Redundancies put pressure on social partner relations

Several large-scale collective redundancies have been announced in the Finnish metalworking and wood processing industries in late 2004. Trade unions have reacted by calling for stronger redundancy protection and holding protest strikes. The strikes have antagonised employers and relations between the social partners have deteriorated. Following almost a decade of growth, industrial employment has been falling sharply since 2002, with the loss of about 40,000 jobs (8% of the total) over this period.

Finland’s industrial sector has been hit by collective redundancies in recent years. Major job cuts started in late 2002, following eight consecutive years of growth in industrial employment. In the two years up until autumn 2004, the number of industrial jobs declined from 500,000 to 460,000 (a fall of 8%). This loss of 40,000 jobs represents the most widespread collective redundancies in the country since the major recession of the early 1990s. All three of the most important industries have been affected. The metalworking and electronics industries began shedding workers first and since autumn 2003 the wood processing industry has followed suit. In the third quarter of 2004 the pace of redundancies slowed, but industrial employment continues to decline. Positive growth figures are expected some time in 2005. The long-term trend, nevertheless, is towards even more decline; the Ministry of Labour estimates that, compared with the current level, another 40,000 industrial jobs will be lost by 2030. However, part of the decrease in industrial employment can be explained by the increasingly prevalent practice of outsourcing, whereby industrial jobs come to appear as service sector jobs in statistics.

The largest-scale collective redundancies announced by companies in autumn 2004 have taken place in the metalworking, wood and paper industries. These have included the shipbuilder Aker Yards (700 workers), the forest products company UPM (670), the tractor manufacturer Valtra (650) and Metso Paper (400). Moreover, major job cuts were made public earlier in 2004 at a Wärtsilä motor manufacturing plant (430) and at the wood products operations of Finnforest (260). In total, the employers' central organisation, Finnish Industries (Elinkeinoelämän keskusliitto, EK), estimates that industrial job losses will amount to about 10,000 during 2004.

Loss of confidence among unions

The job cuts have clearly widened a 'confidence gap' between the social partners. The accusation by trade unions has been that companies are increasingly evading their social responsibility. Following several years of slow growth, the economy has finally picked up in 2004. This was, in the view of the unions, achieved in large part because of various concessions made to employers, for example by maintaining wage restraint. Now that the situation has improved, companies have, on many occasions, cut their workforces merely in order to further increase their profitability from already high levels, unions argue. By doing so they do not show adequate responsibility for their workers and Finnish society at large, it is claimed.

The timing of collective redundancies has also been controversial, because the announcements of job cuts at Valtra, UPM and Metso Paper came, unexpectedly, during the preliminary phase of difficult negotiations over a new incomes policy agreement (FI0411201N). All three trade union confederations insist that this was an irresponsible move by employers and that the announcements have damaged the negotiating process.

What trade unions label as immoral, employers view as being vital for their competitiveness. It is not enough for a company to be profitable if its competitors’ margins are larger, they maintain. Moreover, EK has reported that first, despite an improved economic situation, there continues to be overcapacity in some sectors such as wood processing and textiles and this is reflected in the current employment situation. Second, prices in Finnish export industries have not developed favourably in recent years.

In addition to the redundancies themselves, unions have criticised the unilateral way in which they have been carried out by employers. Many of the job cuts were announced without prior consultation or negotiation with workers' representatives, the Central Organisation of Finnish Trade Unions (Suomen Ammattiliittojen Keskusjärjestö, SAK) states. Once redundancy plans have been announced, employers are under a legal obligation, as stipulated in the Act on Cooperation within Undertakings (FI0311203T), to begin negotiations with workers. Unions have, however, on many occasions complained that the negotiations have not amounted to much more than employers dictating the terms of redundancy. Meanwhile, employers argue that staffing decisions are part of the strategic decision-making of companies and as such they should be the responsibility of managers, not employees. None of the social partners are content with the cooperation Act and amendments to it are currently being drafted by a working group.

The job cuts in industry have strengthened trade union demands for increased redundancy protection. This goal has been prioritised by all three of the union confederations in the current incomes policy negotiations (FI0411201N). Union confederations demand first that special 'employability' programmes should be drawn up for each individual worker who is made redundant. Second, they call for the introduction of statutory redundancy payments. The job cuts at Wärtsilä, in particular, increased union demands for the latter. The company has decided to end its production of diesel engines in Finland and concentrate production at its plant in Italy. The Finnish Metalworkers' Union (Metallityöväen Liitto, Metalli), the largest union representing industrial workers, argued that the reason for Wärtsilä ending production in Finland and not in Italy is that it is much cheaper to shed workers in Finland. For this reason, Metalli has called for stronger EU-wide regulatory standards concerning collective redundancies.

Employers criticise illegal strikes

Unions have also responded to the collective redundancies with industrial action, as they did in 2003 (FI0312203F). While strikes have occurred in various sectors, the situation in the paper and pulp industries has been particularly tense. According to the Finnish Forest Industries Federation (Metsäteollisuus), the forestry sector employers’ organisation, almost 20 strikes have been held by the Finnish Paper Workers’ Union (Paperiliitto) in the last year. The most recent of these, a one-day strike against redundancies at UPM, was held at the beginning of November 2004. As usual, it met with outrage from Metsäteollisuus, which pointed out that all the 20 or so recent strikes by Paperiliitto have been deemed illegal by the Labour Court. It demands that Paperiliitto start obeying legislation and stop the practice of organising illegal strikes. Meanwhile, the union has argued that, in the face of a harder line adopted by employers, industrial action is the only way workers can defend themselves.

The curbing of illegal strikes has become an important issue for employers’ organisations at both sectoral and national level. The issue is also creating increasing tensions between the social partners. Amending the strike legislation has now become one of the objectives of EK in the ongoing incomes policy negotiations. The employers' confederation insists that strike rights are too generous in Finland and that the fines for holding illegal strikes are too low to be prohibitive. There is therefore a case for amending the legislation, it argues. Union confederations and the Ministry of Labour have expressed their opposition to these proposals.

Commentary

The recent collective redundancies and the subsequent protest strikes by unions have significantly worsened the relations between the social partners. The job cuts may even have become a test of Finland's consensual model of industrial relations. Trade union confederations were very willing in autumn 2004 to start negotiations on another centralised agreement. There is, however, increasing discontent among unions about what has been achieved by consensual incomes policy (FI0408202F). 'Functional income distribution' (the share of labour costs in the value added by companies) is seen by many in union circles as having become too favourable for employers since the early 1990s, and many concessions have been made by unions to increase the profitability of companies. In this context, it is hard for unions to accept that not only are employers unwilling in their turn to concede to union demands but that firms continue their efforts to increase profitability, among other measures by making collective redundancies.

The global markets in which Finnish industrial firms increasingly operate dictate rules to them that are far from those of social responsibility. Their challenge is to create 'shareholder value', and one way of achieving this is by increasing the productivity of their labour through collective redundancies. By doing so, their competitive position strengthens, at least in the short term. Many employers believe that their position becomes weaker the more they concede to any union demands. It is therefore not surprising that there is much willingness on the employer side to scrap the consensual system. EK only narrowly reached the decision to begin incomes policy negotiations in autumn 2004, and discontent among its member companies remains widespread. The main motives for employers to sign a centralised agreement may be wage moderation and the labour market peace obligation involved in such a deal. Illegal strikes reduce the attractiveness of the latter and therefore further increase employers’ dissatisfaction with centralised incomes policy. (Aleksi Kuusisto, Labour Institute for Economic Research)