Employers' pay comparison report rejected by unions

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In May 2002, the Confederation of Finnish Industry and Employers (TT) published a report comparing Finnish pay levels with those in other countries, which states that the total wages of Finnish industrial employees are among the highest in EU. According to the Central Organisation of Finnish Trade Unions (SAK), the report seeks to promote employers' aims and represents an opening shot in the next incomes policy bargaining round.

The Confederation of Finnish Industry and Employers (Teollisuuden ja Työnantajain Keskusliitto, TT) published in May 2002 a report in which Finnish wage levels are compared to those of other countries (Kansainväliset palkkavertailut, TT 2002). The report is based on international sources and it studies Finnish wage levels, labour costs, wage differentials, purchasing power, labour productivity and working time.

Content of the report

The key findings of the report include the following:

• Finnish total wages per actual working hour are the third-highest among the EU countries. In the comparison, the total wage is taken to include wages other than those earned during actual working hours. The wage level of those in demanding tasks is not as high as the EU average (finding based on 2001 figures from Employment Conditions Abroad);

• Finland's total labour costs per actual working hour in 2001 were the fourth highest among the EU countries (based on figures from the Confederation of Swedish Enterprise [Svenskt Näringsliv]);

• it is considered noteworthy that Finland's solidarity-based wage policy has kept wage differentials small. In Finland and in other Nordic countries, wage differentials – and also income differentials – are clearly smaller than in other EU and industrialised countries. The ratio between the highest and lowest pay decile is about 2 in Finland, but over 3 in France and the UK. The wage ratio has, with a few exceptions, remained more or less unchanged during the last decade (based on 1995 Eurostat figures);

• the rise in nominal wages in Finland has been clearly greater than in other EU countries on average (based on 1980-2001 figures from Svenskt Näringsliv and TT). However, the real income level has been affected by inflation, which has been stronger in Finland than in other EU countries. As to the development in labour costs, the report does not make any definite statement, because estimates concerning cost developments vary between different forecasting and research institutions;

• Finnish taxation of middle incomes is, on average, greater than in other EU countries. However, in several countries wage earners make more social security-related payments than in Finland. The tax level on marginal income is on average higher than in other EU countries (according to 1999 figures from the Organisation for Economic Cooperation and Development[OECD] and 2001 statistics from the Taxpayers' Association of Finland). Due to Finland's heavy income taxation, the net income of the wage earners does not reach the same level as elsewhere in the EU. According to the report, this concerns especially people on middle and high incomes;

• higher price levels in Finland weaken purchasing power parity compared with other EU countries. In terms of price level comparison, Finland comes second among the EU countries (OECD 2001);

• as for labour productivity, the report states that Finland is at the middle level in relation to the EU as a whole. However, the increase in productivity has been especially brisk during the 1990s (according to 2001 figures from the University of Groningen and Conference Board, GGDC Total Economy Database 2001). Furthermore, the GNP per inhabitant, adjusted for purchasing power parity, improved in Finland during the 1990s so that it rose above the EU average despite high unemployment (OECD 2001);

• the cost competitiveness of Finnish industry improved clearly during the 1990s. This was caused by the favourable productivity development and by the weakening of the former Finnish Mark at the beginning of the decade. The increased productivity of industry can be attributed mainly to the electrical and electronics industry - in other sectors, productivity growth has been more moderate (2002 figures from the Research Institute of the Finnish Economy); and

• the number of hours worked by a Finnish industrial worker is among the lowest in the EU (according to the Confederation of German Employers' Associations ([Bundesvereinigung der deutschen Arbeitgeberverbände, BDA]).

Concerning the recent discussion on the change in the shares of capital and wage income in the national income (FI0204104F), the TT report states that the proportion of wage income in Finland has not dropped to an exceptionally low level (in international comparison). In 2001, the share of wage income took an upward turn and rose almost to its level before the recession of the 1990s (according to 2001 figures from Statistics Finland). Only in the electrical and electronics industry have the changes been very marked. Excluding this sector, the development is stated to be quite steady. The report states that the increase in capital incomes indicates a rationalisation of investments and a healthy tightening of competition, also in capital-use efficiency.

SAK dismisses report

Eero Heinäluoma of the Central Organisation of Finnish Trade Unions (Suomen Ammattiliittojen Keskusjärjestö, SAK) considers the TT report to be 'purpose-oriented'. According to him, the report is a starting shot initiating preparations for the next incomes policy round (the current national incomes policy agreement - FI0012170F- expires at the end of 2002): 'The purpose of the TT report is to show that when the money has been dealt out as share options (FI9804158F) to the company and as record high dividends to the shareholders (FI0203102F), the worker can be shown the empty cash till and informed that there is nothing left to dispense any more.' In Mr Heinäluoma's view, wage increases can be afforded if good productivity developments are ensured.

Commentary

The TT report is a response to the discussion concerning wage levels and differentials in Finland. Industrial employers are advocating a decrease in marginal taxation and point out that Finnish wages are above the EU average. Further, the report criticises the Finnish solidarity-based wage policy, from which the low-wage and often low-productivity sectors have benefited. The findings of the report have clearly been like a red rag to a bull for SAK, which has given them an immediate thumbs-down.

The discussion now under way shows how the labour market machinery is being 'oiled' for the forthcoming wage round. Earlier in spring 2002, a report commissioned by the tripartite incomes policy information commission (FI0204104F) showed how national income distribution has shifted clearly in favour of capital income. In 2001, however, the share of wage income did begin to rise noticeably.

SAK had earlier presented its own demands concerning the coming 'wage battle'- this was clearly an opening salvo for the next incomes policy round. The TT report is also a response to SAK's views. At the same time, the biggest public sector unions have already demanded large wage increases for the bargaining at the end of 2002, as the doctors did in the last round (FI0103182F). On the basis of these opening shots, it may be difficult in the next bargaining round to achieve a centralised wage agreement, even if many members of the public sector unions welcome this approach. (Juha Hietanen, Ministry of Labour)