Labour market reform facing stiff opposition

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In the search for a remedy for Finland's long-running mass unemployment, in mid-1998 the opposition Centre Party proposed a labour market reform with its ideological roots in the UK Labour Party. Trade unions are trying to resist the reform at an early stage, fearing that it will undermine the general validity of collective agreements, which is held sacred amongst the Finnish labour movement.

Unemployment in Finland is still high, despite economic growth; traditional growth policy is not cutting unemployment efficiently enough. Against this background, the biggest opposition party, the Centre Party, is preparing for the March 1999 general elections by proposing a labour market reform which is seen as having its ideological background in the policies of the UK Labour Party. The Centre Party has christened the reform "the Finnish model" and it includes a lightening of companies' cost burden ,a decrease in taxes, a reform of social security and the establishment of a "basic income system" for all. The aim of these reforms is to make entrepreneurship and work more profitable.

Proposals and reactions

The Central Organisation of Finnish Trade Unions (Suomen Ammattiliittojen Keskusjärjestö, SAK) has been provoked especially by the section of the Centre proposals that suggests a widening of the scope of local collective agreements to cover all terms and conditions of employment. Furthermore, it would be possible to agree locally on the terms of employment in companies with under five employees. SAK has rejected this proposal, fearing that it will undermine the principle of general validity - ie that when over half the employers in one sector are members of the employers' organisation which signs a collective agreement, the agreement will also be valid for non-organised employers. The Centre Party withdrew its proposal on this point at a party meeting on 7-9 June 1998, stressing that it would not compromise the general validity principle.

The Centre Party also wishes to make changes in unemployment benefit, claiming that it promotes inequality by dividing unemployed people into groups: members of unemployment benefit funds; those who receive a basic daily allowance; and those who receive labour market support. The Centre Party proposes a general unemployment benefit scheme and changing the financing arrangements so that its insurance-type character would be stressed. An increase in the employee's contribution to financing unemployment benefit is also proposed. The increase would be compensated for by decreasing income tax. This part of the reform has been seen as an attempt to do away with earnings-related unemployment benefit.

The SAK chair, Lauri Ihalainen, said at the union confederation's council meeting on 15 May: "Unfortunately in the pages of the document, there isn't any security or support to be found for the workers concerning issues of major importance to them. This is because it has been produced to suit the needs of enterprise organisations and as a weapon in the "battle" for votes between Centre and the conservative National Coalition Party" (quoted in the Helsingin Sanomat newspaper on 16 June). In a communiqué, the SAK council condemned the labour market reform put forward by Centre and warned against all attempts of any kind to break down contractual safeguards or unemployment security. According to SAK, it will defend all the basic rights of wage earners - ie the minimum safeguards given by collective agreements, the general validity principle, the right to strike and the right to sufficient social security.

The left-wing parties and the trade unions have joined forces in opposing the reform. Previously, when Centre was in power, the labour movement and government were in constant conflict. It is predicted that this will happen again if Centre regains power. The labour market reform proposal has not had a warm reception among the employers either. Jarmo Pellikka, the managing director of the Employers' Confederation of Service Industries (Palvelutyönantajat, PT), states that labour market reform has in fact been an ongoing process during the 1990s and will accelerate. The continuation of this process requires a common will to go further with the reforms, rather than dictating (quoted in Palvelutyönantajat, 5/1998).

Tripartite cooperation highlighted by unions

On Monday 15 June, as a continuation to this debate, the three main trade union organisations published a joint declaration which stressed tripartite cooperation as a Finnish strong-point. This declaration was seen as a reminder of the issues which the labour movement considers as important for a future government to tackle. The declaration does not mention the proposed labour reform specifically, but - according to a statement by Mr Ihalainen of SAK, Esa Swanljung, the chair of the Finnish Confederation of Salaried Employees (Toimihenkilökeskusjärjestö, STTK) and Mikko Viitasalo, the chair of the Confederation of Unions for Academic Professionals in Finland (Akateemisten Toimihenkilöiden Keskusjärjestö, AKAVA) - as the reform proposal has been changed, it can now be discussed.

In their joint declaration, the three confederations stress the necessity of following the tripartite principle in preparatory discussion of issues concerning working life at national and at EU level, especially in the environment of Economic and Monetary Union (quoted in the Demari newspaper, 16 June). This united front can be seen as a joint show of strength by the unions and a warning to the Centre Party not to forget the importance of tripartite cooperation, as they believe was the case when it had power in the former government.


The high unemployment in Finland can be seen as a central issue for political debate in the run-up to the 1999 elections. Even if Finnish economic growth is among the fastest in OECD countries, unemployment still remains high. This provides the political opposition with a good opportunity to attack the Government and to attract votes. However, the reactions of trade unions are already indicating that it will be difficult to reform the labour market system radically, whatever the government coalition turns out to be. Tripartite cooperation has deep roots in Finland, and the government can hardly make its own independent decisions without severely harming the social dialogue. (Juha Hietanen, Ministry of Labour)

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