Differing views of trade unions on national statutory minimum wage

The Central Organisation of Finnish Trade Unions argues that full-time workers should be paid at least €1,500 a month. The Finnish Confederation of Professionals has criticised the proposal for resembling the idea of a ‘citizen’s wage’ or a guaranteed pension. Finland has no statutory national minimum wage, but most employees are covered by collective agreements setting sectoral minimum pay rates. However, minimum wages in selected industries have been about half of full-time workers’ average earnings.

The Central Organisation of Finnish Trade Unions (Suomen Ammattiliittojen Keskusjärjestö, SAK) and its affiliated trade unions state that all workers should be guaranteed pay of at least €1,500 a month for full-time work. SAK’s proposal is for a long time the most far-reaching initiative for a national minimum wage in Finland.

The new President of SAK, Lauri Lyly (FI0905019I), stated that the organisation will fight for this basic pay during the next round of wage negotiations. Mr Lyly added that employees should be able to survive on their earnings without having to resort to welfare benefits.

Opposition to minimum wages

Those who oppose the idea of minimum wages argue that they would increase unemployment, as some employers simply cannot afford to pay such minimum wage rates.

The President of the Finnish Confederation of Professionals (Toimihenkilökeskusjärjestö, STTK), Mikko Mäenpää, has also rejected SAK’s proposal. He believes that, at first glance, it may be a sound initiative, but argues that it is based on the false premise of ‘base level social security’. Mr Mäenpää claimed that such a guarantee resembles the idea of a citizen’s wage or a guaranteed pension and that wages and social benefits should be kept apart. According to Mr Mäenpää, ‘it would be a movement away from the respect for work promoted by the labour union movement’. He argued that ‘wages and social benefits should have some connection with work’.

Mr Mäenpää also noted that negotiations on pay packages involve assessments of productivity, on which basis decisions are made on what proportion of the business profits should go to the wage earner. He also argued that such a proposal would involve an assessment by the social partners of how labour is to be priced according to the markets and in an equitable way, as well as establishing a minimum wage.

Mr Mäenpää claimed that raising the lowest wages would not be possible without such an increase affecting the whole pay scale. He asserted that if the lowest wages are raised, mid-level pay and the highest salaries should also be increased. Furthermore, Mr Mäenpää stated: ‘According to international statistics, our minimum wages are not the lowest by far, but the pay levels of many well-educated groups of white-collar workers are clearly lower.’

Setting minimum wages

Since the beginning of the 1970s, the minimum wage system has been based on collective agreements. Although no universal statutory minimum wage exists in Finland, most employees are covered by collective agreements specifying minimum pay rates for various sectors of economic activity. These legally binding minimum pay rates must be applied equally to Finnish and foreign workers.

Normally, collective agreements have erga omnes (universal) applicability. Thus, members of employer organisations are obliged to follow the collective agreement signed by their respective confederations. This also means that non-organised employers have to observe the collective agreement that sets out minimum terms and conditions of employment within the area of employment it covers. They are not allowed to pay lower wages than is stipulated in the collective agreements.

The current minimum wage in the maintenance and cleaning sector is around €7.50 an hour. The average hourly wage among industry workers is about €14 an hour. According to Statistics Finland (Tilastokeskus), minimum wages in those industries that apply minimum pay rates by collective agreement have been about half of the average earnings of all full-time employees. However, it is worthwhile noting that the progressive taxation system reduces the differences in net earnings: at the minimum wage level, the taxation rate is about 12% while it is about 18% at the level of average earnings (see the Finnish contribution to the EIRO comparative study on Wage formation in the EU in 2008).

Pertti Jokivuori, Statistics Finland and University of Jyväskylä