many local disputes arose during the year, particularly in relation to the increasing tendency towards contracting-out and "outsourcing" (FI9709132F and FI9802149F). Strikes on this issue were concentrated in the paper industry.

Industrial relations, employment creation and new forms of work organisation

As mentioned above, the employment situation continued to improve significantly throughout 1997. This particularly benefited younger and highly-skilled workers, while older workers and the low-skilled continued to be most affected by long-term unemployment. Regional and local differences in unemployment rates also became more accentuated. New legislation covering "atypical" employment relationships provided for improved job security and the possibility to accumulate pension benefits, thus boosting the attractiveness of fixed-term employment (FI9703107N).

The employment debate in the "rainbow" coalition Government centred around national employment policy plans, oriented towards EU policy in this area. Measures proposed with the aim of boosting employability and job creation focus on young and long-term unemployed people, women, people with disabilities, immigrants and refugees and older workers. The current incomes policy agreement will feed into this process, providing for the social partners to continue their existing cooperation in the development of occupational knowledge and skills, while training measures will be carried out on a tripartite basis.

Particular attention has been paid to the position of older workers and the problems associated with an ageing workforce, and the action plan includes the implementation of the "national programme for older workers" (FI9708125F) initiated in 1997. The Government's goal is to raise the average retirement age (to 60 by the end of 2002) by encouraging the retention and reintegration of older workers. The new incomes policy agreement provides for a special fixed-term law, to run until 2000, to be drawn up on a tripartite basis, obliging employers to provide part-time jobs when requested. At the same time, the age limit for receiving a partial pension will be lowered to 56 years.

In the field of new work organisation and working time reorganisation, the Government's plan provides for a number of initiatives, to be implemented in close cooperation with the social partners in order to implement the guidelines of the incomes policy agreement. These include the following:

  • working time policy will be developed jointly, involving the Ministry of Labour and the social partners, following developments in competitor countries. Furthermore, it is envisaged that regulations concerning annualised working hours will be made more flexible to allow for time off to be saved in working hours "banks";
  • a tripartite committee is working on the reform of the Employment Contracts Act (FI9706116F);
  • the number of projects covered by the "national workplace development programme" (FI9707122F) is to be increased to cover around 400 workplaces and 30,000-35,000 persons by the year 2000;
  • the social partners are to carry out a survey of workplace stress which is to feed into improving personnel practice; and
  • national "buffer funds" will be established (see below), which should soften the effects of economic shocks within EMU and, at the same time, function as support for training. "Personnel funds" (a form of profit-sharing), which currently exist in the private sector, will be developed for the public sector.

Developments in representation and the role of the social partners

As part of the plan referred to in the previous point, the social partners have agreed that management and employees are to be given general training on the issue of local collective agreements. In addition, the social partners will conduct a study before 2000 concerning local agreements, the tasks and status of workplace union representatives, and changes in the nature of these tasks and agreements over time. Furthermore, the social partners aim to ascertain, by 31 December 1998, the extent to which representatives should be able to obtain expert assistance where special knowledge is needed.

In order to implement the provisions of the European Works Councils Directive, the Act on Cooperation in Undertakings was amended in 1996 to include provisions on employee information and consultation at group level and at the transnational level within the EEA, with the exception of the UK. The provisions on information and consultation in transnational groups apply to undertakings and establishments of a group based outside the EEA, if the group has appointed a Finnish undertaking as its representative or in the case that no representative is appointed, if it employs most of its employees within the EEA. The arrangements concerning information and consultation at group level will be implemented on the basis of company-level agreements, and only when an agreement cannot be made are the minimum requirements applied.

Industrial relations and the impact of EMU

In preparations for EMU, negotiations between the social partners led in 1997 to an agreement on "buffer funds" aimed at protecting Finnish workers against economic fluctuations within EMU by creating reserves in the occupational pension scheme and the unemployment insurance system (FI9711138F). The Government and the social partners in Finland fully endorse the EMU process (FI9706120N), and the country is set to join in the first wave of EMU.

Conclusions and outlook

The new climate in the labour market has had a strong impact on Finnish industrial relations. The difficult recession in the early 1990s resulting in mass unemployment, together with a vigorous internationalisation process, have put bargaining mechanisms under heavy pressure. It is likely that the centralised negotiation process will remain in place, but that more issues will be the subject of local bargaining.

The employment policy debate in Finland is very much influenced by the EU policy debate and reflects similar concerns. The Government was quick to develop measures in response to the 1998 employment guidelines, which will be the focus for discussions at EU level in 1998.

(Juha Hietanen, Ministry of Labour)

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