Social partners set objectives for new government's policy

Following general elections in March 2003, Finland is to have a new coalition government of the Centre Party, the Social Democratic Party, and the Swedish People’s Party. The social partners have been active in discussions on the new government's policy. Employers’ organisations have been emphasising the need for further tax cuts, while trade unions have emphasised the need to tackle the issues of employment and to adopt a sound policy of tripartite cooperation with the social partners.

On 16 March 2003, general elections were held in Finland. The Centre Party of Finland (Suomen Keskusta), the Finnish Social Democratic Party (Suomen Sosiaalidemokraattinen Puolue, SDP), and the Green League of Finland (Vihreä Liitto) were the main winners in the elections. The Centre Party, which won the highest number of seats in parliament, started negotiations over the composition of the next government. It soon became clear that the new government will be formed by three parties - the Centre Party, the Social Democratic Party, and the Swedish People’s Party (Svenska Folkpartiet) - replacing the former 'rainbow' coalition government of left- and right-wing parties. The president of the Centre Party, Anneli Jäätteenmäki, will be Finland's first female Prime Minister. Half of the ministerial posts will also be filled by women. The social partners have been actively involved in discussions on the objectives for the new government.

SAK emphasises importance of active labour market policy

The Central Organisation of Finnish Trade Unions (Suomen Ammattiliittojen Keskusjärjestö, SAK) had already presented its views on the programme of the next government in late autumn 2002 (FI0212104F). Lauri Ihalainen, the president of SAK, commented on the election results as follows: 'The new government will have to tackle the issues of employment, ensuring stable economic growth, preserving public services, and managing changes and generation shifts in working life. Sustaining employment in the prevailing uncertain situation will not only require economic growth, but also an extensive package of special measures, especially in the early stages of the new administration.' SAK wants resources for active labour market policy to be increased substantially. The 'activation rate' for unemployed people should be lifted from the present 20% to 40%, which is more in line with the activation rates usually seen in other Nordic countries.

Mr Ihalainen stated that the main issue for employees is the extent to which the new government adopts a sound policy of tripartite cooperation with social partner organisations. In the course of the election campaign, all of the political parties' leaders expressed their commitment to tripartite collaboration with the social partners. As many as 36 (out of 200) members of the new parliament are linked to the SAK-affiliated labour movement. Of these, 28 represent the Social Democratic Party and 8 are members of the Left Alliance.

STTK concerned about gender equality

The president of the Finnish Confederation of Salaried Employees (Toimihenkilökeskusjärjestö, STTK), Mikko Mäenpää, has called for unprejudiced and functional cooperation between trade unions and the government. Together with Mr Ihalainen of SAK he emphasises the importance of tripartite negotiations in the development of working life. The most important issues for the government's term of office is stable economic growth, increasing the employment rate, and low inflation. Resources should be concentrated so that they guarantee present public services. STTK feels that the government should continue tax cuts with a focus on low- and middle-income groups. Tax cuts should, however, not endanger public services.

In March 2003, a working group on employment proposed increasing part-time work as one means to increase employment (FI0304201N). STTK finds this problematic. Increasing part-time work would concentrate on women and would weaken women’s labour market and economic status, states STTK. Furthermore, STTK demands that unfounded wage differentials between men and women should be removed. It suggests that the new government should, together with the social partners, prepare a programme for equal pay.

AKAVA wants more investments in education and research

According to Risto Piekka, the president of Confederation of Unions for Academic Professionals in Finland (AKAVA), the new government's programme should emphasise issues that are important for the future of Finland - ie employment, education, research and taxation. Mr Piekka states that the future of Finland is knowledge-based, which requires more investments in education, research and development. AKAVA agrees with the general tax cuts that the working group on employment has suggested. According to the working group, the income tax rate should be reduced during the term of the present parliament by 4 percentage points for all income brackets, reducing the highest marginal tax rate to 52%. According to AKAVA, the highest marginal tax rate should be cut further to 50%. Along with the other trade union confederations, AKAVA emphasises the need for cooperation between the new government and the social partners, and the importance of tripartite negotiations.

TT emphasises need for tax cuts

Tarmo Korpela, the general director of the Confederation of Finnish Industry and Employers (Teollisuuden ja Työnantajain Keskusliitto, TT), believes that in the next government programme tax cuts are a necessity. TT expects extensive measures on tax cuts so that Finland will be competitive both for highly skilled individuals and for companies. It fears that if the government does not respond to increased tax competition from other countries (FI0201142N) there is a risk that competent people will leave Finland. There is also a danger that investments, research and development as well as company head offices are more likely to be transferred to other countries. TT believes that increasing employment rate also requires tax cuts. A recent survey conducted by TT indicates that, despite the weakened economic outlook, tax cuts have continued in countries that compete with Finland in world markets. This is true in the case of both income taxes and corporate taxes.

TT emphasises that the government programme should strengthen economic growth and increase the employment rate. This requires new measures, of which the most important is reducing income taxes. It is also necessary to reduce structural unemployment. To achieve this, activation measures and the responsibilities of unemployed job-seekers receiving labour market support should be increased.

PT wants more efficient public services

Arto Ojala, the general director of the Employer’s Confederation of Service Industries (Palvelutyönantajat, PT), rejects the idea that tax cuts would endanger welfare services in Finland. According to Mr Ojala during the next parliamentary term tax cuts amounting to EUR 3 billion are needed. PT also requests that the government should at the beginning of its term look at the structure of public spending. During the last parliamentary term, public expenditures rose 5% more than was stated in the government programme. According to PT, one of the most important issues for the next term will be increasing the efficiency of public services. It states that it is of vital importance that both the state and the municipalities use to a larger extent the private service sector when providing welfare services to people. Competition in public services increases their efficiency, it is claimed.

PT believes that the best effects for growth and employment will be attained by reducing simultaneously income taxes, employers’ social security contributions and value added taxes on services.

Mixed response to new government programme

On 14 April 2003, the government programme for the next parliamentary term was finalised by the Centre Party, the Social Democratic Party, and the Swedish People’s Party. One of its major goals is to increase employment by 100,000 by the end of 2007. In 2003, the government will increase the provision of active labour market measures, and it will start public investments earlier than planned. The government will reduce taxation by at least EUR 1.12 billion, concentrating on income taxation so that the emphasis is on low- and middle-income groups. It will also lower corporate taxation and introduce changes in value added, environmental and energy taxes. Possibilities to reduce taxation further will be studied in the middle of the parliamentary term. The government will also study options to lower employers’ social security contributions in respect of low-income earners. Equal wages on the labour market are to be promoted by an equality programme that will be prepared in cooperation with the social partners. The government will also introduce new measures that help reconcile work and family life. It is also committed to tripartite cooperation with social partner organisations.

The response to this very extensive government programme among the social partners was mixed. Employers’ organisations were disappointed with the suggested tax cuts whereas trade unions were satisfied that employment was in the forefront of the programme. Unions were also satisfied that the government was committed to tripartite cooperation with social partner organisations. Overall, the general opinion of the government programme appears to be that it leaves many questions open, making it difficult at this stage to evaluate the final impact of the programme on the economy and Finnish citizens.

Commentary

The social partners play an important role in the Finnish economy. They have been actively involved in discussions on the objectives for the new government. The end of the former 'rainbow' coalition government, which was in power for eight years, has created a new and - to a certain extent - uncertain situation. The new government needs to find its own ways to cooperate with social partners. It will start tripartite negotiations on a number of labour market-related issues. It is noteworthy that equality at work has great weight in the government programme. This reflects the fact that the new Prime Minister is a woman. (Reija Lilja, Labour Institute for Economic Research)