Mixed reaction from unions to tax freeze in exchange for wage moderation

The proposal of the Ministry of Finance not to raise income tax if trade unions accept moderate pay increases has gained conditional support from the trade union confederations. However, trade unions representing the public sector have not been enthusiastic about the offer. Some unions have expressed scepticism about whether the employer organisations will agree to any pay increases, while others have criticised the finance minister’s proposal as being insufficient.

The Minister of Finance, Jyrki Katainen, has proposed to the social partners that the government will commit itself not to raise income tax if wage earners accept moderate pay increases in the ongoing wage bargaining round. Minister Katainen announced a special employment agreement, explaining that:

The unions would know when they sign agreements that purchasing power would not be reduced by tax increases, and that it would not be necessary to ask for high nominal pay for that reason.

Minister Katainen has seen willingness on the employee side to bear responsibility in the pay agreements that have been made. However, the minister is concerned that there are pressures to raise pay in a number of female-dominated professions in the public sector at municipal level.

Overall, the trade union confederations have welcomed the proposal. Minister Katainen’s offer is seen as an extended hand towards the unions, which have been calling repeatedly for some kind of framework agreement involving employment policy, economic policy and collective agreements.

Conditional support from trade union confederations

According to the President of the Central Organisation of Finnish Trade Unions (Suomen Ammattiliittojen Keskusjärjestö, SAK), Lauri Lyly, Minister Katainen’s concern for employment is very positive. Mr Lyly believes that it is good that the government is active in the matter, stating that:

If we try to coordinate something with respect to employees’ purchasing power, the initiative of the Ministry of Finance is worth using. The government and Ministry of Finance are interested in whether or not a common solution will be found. I will not comment on the level of pay hikes.

The President of the white-collar Finnish Confederation of Salaried Employees (Toimihenkilökeskusjärjestö, STTK), Mikko Mäenpää, highlights that Minister Katainen’s proposal is most appropriate in a situation in which the economy has not recovered. However, Mr Mäenpää argues that freezing taxation is not enough in itself to guarantee high employment, or as a trade-off for low pay increases. He acknowledged that: ‘It can be a part of the whole.’

In the opinion of the President of the Confederation of Unions for Professional and Managerial Staff in Finland (Akateemisten Toimihenkilöiden Keskusjärjestö, AKAVA), Matti Viljanen, Minister Katainen’s offer is insufficient, although the trade unions understand the economic situation. Mr Viljanen notes that the trade unions have requested moderate pay increases during the ongoing bargaining round. According to Mr Viljanen, the crucial question is whether the Confederation of Finnish Industries (Elinkeinoelämän Keskusliitto, EK) can be persuaded to agree to any pay increases.

Criticism from public sector unions

However, trade unions in the public sector have not been particularly enthusiastic about the finance minister’s proposal. The Chair of the Trade Union for the Public and Welfare Sectors (Julkisten ja hyvinvointialojen liitto, JHL), Tuire Santamäki-Vuori, stated that in general the trade unions support the idea, but that mere freezing of income tax is not enough. Ms Santamäki-Vuori declared that, if the state is to really help income negotiations to succeed, it should improve unemployment benefits, protect municipal budgets and freeze the state’s productivity programme, which in fact means merely downsizing. This strategy would transform the proposal into something truly beneficial.

The Finnish Union of Practical Nurses (Suomen lähi- ja perushoitajaliitto, SuPer) does not accept Minister Katainen’s offer. The Chair of SuPer, Juhani Palomäki, pointed out that:

It is worth remembering the election situation in 2007 and talk from Minister Katainen about pay increases for nurses. And equal pay for men and women remains completely open. So, Minister Katainen can now answer for what he has said. It is completely impossible to give up pay hikes because of the recession.

The Chair of the Trade Union of Education in Finland (Opetusalan Ammattijärjestö, OAJ), Erkki Kangasniemi, considers the combination put forward by Minister Katainen as ‘sensible as such’. However, according to Mr Kangasniemi, the public sector – especially at municipal level – is not to blame for the difficult economic situation. In his opinion, the public sector and the municipalities in particular have been sometimes seen as a scapegoat. Mr Kangasniemi also accused EK of breaking the centralised tripartite bargaining structure and trying to develop a new kind of pay increase coordination (FI0806029I). Mr Kangasniemi stated that:

We had a functional centralised tripartite cooperation system, but EK rejected it. There is no alternative centralised system.

Commentary

The proposal of Minister Katainen is considered to be an effort to boost the slow progress in the ongoing bargaining round (FI0911019I). In addition, the recommendation contradicts the idea of income tax increases proposed by Prime Minister Matti Vanhanen. According to the prime minister’s suggestion, a tax increase would apply to all those who earn more than €47,000 a year.

Pertti Jokivuori, Statistics Finland

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