Social partners start negotiations on incomes policy agreement

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In October 2002, Finland's central trade union and employers' organisations started talks over a new national incomes policy agreement. The unions want a two-year agreement which will increase wage costs by 3.7%-3.8% in 2003 and 3.4%-3.5% in 2004. The employers have stated their hopes for agreed pay increases of 1.0%-1.5% per year. The unions are also making a number of demands related to working time, to which the employers are opposed. The negotiations are likely to be difficult, as the parties' goals are far apart.

Following preparations over several months (FI0209101F), in October 2002 central trade union and employers' organisations announced their goals for the next national incomes policy agreement - to replace the current two-year central deal which expires at the end of the year (FI0012170F) - and started negotiations aimed at concluding a new two-year accord.

Trade union goals

The Central Organisation of Finnish Trade Unions (Suomen Ammattiliittojen Keskusjärjestö, SAK) has confirmed that it is seeking a two-year centralised agreement which will both ensure the positive development of workers' purchasing power and support employment. SAK is calling for a wage agreement which, along with new tax cuts, would mean a 2% increase in purchasing power. The proposed settlement would increase wage costs across the whole economy by 3.8% in 2003 and 3.4% in 2004. For 2003, SAK is aiming for a general increase worth 2.5%, or at least EUR 55 per month and EUR 0.33 per hour, plus 1% to be distributed at sector level and an extra 0.3% 'equality increase' for sectors with high proportions of female workers. For 2004, SAK wants a general increase worth 2.3%, or at least EUR 53 per month and EUR 0.32 per hour, plus 0.8% for sectoral distribution and a 0.3% equality increase.

SAK wants the agreement to include an 'income progression' guarantee for all workers, and a wage indexation clause to make allowance for unexpected economic changes. Overall, SAK's goals are: increased employment; support for steady purchasing power development; increased security in situations of change; and improved reconciliation of work and family life.

The Confederation of Unions for Academic Professionals (Akateemisten Toimihenkilöiden Keskusjärjestö, AKAVA) is seeking an agreement covering all wage earners, which would support education, training and employment. The organisation proposes wage increases such that the cost increase would be 3.7% of the paybill in each sector from 1 February 2003, and 3.4% from 1 February 2004. According to AKAVA, the new incomes policy agreement should focus especially on improving the relative wage level of those groups whose pay is clearly too low considering the demanding nature of their tasks and the education required. AKAVA also wants an incomes progression guarantee, an indexation clause and a provision to reopen negotiations in the event of unexpected economic changes.

AKAVA has also announced its goals for non-pay improvements in the new agreement. Its central aims include:

• monitoring and control of employees' actual working time, and the introduction of working time accounts;

• prevention of abuse of fixed-term employment relationships; and

• improvement of employment security and job security.

The Finnish Confederation of Salaried Employees (Toimihenkilökeskusjärjestö, STTK) wants a two-year agreement under which the cost effect of wage increases would be 3.7% in the first year and 3.5% in the second. STTK is targeting increased purchasing power for middle-income wage earners. In addition, its wage increase proposal includes a sum for sectoral distribution and an equality increase (included in the 3.7% and 3.5% cost increase figures) of 0.4% in the first year and 0.3% in the second. STTK, too, wants an indexation clause. It is also calling for 'qualitative' changes which would improve 'ability to cope' at work and promote flexible reconciliation of work and family life.

Employers' offer falls short of union goals

According to the Confederation of Finnish Industry and Employers (Teollisuuden ja Työnantajain Keskusliitto, TT), in 2001 and 2002 economic growth has remained at a lower level than forecast. The risks in the international economy have clearly increased, and this is reflected directly in company activities. The employers' organisation states that the trade unions' demands for wage increases are in clear contradiction to an incomes policy agreement aimed at improving employment. TT considers that such pay rises would increase unemployment and weaken competitiveness. Further, the organisation criticises the qualitative goals proposed by the unions, claiming that they would cause increased costs and hamper competitiveness.

However, TT is prepared to start negotiations with the aim of a two-year agreement which would improve employment and the competitiveness of companies, and safeguard the positive development of purchasing power. According to TT, the achievement of these goals would require that the total development of Finnish labour costs should not exceed the average estimated increase in the countries of the 'euro-zone'. As an opening offer in the talks, TT has suggested that wages should be increased by 1.5% per year.

According to the Employers' Confederation of Service Industries (Palvelutyönantajat, PT), the margin for wage increases is considerably less than the figures proposed by the unions. PT states that the new agreement must take into consideration the slowdown in productivity increases and the need to hire new employees in the low-productivity sectors. PT calculations indicate that the pay increase margin for 2003 will be just over 1%. PT justifies its view on the grounds of the uncertain economic prospects and the possible weakening in the employment situation. PT does not accept either a general reduction of working time or the idea of minimum working hours, as suggested by some unions as aims in a new agreement. It also considers that variable pay schemes must remain a company management tool, rather than an issue for central bargaining.

Both central employers' organisations expect the government to cut taxes more than set out in its budget for 2003.

Commentary

The incomes policy agreement talks are expected to be more difficult than they have been for many years. The differences between trade union and employers' views are great. The recession in the economy and the uncertain future prospects are likely to impede agreement. The government is now expected to take on a significant role in order to speed up the bargaining process. Tax cuts would support an increase in purchasing power, but at the same time mean a decrease in resources for the public services -at a time when nurses, teachers and social workers have demanded a 'rectification' of their salary levels, which have been lagging behind other groups. Tax cuts would not be consistent with pay increases in these parts of the public sector. This equation is hard to solve by a centralised agreement. In the current round of talks, if the main focus is on wages, it might be difficult for the unions to gain acceptance for their qualitative goals such as minimum working hours. However, it is most probable that these demands will continue to be discussed throughout the bargaining period. As to improvements in the areas of training and know-how, the employers and unions are striving to achieve satisfactory results which will further the interests of both parties. (Juha Hietanen, Ministry of Labour)