New incomes policy agreement covers over 90% of wage earners

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In December 2002, the Finnish social partners formally signed a new two-year incomes policy agreement, which covers over 90% of wage earners. A few sectors which are strategically important for Finnish industry, such as seafaring and transport, rejected the deal. The cost effect of the of the agreed wage increases is 2.9% in 2003 and 2.2% in 2004.

In December 2002, the Finnish social partners signed a new two-year central incomes policy agreement for 2003-4, after individual trade unions had decided their stand on the negotiation result achieved two weeks earlier (FI0211102F). The majority of the unions approved the deal, with the result that over 90% of Finnish wage earners are covered by the new agreement. After approval, the government announced that it would implement a tax cut and employment 'package', as promised.

Some significant sectors remain outside deal

Despite the coverage of the agreement, some significant - and strategically important for industry - trade unions remained outside the deal. Unions representing workers in seafaring, aviation, road transport, the forestry processing industry and the food industry decided not to approve it. However, the Finnish Medical Association (Suomen Lääkäriliitto, SLL) and the Paper Workers’ Union (Paperiliitto) changed their earlier positions and decided to join the deal. It is thought that the most difficult negotiating situation in the sectors which have not signed up to the central agreement will come in January 2003 in the transport sector, whose possible strikes will also affect industry. The employers consider it a severe shortcoming that such a key sector was left outside the deal.

Due to disagreement on seafaring wages and foreign labour, collective agreements for workers on freight and passenger vessels in overseas traffic have not been reached (FI0212101N). The Finnish Seafarers' Union (Suomen Merimies-Unioni, SM-U) has not agreed to allow the use of foreign labour during the period of a new collective agreement, which is demanded by the Finnish Shipowners’ Association (Suomen Varustamoyhdistys, SVY). Furthermore, the employers have not agreed to the wage increases as set out in the new incomes policy agreement, which would have satisfied the union.

Wage deal

The wage increases agreed under the new 2003-4 central incomes policy agreement and the overall cost impact are set out in the table below. The accord contains general increases for all workers, plus a 'union increment' for sectoral distribution, and an 'equality increment' to be used for improving gender wage equality. The deal will increase wage costs by a total of 2.9% from 1 March 2003 and by 2.2% from 1 March 2004.

Wage provisions of 2003-4 central incomes policy agreement
. 1 March 2003 1 March 2004
General increase: . .
- hourly (EUR) 0.17 0.16
- monthly (EUR) 28.39 26.72
- minimum (%) 1.8 1.7
Union increment (%) 0.8 0.5
Equality increment (%) 0.3 -
Overall cost impact (%) 2.9 2.2

The agreement also includes a general negotiation clause, a wage development clause and an index clause, meaning that wages must be increased by up to 0.4% if the rise in the consumer prices index from November 2002 to October 2003 exceeds 2.7%.

Qualitative measures

The social partners have agreed on the following 'qualitative' provisions in the 2003-4 central agreement.

  • Improved status for workers' representatives. The social partners agreed to safeguard the career development and professional knowledge of workers’ representatives and labour protection (health and safety) delegates, and to provide them with up-to-date working tools (such as information technology). The minimum compensation for representatives will be increased to EUR 48 per month, and the possibilities for flexible use of time will be improved.
  • Improved supervision of the employment terms of foreign workers. It is proposed that a special unit for supervising the employment terms and work permits of foreign workers be established at the Ministry of the Interior by the end of 2003. Furthermore, the resources and rights of labour protection delegates in this sphere will be increased. By the end of March 2003, the situation as regards criminalising the use of cheap foreign labour will be clarified (FI0209103N).
  • Minimum working time. A consensus was reached that daily working times of under four hours should not be used if there are no specific grounds for this, or if the employee does not want it. There will be further discussion on the subject in the talks to be conducted in each sector to implement the central agreement. Furthermore, working hours will be controlled more effectively.
  • Improved redundancy protection and increased unemployment benefit. A central goal of the trade unions was to obtain greater financial compensation for employees who are made redundant (FI0209102F). They were not successful in this respect, but instead it was agreed that an 'employment programme' for workers threatened by redundancy should in future be prepared in cooperation between employers, employees and public authorities. The aim is to ensure that redundant employees will be able to find a job quickly, either with the same or another employer. In addition, the period of increased income-related unemployment benefit will be extended from 130 to 150 days for employees with 20 years’ employment.
  • Adult training programme. Resources for funding a programme to raise the level of 'know-how' among adult employees (FI0203103F) have been agreed for 2003. Some 10,000 students a year will be involved from the beginning of 2004. The basic amount of adult training benefit will be increased from EUR 440 to EUR 500 per month. Personnel training will be made more effective. Learning at work will be developed on a tripartite basis, and adult training will be covered by extra financing.
  • Partial care leave. The 'partial care' leave scheme - whereby parents of young children may reduce their working hours - will be extended to cover a child's first years at school. A working group will examine ways of making working time arrangements more flexible to meet family needs, and will put forward proposals on the issue. The working group will also examine the use of working time accounts.
  • Strengthening of ongoing negotiations. The parties agreed that ongoing negotiations in between central incomes policy rounds should be strengthened. Projects promoting equal pay will be continued and made more effective during the period of the new agreement. In addition, the central social partner organisations recommend that the gender effects of collective agreements should be evaluated in the forthcoming sector-level negotiations.

Government implements employment package and tax cuts

Now that the central agreement has been signed, in order to support it the government will implement the promised tax cuts and provide money for various kinds of employment measures, eg dock subsidies and various construction projects. After the deal was concluded, the government passed over to parliament proposals concerning the 2003 state budget in relation to these measures. The price of the package is estimated at about EUR 100 million.


In the end, the new incomes policy agreement was concluded quite as foreseen, though it had been believed that it would be more difficult. Its coverage is very high: over 90% of wage earners come within its scope. The Finnish incomes policy system has thus proved that it is still strong. The most significant trade unions finally decided to approve the deal, including the Paper Workers’ Union, which is important for Finnish exports. The central factor influencing the deal on this occasion was the continuing economic recession. The government's tax and employment package reflects its interest in ontaining an agreement which would stabilise the economy. Over the decades, incomes policy agreements have shifted away from the goal of guaranteeing social and labour market peace and towards that of supporting employment. The new global economic environment sets clear boundaries for bargaining activity. The Finnish strategy is aimed at retaining a high level of competitiveness, which it is believed will also ensure high employment. (Juha Hietanen, Ministry of Labour)

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