1999 Annual Review for FINLAND

This record reviews 1999's main developments in industrial relations in FINLAND

Economic developments

GDP growth was 3.2% over the first three quarters of 1999, representing a continuing slow-down after the annual figures of 5% in 1998 and 6.3% in 1997, which was the peak year of the recovery experienced after the recession of the early 1990s, when growth was zero or in minus figures between 1990 and 1993. Gross debt was 46.6% of GDP in 1999, down from 49.7% in 1998 and 55% in 1997, continuing a steady decline since 1994. The public accounts showed a positive balance of 3.1% of GDP in 1999, up from 1.3% in 1998 and a deficit of 1.5% in 1997 (a deficit was recorded throughout the 1990s until 1997).

Inflation looks to have slowed during 1999, with an average rate of 1.0% during the first three quarters of the year, compared with an annual rate of 1.4% in 1998 (up from 1.2% in 1997 and 0.6% in 1996). The unemployment rate has been decreasing steadily since the high point of 16.6% (408,000 people) in 1994, with a figure of 10.3% (264,000) for the months of January to November 1999, compared with an annual average of 11.4% (285,000) in 1998 and 12.7% (314,000) in 1997.

Political developments

Parliamentary elections were held in March 1999 (FI9904101F), resulting in a continuation of the "rainbow" coalition government of left- and right-wing parties - the Social Democratic Party (Suomen Sosiaalidemokraattinen Puolue) the conservative National Coalition Party (Kansallinen Kokoomus), the Left-Wing Alliance (Vasemmistoliitto), the Greens (Vihreä Liitto) and the Swedish People's Party (Svenska Folkpartiet).

The new government issued a policy programme in spring 1999 (FI9904101F) in which it set out a number of objectives in the social policy field. Notably, it stated that studies will be carried out on the need to revise the Annual Holidays Act and that a Data Protection Act concerning working life will be prepared in collaboration with the social partners. Further, in terms of labour market policy, it stated that unemployed people's need for services will be evaluated through regular interviews and that after 12 months of unemployment - or six months in the case of young people - unemployed people will be offered work, a traineeship or other measures to support jobseeking. Other proposals of the new government are covered below under "Training and skills development" and "New forms of work".

(Presidential elections were held in January 2000 and resulted in the election of the Social Democrat, Tarja Halonen, who defeated her opponent, Esko Aho, by 51.6% of the vote to 48.4%. Ms Halonen, who was the Finnish foreign minister, is the first woman to be elected to the office of President of Finland.)

Collective bargaining

Industrial relations remained stable throughout 1999, a trend which can largely be attributed to the two-year central incomes policy agreement covering the period from January 1998 to January 2000 (FI9801145F). Within the framework of this agreement, several working groups were set up to examine areas such as working time, equal opportunities and local agreements, but no new agreements were concluded in 1999.

In a break with the practices of the past four years, the 2000 bargaining round will be conducted on a sectoral, rather than a central basis. This follows the decision not to pursue a central agreement by a handful of strong trade unions affiliated to the Central Organisation of Finish Trade Unions (Suomen Ammattiliittojen Keskusjärjestö, SAK) (such as those representing paper and transport workers), arguing that their industry-specific problems are best dealt with at sectoral level (FI9910124N).

Pay

From 1 January 1999, the central incomes policy agreement provided for a general pay increase of FIM 0.85 per hour, or FIM 142 per month, for those earning less than FIM 8,870 per month, with an increase of at least 1.6% for those earning more. The estimated growth of actual income was 2.6%, made up of a 1.8% increase in agreed pay and wage drift of 0.8%. Purchasing power increased by 4.5% in 1999, due to tax cuts and improvements in employment.

Working time

1999 saw no agreed changes in working time. However, a number of issues concerning working hours were included in the 1998-9 incomes policy agreement, as follows:

• the minimum age limit for receipt of a part-time pension was lowered from 58 years to 56 years from 1 July 1998 on an experimental basis until the end of 2000. Also, unemployed people - if they have worked full-time for at least 12 months during the previous 18 months - are entitled to combine a part-time job and a part-time pension. Furthermore, the social partners concluded an agreement on early retirement and pensions in August 1999 (FI9908114F);

• compensation for employees taking "job alternation" sabbatical leave is increased to 70% of earnings-related unemployment benefit;

• a working group has been studying schemes which allow holiday entitlement to be saved; and

• a working group has been monitoring developments in the field of working hours throughout the world.

Equal opportunities

Bargaining in 1999 produced no significant new developments in the area of equality. However, the new government's programme stated that the main issues in this field are to safeguard welfare services and to implement the principle of equal pay for equal work - areas in which negotiations involving the social partners will play a role. The government will seek, together with the social partners, to share between employers the costs of the various types of parental leave, within the framework of the present sickness insurance system. Obstacles to women's entrepreneurship will be removed and the granting of loans to female entrepreneurs will be continued. More generally, the government will take measures to advance equality in working life and implement good practice in this area: the division of parental leave on a more equitable basis between men and women will be promoted; the possibility of giving fathers the right to a whole month of paternity leave will be clarified; and the possibility of taking maternity and parental leave on a part-time basis will also be examined. Furthermore, initiatives are to be put forward concerning the strengthening of gender equality in EU policy.

Training and skills development

Training was not a prominent issue in bargaining in 1999. However, the main goals of the new government's programme include an educational policy that meets the needs of working life. The development of vocational training is identified as an important task, and the government pledges to support actions to improve its status. Periods of on-the-job learning will be implemented in cooperation with the social partners.

The new government's policy programme also states that, in order to address problems of labour quality and availability, cooperation with enterprises will be increased. Training will be developed in order to correspond better to the needs of the labour market and to improve employees' general capacity to seek and gain employment.

Legislative developments

The EU Directive on Posted Workers (96/71/EC) was transposed in Finland by the Act on Posted Workers, which came into force on 16 December 1999. This Act extends existing regulations concerning working conditions and the working environment to cover posted workers. In addition, the Act includes regulations concerning the authority of courts of law and cooperation between civil servants.

The 1997 Directive (97/74/EC) extending the EWCs Directive to the UK was transposed into Finnish law by amendments to the Co-Determination Act, which came into force on 15 December 1999. This Act now contains the amendments to Finnish law which were required as a consequences of the inclusion of the UK.

The Act on Personnel Funds was amended in 1999, in order to extend the flexibility and usability of the system of personnel funds - a form of profit-sharing scheme - in accordance with the government programme. The amendment came into force on 1 January 2000.

Finally, a total reform of the Employment Contracts Act is being prepared by a tripartite committee (FI9810179F), working to a deadline of 31 January 2000. The government aims to issue a proposal for reform in the spring of 2000. This committee has found that current employment protection legislation has a relatively weak impact on employment.

The organisation and role of the social partners

There were no major changes relating to the organisation and role of the social partners during 1999. The Finnish Firefighters' Union (Suomen Palomiesliitto, SPAL) separated from the Finnish Federation of Technicians in Special Branches (Suomen Erityisteknisten Liitto, SETELI), which is affiliated to the Confederation of Salaried Employees (Toimihenkilökeskusjärjestö, STTK) and joined the Confederation of Employees in Technical and Basic Service Professions (Tekniikan ja Peruspalvelujen Neuvottelujärjestö, KTN).

On the employers' side, the Federation of Finnish Enterprises (Suomen Yrittäjät, SY), representing small and medium-sized enterprises, sought during 1999 to achieve the status of a central social partner organisation with negotiation rights. The existing central organisations are unsympathetic toward such a move and would like to maintain the status quo (FI9906108F).

In terms of general cooperation between the social partners, the new government's two-year programme (FI9904101F) stressed the continuation of tripartite cooperation.

Industrial action

According to preliminary information issued by Statistics Finland in November 1999, 36 strikes were recorded in the first half of the year (FI9912128N). This represents a decrease of five strikes when compared with the same period in 1998, while the number of working days lost due to strikes fell more markedly, from 101,053 to 13,411 days, and the number of workers participating in strikes was more than halved.

The most significant industrial conflict of early 1999 was the air-traffic controllers' strike (FI9903102N), which affected international air traffic in particular and lasted almost a month. During this dispute, 5,600 working days were lost - 41% of the total working time lost during the first half of the year. The dispute also accounted for over 60% of the gross wages lost through strike action in the first half of 1999, due to the high wages of air-traffic controllers.

In sectoral terms, most strikes in 1999 occurred in machine manufacturing (seven), electrical equipment manufacturing (five) and metal manufacturing (five). The sectors where most workers participated in strike action were the food and shipbuilding industries.

National Action Plan (NAP) for employment

The central organisations of the social partners appointed members of the working group charged with preparing Finland's 1999 National Action Plan (NAP) for employment, in response to the EU Employment Guidelines. The basic elements of the Finnish NAP – economic development, strategic alignments, and lifelong learning measures in accordance with the adaptability guidelines – were all discussed with the social partners.

The impact of EMU on industrial relations and collective bargaining

The launch of EMU"buffer funds" (FI9711138F) in 1997 remains the single most important Finnish reaction to the launch of EMU. The aim is to prevent economic fluctuations within EMU from affecting social contributions and thus increasing labour costs. The buffers accumulate reserves from the unemployment insurance and occupational pension contributions of employers and employees during good times. These reserves can be used in times of recession so that, in the event of a rise in unemployment, the contributions need not be increased. During 1999, EMU did not influence collective bargaining specifically, although the EMU economic criteria serve to restrict bargaining in a number of ways. For example, inflation targets must be met, which in turn limits pay policy.

Employee representation

As mentioned above (under "Legislative developments"), the EU Directive extending the EWCs Directive to the UK was implemented by an amendment to the Finnish Co-operation Act, which came into force on 15 December 1999.

During the whole of 1999, there was an ongoing debate amongst the social partners and other industrial relations actors in Finland concerning both worker involvement in the proposed European Company Statute and the draft EU legislation on national-level information and consultation of employees. At EU level, the new government will "urge the approval of regulations concerning the right of personnel to participate in company decision-making". At national level, it will make every effort to ensure that, in companies in which the state has a major shareholding, the workforce is represented on the board of directors and supervisory board.

New forms of work

In the spring of 1999, the new government's policy programme (FI9904101F) set out a number of measures relating to new forms of employment, including the following:

• labour legislation will be developed so that the security of employees and the flexibility required by companies will be "moulded into a balanced entity". The Employment Contracts Act will be revised once the committee examining it has completed its work (FI9810179F) and the system of guaranteeing a minimum level of employment conditions will be maintained;

• working life development and productivity programmes will be continued and further upgraded, and additional resources will be provided;

• the government, together with the social partners, has prepared a comprehensive programme of research and measures concentrating on practical steps to address the issues surrounding coping with working life (FI9911127F); and

• the government will seek to promote "the protection of working hours, employment and a flexible system of working time". It will also promote "cooperation at work" in questions related to work organisation.

While recent years have seen reform of labour legislation in the area of work organisation, in areas such as the flexible arrangement of working time and sabbatical leave, 1999 saw no new developments.

The use of "atypical" working relationships is becoming increasingly frequent - in 1998, fixed-term work accounted for 17% of all employment contracts. Part-time work is not as common – 16% of women and 7% of men work on a part-time basis. Fixed-term employment contracts are now easier to conclude, following the recent abolition of the ban on successive fixed-term contracts. It has also become easier to conclude a fixed-term contract in the service sector – such contracts are justified if the demand for services concerned does not appear to be regular.

Outlook

After a four-year period (1995-9) of centralised incomes policy agreements, the 2000 collective bargaining round was to take place at sectoral level. The centralised model has been advantageous for the whole economy, and purchasing power has increased more than expected for those at work (FI9909118F). Economic growth has been rapid, although in the views of some commentators this has developed hand-in-hand with a polarisation between owners of capital, workers and unemployed people.

The fact that the 2000's bargaining is being conducted on a sectoral rather than a central basis makes it more likely that Finland will face more strikes and harder wage competition between sectors in the bargaining round. In addition, the sectoral agreements are likely to be of different durations and it may therefore prove difficult to implement a coordinated wage policy in line with the experiences of the two previous incomes policy agreements. (However, there were signs that the 2000 round was developing in a coordinated way (FI0002135N), following the conclusion of a trend-setting agreement in the metalworking industry in January 2000. (FI0001133F).)