Speculation starts on the next incomes policy agreement

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In spring 1999, the Finnish social partners have been speculating as to the eventual form of the next national incomes policy agreement. There seems to be no resistance to a centralised agreement in principle, even if there is disagreement on many substantive issues at this stage. So far, the Chemical Workers' Union, the Finnish Electrical Workers' Union and the Paper Workers' Union have expressed their wish for a sector-level round of agreements. By autumn at the latest, the other organisations are expected to state their final position concerning the form of the coming agreement.

The broad-based national incomes policy agreements concluded in 1995 and 1997 aimed to improve employment and ensure a moderate increase in employees' purchasing power (FI9801145F). Purchasing power has improved during the present 1998-2000 agreement by over 3% per year, while employment increased by 2.0% in 1997 and by 2.4% in 1998. In spring 1999, the social partners started to speculate on the destiny of the next agreement. The present deal expires in January 2000.

A point in favour of a centralised agreement concluded by the main confederations of trade unions and employers is that the new government's programme, issued in April 1999, contains a commitment to create a common growth and employment strategy in cooperation with the social partners (FI9904101F). A centralised agreement is also supported by the Finnish decision to enter EU Economic and Monetary Union (EMU) in the first wave, and in principle there seems to be preparedness for such an agreement: the importance of tripartite cooperation is being stressed for the future, too, due to the good economic growth and the predictability that it has brought (FI9711138F).

Many areas of disagreement

At this stage, the social partners' positions are divided by disagreement concerning the tax provisions associated with the agreement, even though tax policy is decided on ultimately by the government. According to the Confederation of Finnish Industry and Employers (Teollisuuden ja Työnantajain Keskusliitto, TT), no new centralised agreement can be achieved without the government giving a lead and dangling a generous tax "carrot". Further, the organisation has stated that there is no chance of larger wage increases than in the previous round, no matter what form the agreement may take.

For its part, the Central Organisation of Finnish Trade Unions (Suomen Ammattiliittojen Keskusjärjestö, SAK) believes that the employers should not count on the objective of increasing purchasing power primarily through tax cuts. In its view, pay increases should have a more important role than tax cuts in raising the purchasing power of wage earners. SAK is worried about social security and welfare services, and wants to ensure that they are not threatened by tax cuts. Furthermore, SAK hopes that demands for limitations on the right to strike and for reform of the conciliation system will be laid aside (FI9902194F). The development, strengthening and clarification of the "general validity" of collective agreements (ie their application to all employers and employees in a sector, whether or not they are members of the signatory organisations) are goals of both SAK and the Confederation for Salaried Employees (Toimihenkilökeskusjärjestö, STTK). SAK also considers it important that employees with a lower level of education should be given a chance to improve their professional skills. Concrete proposals for such measures are: realisation of the third phase of "training insurance" (whereby employees could acquire training while receiving incomes-related unemployment benefit - FI9805161F); wider introduction of an occupational diploma system at workplaces; and other extra resourcing of staff training.

Overall, SAK sees a common incomes policy agreement as a significant societal guarantee for workers in the coming years. The organisation has prepared proposals for more flexible incomes policy agreements than at present, whereby the scope for local agreement could be widened in comparison with previous agreement periods.

The TT employers' organisation believes that the maintenance of steady growth requires stability and labour market peace. TT is mainly satisfied with developments during the past four years, even if there has been disagreement on some points. It considers that the precondition for a new agreement on pay increases cannot and should not be a certain format for the agreement or a set of separate objectives on the development of various aspects of working life and employment. According to TT, there are numerous sets of negotiations already in progress concerning the development of employment legislation, such as reform of the Employment Contracts Act (FI9810179F), development of the pensions system, maintenance of the working capacity of older workers (FI9803155N) and development of training systems. Negotiations over these outstanding issues should be completed before new projects are agreed on, states TT.

The reason why there is a reluctance for new issues to be added to the list is that the working groups set up as part of the negotiation of the current incomes policy agreement have not yet finished their job. Altogether 22 working groups were set up, and only four have achieved their goal, while two have terminated their work for some other reason (FI9801145F). According to STTK, the approach whereby "qualitative" issues are delegated to working groups, as has happened under the present agreement, should be ruled out for the coming deal. One of the working groups is discussing the use of early retirement schemes, and the changes needed in them - a burning topic in Finland at present. The employers are vigorously advocating a blocking of the so-called "pension pipeline", whereby workers may quit working life at the age of 55, receive incomes-related unemployment benefit up to the age of 60 and then automatically be granted an "unemployment pension" and, at the age of 65, a normal retirement pension. Trade unions find the employers' position provocative: in their view, employers are current "rationalising" older workers out of their jobs (FI9903198N) and if the "pipeline" were closed, it would mean a drop in income security for those made redundant (FI9904103N).

For the next incomes policy agreement, the Confederation of Unions for Academic Professionals in Finland (Akateemisten Toimihenkilöiden Keskusjärjestö, AKAVA), is seeking the maintenance of purchasing power, guarantees on the provision of basic services in the public sector, agreement on measures promoting ability to cope at work, and development of the Working Hours Act. The issues of coping and working hours concern other trade unions as well. However, these are qualitative issues of the kind which, judging by past experience, are difficult to settle at the incomes policy bargaining table (FI9811182F).

Concern about speculative capital

SAK considers that one of the worst barriers to agreement on incomes policy is the "worship of speculative capital", which it warns that workers will oppose. SAK is referring here to the combination of redundancy announcements and record dividends at some companies which have allegedly been partially aimed at manipulation of stock exchange rates, and are seen to have taken place at the expense of the personnel (FI9903197F). Such moves give rise to increased demands by workers for a share in firms' growing profits. This sort of approach is expressed strongly by the SAK-affiliated Chemical Workers' Union (Kemianliitto), Finnish Electrical Workers' Union (Sähköliitto) and Paper Workers' Union (Paperiliitto), which have announced that they will seek "union-level" agreements at the level of the individual sectoral trade union and employers' organisation in the forthcoming bargaining round. Furthermore, the Paper Workers' Union says that its sector-specific problems call for a withdrawal from the centralised agreement. However, SAK is putting a brake on these aspirations by praising the positive developments brought about by the current agreement, and doubting whether it would be possible to achieve the same results by other methods, even in the strongest sectors. Concern about employment will also weigh heavily in the scales if the prospects of stable inflation and employment growth are threatened by wage competition.

STTK, like SAK, sees perceived "over-presumptuous" moves by companies as weakening the chances of concluding a broad-based agreement. In its view, an agreement cannot be built on the kind of politics in which wage earners exercise moderation while other parties "live in clover". The central organisations on the trade union and employers' sides are hastening to have the final position of their affiliates clarified by the end of the summer, because the situation of doubt regarding the coming agreement cannot go on for too long into the autumn. The goals and the decision-making process will require adequate preparation time if the sectoral, union-level path is chosen.

Commentary

After two broad-based, centralised incomes policy agreements, it may be difficult to draw up a third one, even if there are no barriers to it in principle. At this stage, the central trade union organisations are showing more enthusiasm for a centralised agreement. This positive attitude is influenced to quite an extent by the fact that these organisations include many female, low-paid and public sector employees, the development of whose pay could be difficult to guarantee otherwise. On the employer side, there may be less fundamental opposition to centralised agreement than before, because opportunities for local-level agreements have been increasing all the time (FI9812186F).

However, the four-year incomes policy era since 1995 has piled up a lot of sector-related problems for some social partner organisations, which may be difficult to solve by means of the centralised model. The resources available for pay also vary considerably between sectors. If there were a willingness to opt for union-level, sectoral agreements, it must be borne in mind that the Finnish commitment to EMU policy imposes a clear framework on wage negotiations. The inflation limit does not allow a great deal of room for large pay increases. Most important, however, is an increase in purchasing power, and this could be achieved - even under the new circumstances - with the help of low inflation and tax solutions. (Juha Hietanen, Ministry of Labour)