New centralised agreement faces many obstacles

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August 2000 saw the opening of discussions on Finland's next collective bargaining round. The prospect of returning to centralised incomes policy agreements, after 2000's sectoral bargaining round, faces numerous obstacles, such as disagreements on the reform of the Employment Contracts Act and government proposals on unemployment benefit and the partial pensions scheme. Rapid economic growth favours another sectoral bargaining round in 2001, even if many parties see a centralised agreement as the best solution for the Finnish economy.

Discussion of Finland's next collective bargaining round started in August 2000. After the sector-level round in spring 2000 (FI0005147F), many parties have expressed hopes that a centralised national incomes policy agreement can again be reached for 2001 and beyond, as occurred over 1995-9 (FI9801145F). The government is especially keen on having a coordinated agreement in order to constrain wage inflation. Among other factors, the increased level of oil prices has already triggered higher inflation.

Disputes weaken chances of centralised agreement

Several obstacles now stand in the way of returning to centralised incomes policy agreements. The dispute over the reform of the Employment Contracts Act and its provisions on the "general validity" of collective agreements is dividing the camps more clearly than before (FI0006152F). The labour movement, headed by the Central Organisation of Finnish Trade Unions (Suomen Ammattiliittojen Keskusjärjestö, SAK) and backed up by the left-wing parties in the coalition government - the Left Wing Alliance (Vasemmistoliitto) and the Social Democratic Party (Suomen Sosiaalidemokraattinen Puolue, SDP) - is keeping firmly to its stand that the proposal for the new Act drawn up by a tripartite committee (FI0006151F) should not be changed. The organisation representing small and medium-sized enterprises, the Federation of Finnish Enterprises (Suomen Yrittäjät, SY), has tried to exert influence through the other main coalition party - the conservative National Coalition Party (Kansallinen Kokoomus) - to have the proposal changed in a more positive direction for employers, as regards the issue of the general validity of collective agreements (ie making a collective agreement binding on all employers and employees in a sector, and not just members of the signatory organisations). SY fears an extension of the general validity principle and the possible effect this would have of making labour markets more rigid. This issue has developed into a clear dispute of principle, involving political "arm-wrestling" which is now focusing on the form of the next wage bargaining round.

The labour movement has also been irritated by a proposal from the Ministry of Finance regarding unemployment benefit. In summer 2000, in connection with negotiations over tbudgethe 2001 national budget, the Ministry proposed that incomes-related unemployment benefit (which is granted for a maximum of 500 days) should be amended in such a way that it would diminish after 150 days. The idea is that at the beginning of the period of unemployment, a higher benefit than at present should be paid, falling to a lower rate than at present as the period continues. The reform of incomes-related benefit would be part of a new labour market policy, whereby people with poorer employment prospects would be encouraged to accept work.

The Ministry has also proposed that the accrual of employees' pension entitlement should be reduced during periods of part-time pension (ie when employees work part time and receive a partial pension - FI9801145F). The reaction of trade unions to this proposal has been negative. The various proposals presented in the budget negotiations are now to be studied in tripartite groups, with reports to be ready by mid-September 2000. After top-level meetings in August - including discussion of the possibilities for a new centralised agreement - the Prime Minister, Paavo Lipponen, will call the social partner organisations' leaders together for fresh negotiations in the autumn.

SAK presents proposals for cutting unemployment

The goal for the government now is to achieve as extensive an incomes policy agreement as possible - one which would curb inflation, support growth and decrease unemployment. Reduction of unemployment is a special concern of the government. Though the unemployment rate has dropped somewhat due to strong economic growth, it still persists at a relatively high level (9.4%), burdening the resources of the national economy and aggravating social problems. Alongside this concern, the government has also been trying to reduce the sizeable national debt, and its policy has been to cut public expenditure. Among other effects, this has meant cuts in education allowances, a measure which appears to contradict the principle of lifelong learning promoted by the EU.

Now that the economy has recovered, the trade union movement has started to demand an alternative policy in place of the expenditure cuts. In August, SAK published its own list of proposed measures setting out an alternative model for improving the employment situation and eliminating labour market bottlenecks. According to SAK's own studies, the supply of work cannot be increased by cutting the income of unemployed people. The organisation is proposing a programme costing FIM 1 billion to eliminate labour market bottlenecks. It justifies the amount on the grounds that Finland allocates only 1.2% of Gross National Product (GNP) to active labour market policy. According to SAK, this is considerably less than in other OECD countries.

SAK's programme proposes resolving labour market problems by increasing people's know-how. It would increase resources for further education and learning at work, develop the training guarantee scheme (FI0002134N) and adult training, and promote workers' ability to cope at work (FI9911127F). Further, the organisation would like: more effective consultation with, and advice to, unemployed people; more jobs in the public sector; an obligation on the labour market authorities to offer work or further training to the long-term unemployed; the permanent establishment of the partial pension scheme; and improved conditions for unemployment benefit.

The reactions of the other social partner organisations will be seen after SAK's proposals have been discussed in the tripartite group that is now preparing the next bargaining round.

Commentary

The industrial relations situation after the spring 2000 sector-level bargaining is quite tense. It may be difficult to agree on an extensive, centralised incomes policy agreement for 2001, due to the problems between the social partners and government and the dissent in the trade union movement during the 2000 bargaining round (FI0004142F). In the event that a centralised incomes policy agreement fails to materialise, another sector-level round is in prospect. However, it should be recognised that the spring round was very coordinated and did not, practically speaking, differ a great deal from a centralised agreement. It is obvious, however, that the sector-level round weakened the basis for a new centralised deal due to the solo efforts of a few unions. This time, it may be useless to expect the Metalworkers' Union (Metallityöväen Liitto, Metalli) again to open a sectoral bargaining round, because in 2000 the provisions of its trail-blazing agreement were exceeded in other sectors. It is also not likely that other trail-blazers will be readily forthcoming.

With GNP continuing on a path of rapid growth, the attraction toward greater dispersion of wages and away from uniform settlements may be unavoidable. There is now a general fear of wage inflation, which could be dangerous, as prices have in any case already started to rise. The next bargaining round may represent some kind of turning point in Finnish industrial relations. There are several disputes of principle, in addition to the pay issue, that will serve as a measure of the authority of the social partner organisations. (Juha Hietanen, Ministry of Labour)