Moves towards decentralisation in 2000 bargaining round?

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Finland's sectoral collective bargaining round in spring 2000 saw strikes or strike warnings by a number of powerful trade unions, such as those in chemicals, transport, and paper. These unions achieved settlements in excess of the general wage increase norm of 3.1%. Solidarity in Finnish incomes policy seems to be eroding during the current economic upswing, and the bargaining system is moving towards greater decentralisation.

After the severe depression of the early 1990s, Finland has since experienced a long and strong economic upswing (FI9801145F). Moderate incomes policy agreements have created a foundation for this economic growth (FI9909118F). At the same time, the growth of the so-called "new economy" has spawned stock market and internet entrepreneur millionaires at a fast rate, while managers, especially, have been rewarded for economic success with significant benefits.

These developments finally provoked the strongest trade unions to demand a larger share of economic growth for their members in the spring 2000 collective bargaining round, which was conducted at sector level. Unions that were able to achieve better results through strikes utilised this weapon, while others had to content themselves with a lower level of wage increases. In this respect, the 2000 sectoral bargaining round can be said to have brought a number of changes in Finnish industrial relations, following some years of solidarity-based wage agreements.

Labour market divisions increase

Income differentials in Finland have grown drastically since the depression of the early 1990s, with a clear division appearing in the labour market, hastened by the economic success of particular sectors. The electronics industry, for instance, has emerged as one of the cornerstones of the country's economy.

During this period, managers especially have been rewarded by better benefits and by new stock option systems (FI9804158F). Labour markets in both the private and public sectors have also become differentiated between key personnel who have open-ended employment contracts, a good salary and other benefits, and a periphery of "buffer" labour hired on fixed-term contracts. However, the proportion of fixed-term workers has been declining in industry, and the problem now seems to be focused on the private service sector and the public sector. Alongside the key staff, these sectors also contain a group of "survivors" who hang on to insecure employment relationships.

The public sector finds itself in the worst position. The recession of the early 1990s forced this sector to make cost savings, which have continued since Finland joined the third stage of EU Economic and Monetary Union (EMU). The need for savings is now being justified on the grounds of "countercyclical" factors and the large public debt.

In this labour market "reshuffle", unemployed people - and especially the long-term unemployed - are increasingly being marginalised, or are already permanently out of the labour market.

2000 bargaining round in review

This divide in the labour market motivated the stronger trade unions - such as the Chemical Workers' Union (Kemianliitto), the Transport Workers' Union (Auto- ja Kuljetusalan Työntekijäliitto, AKT) and the Paper Workers' Union (Paperiliitto) - to take a stronger stance in the sectoral bargaining round in spring 2000. These key unions endeavoured to take by force what they had not been able to obtain through negotiations, and their efforts proved successful. The bargaining round was conducted at sectoral level because in autumn 1999, these unions had opposed the new central incomes policy agreement which had been widely mooted (FI9910124N).

The sectoral bargaining round was opened by the metalworking industry, with the Metalworkers' Union (Metalli) - along with the Construction Trade Union (Rakennusliitto) - setting the general trend for wage increases of a 3.1% rise in labour costs (FI0001133F). Many sectors followed this lead, and bargaining seemed to be developing into a form of centralised settlement when over 90% of the wage earners involved soon approved deals at that level (FI0002135N). This pay increase was widely considered moderate, even though employers stated that it was too high in the light of EMU. The Metalworkers' Union had sought a working time reduction of one day per year - but with no success, due to outright rejection by the employers, which argued that Finnish metalworkers already had one of the shortest working times in Europe. This argument was also partly accepted by the union's chair, Per-Erik Lundh.

The bargaining round continued without problems for some time after the opening settlements. However, the negotiations involving the strongest unions came last and, as expected, proved difficult, as it was awkward sectoral problems in these industries that had scuppered the prospects of a central deal, because these problems could not be dealt with in a national incomes policy agreement. These unions played a waiting game, finally putting their demands onto the table long after the others (FI0004142F). It was nevertheless somewhat unexpected that unions called strikes in key sectors - notably in chemicals, transport and paper (FI0004145N) - and thus achieved pay settlements higher than the general trend. They also succeeded in partly breaking down the employers' resistance concerning working time cuts, with extra paid holidays achieved in chemicals and paper. It appears that the stronger unions have not taken fright at the new era of EMU membership, which is widely perceived as requiring low wage increases.

Commentary

As a result of the 2000 bargaining round and the success of some unions in achieving higher settlements than those for the majority of workers, it seems that a future centralised incomes policy agreement may prove difficult to achieve. Some hopes have been expressed of a centralised deal of up to three years' duration, but it seems quite unlikely that this could be achieved during the economic upswing. A long-term, moderate agreement would bring predictability and moderate economic growth, but the 2000 sectoral bargaining round left a degree of tension in many trade unions due to the less advantageous agreements they concluded, compared with those in sectors such as chemicals and paper. The reduction of working time will also be on the agenda of these unions when they prepare for the next bargaining round.

It can also be said that the 2000 round shifted Finland's bargaining model further towards decentralisation. The tendency has for a long time been away from the centralised model, due to the increasing number of local agreements. Now, it seems that sectoral collective agreements are increasingly becoming mere framework agreements, whose practical importance is diminishing. The employers have long hoped that developments would proceed in this direction (FI9812186F).

One problem for the trade unions in the EMU environment is that the rules of the game have changed. Productivity in the successful sectors is of a completely different order than in other sectors, with the result that the setting of unions' wage demands in line with the situation in successful sectors is no longer possible. Furthermore, the average productivity of a sector, which has often been used as a reference point for wage increases, makes no distinction between the more and less successful areas of production within the sector.

The 2000 bargaining round has shown how the stronger trade unions are using their position in the favourable economic environment at the expense of solidarity. The public sector, in particular, will fall behind other sectors in this situation: wage growth in this sector is best assured by centralised agreements. Under the present system, the situation in the most significant public services (eg education and healthcare) can be expected to deteriorate even further, with the public sector, lagging behind in its wage levels, unable in the long run to compete for labour that is gravitating towards the successful sectors. The public sector, which has enabled the success of the private sector, now has to keep going on scant resources, and the Scandinavian "welfare model" has become a subject for critical debate. During the current boom, at least, solidarity-based Finnish wage policy appears to be a thing of the past. (Juha Hietanen, Ministry of Labour)