Preparations for upcoming incomes policy negotiations have started

On 30 September 1997, the Finnish social partners started preparatory talks concerning the upcoming incomes policy negotiations, led by Prime Minister Paavo Lipponen. Trade union organisations are stressing qualitative goals, but employers do not look with favour on these themes.

The Finnish social partners started the preparatory negotiations concerning the next comprehensive incomes policy solution on 30 September 1997. The discussions took place in Helsinki under the lead of the Prime Minister, Paavo Lipponen.

It seems that the current 1995-7 incomes policy agreement, due to expire soon, has been very beneficial from the point of view of employees' real wages, and that as a whole the agreement has been considered to be successful. The completion of the wage development statistics in November 1997 will set the targets for the wage increase demands in the next round of negotiations. More often than before, agreements on the final raises will be drawn up in sector-specific negotiations and at local level. The general objective is a wage settlement which supports a low inflation rate. At this point, though, trade union organisations have had time to list mainly their qualitative objectives, and several obstacles have emerged that may make it difficult to reach a quick resolution.

Quality issues in working life


The debate since the start of the negotiations between the social partners has been focused largely on the problems concerning "outsourcing". The Central Organisation of Finnish Trade Unions (Suomen Ammattiliittojen Keskusjärjestö, SAK) wants clear rules to govern subcontracting - a dispute over the use of outside labour recently led to strikes in the paper sector (FI9709132F).

Lauri Ihalainen, the chair of SAK, introduced the organisation's objectives for the upcoming incomes policy negotiations at a press conference held on 6 October. According to Mr Ihalainen, bargaining over the use of outside labour is more important to a number of service sectors (often dominated by women workers), in which there are no agreements concerning the issue, than to the industrial unions affiliated to SAK. In this way, SAK wants to signal that the Finnish Paperworkers' Union (Paperiliitto) which is one of its most powerful member unions, is not the only union to which the organisation gives its support in this matter.

SAK would like to stick to the principle in subcontracting that in every case the collective agreement to be obeyed is that concluded in the industry of the user company (eg, subcontractors carrying out maintenance should be covered by the collective agreement of the factory where their employees are operating). The pressure for this approach comes especially from the side of the Paperworkers' Union. In the metalworking industry, subcontracting has been in practice for a long time and is not a problem, because the subcontractors used, as a rule, come from companies in the same industry. The difference in paper mills is that the subcontractors are not other paper mills but, for example, specialist maintenance and cleaning companies.

In order to obtain clear rules on this issue, SAK is seeking the following provisions:

  • when making agreements on the use of outside labour, the starting point has to be that the permanent personnel will do the work if this work is available on a permanent basis. The use of fixed-term, outside or leased labour would be possible only during peak periods or in cases where the work is unsuitable for the company's own personnel - eg, due to the duration of the work or the vocational requirements. SAK starts from the assumption that the companies' own personnel shall not be laid off, made redundant or work part-time because of the use of outside labour;
  • subcontracted work should not be given to an "artificial entrepreneur" (eg, a former company employee advised to become self-employed by the employer) and the grounds for any use of part-time work among permanent staff should be acceptable. The obligations of the user of leased labour should be the same as the obligations of the actual employer. Companies using subcontractors should make sure that the subcontractors obey the obligations of labour and social welfare legislation; and
  • the status of shop stewards should be strengthened in many ways. For example, the precondition for any local bargaining should be that there is a shop steward elected in the appropriate manner at the workplace.

The employers are unwilling to negotiate outsourcing at all, and are placing more stress on financial issues in the forthcoming bargaining. The Confederation of Finnish Industry and Employers (Teollisuuden ja Työnantajien Keskusliitto, TT) looks forward to sector-specific outsourcing problems being resolved in the paper industry (FI9708126N). According to TT, it seems at the moment that the biggest obstacle to a centralised incomes policy agreement is what it sees as the indifferent attitude of the Paperworkers' Union to the law and the recent court decision in a case concerning the use of outside labour (FI9709130N). TT refers to the "basic agreement" between SAK and TT, according to which subcontracting companies must apply the collective agreement of their own industry (FI9706118N).

Working time

Another central theme during the preparations for central bargaining has been the reduction of working hours, and employers and employees have conflicting opinions.

SAK would like to follow the direction of the leading EU countries in this matter. In order to improve the employment situation, it believes that sector-specific collective agreements on working time are needed and that the "job-alternation" sabbatical leave scheme, currently experimental, should be changed into a permanent system (FI9709131N). The compensation for those taking job-alternation leave should be raised to 75% of the level of earnings-related unemployment benefit. For older workers, SAK is trying to obtain age group-specific company agreements between the employers and the employees:

  • based on sector- or workplace-specific collective agreements, an employee could voluntarily shorten her or his working time and the employer would agree to employ an unemployed person in the time thus vacated; and
  • on the basis of an age group-specific company agreement, one young person could be hired for every two employees who switch to part-time work. According to SAK, the age limit for receiving a part-time pension should be lowered to 55 from the present 58, and everyone over 55 years of age should have the right to shorten their working hours.

The Finnish Confederation of Salaried Employees (Toimihenkilökeskusjärjestö, STTK) is also emphasising quality issues in working life. STTK has proposed the following:

  • a so-called "bank" of working hours should be created, enabling employees to save that part of their annual leave which exceeds 18 days to be used later on. Free time accumulated as compensation for additional and overtime work could also be saved in the bank, and other ways of collecting free time could be agreed on a sector-specific basis. By means of the bank, employees could save up longer periods of time off;
  • the job alternation scheme should be changed into a permanent legislative system. The compensation for those taking leave should be increased from the present 60% to 80% of the amount of the earnings-related daily unemployment allowance; and
  • older people should have the right to work part time and at the same time receive a part- time pension. According to STTK, this right should available to all people over 55 years of age.

The Confederation of Unions for Academic Professionals in Finland (Akateemisten Toimihenkilöiden Keskusjärjestö, AKAVA) has also stated its views in this area:

  • issues concerning the ability to work and the maintenance of working capacity are crucial, since the working week of AKAVA members is significantly longer than that of the other personnel groups. AKAVA demands a development programme for working life, which consists of developing the job-alternation scheme and the working time "bank" (though the details of this proposal are not yet clear); and
  • it does not approve of any "dogmatic" reduction in working hours, and any such reduction must be implemented by using several methods. AKAVA has also repeated its demand for making the job-alternation scheme permanent and for removing the maximum limit for compensation (at present FIM 4,500 per month). Like SAK, AKAVA also wants to increase the level of compensation to 75% of the earnings-related daily unemployment allowance.

The employers are against any "mechanical" cut in working time. TT's view is that both annual and life-time working time are already very short in Finland, and working time should thus be used as effectively as possible if the amount of work is to be increased. General reductions in working hours are not possible.

According to TT, the "part-time pay supplement" scheme and the subsidies (from the financial resources reserved for fighting unemployment) targeted to cover the costs of reducing working hours in the municipal sector (FI9703108N), are distorting the labour market. Under the "part-time pay supplement" scheme, which is aimed at job-sharing and supporting job-alternation leave, working hours can be cut by 40%-60% and, if an unemployed person is recruited to work the hours vacated, those involved receive a pay supplement of up to FIM 4,300 per month, though in practice it amounts to about 75% of full-time pay.

Wage issues

Employee organisations have announced that they are seeking a moderate wage increase, which should be combined with tax cuts - a solution which supports a low inflation rate. SAK is willing to accept a flat-rate cash wage increase and is hoping for solidarity from the other union confederations.

AKAVA is instead insisting on a percentage increase, and is prepared to widen pay differentials. According to AKAVA, during this decade Finland has returned to the road of solidaristic wage policy, with differentials again becoming narrower. Mikko Viitasalo, the chair of AKAVA, has stated that this matter needs to be addressed.

The Finnish Medical Association (Suomen Lääkäriliitto, SLL), a member union of AKAVA, has already threatened to go on strike if wages do not rise considerably. The level of income of doctors will decrease significantly in 1998 when hospital doctors come entirely under the coverage of a new working hours law implementing the EU working time Directive. This will prevent length emergency duties, and the doctors want their loss of income to be compensated by increased wages. Previously, the wages of hospital doctors consisted largely of compensation for emergency duties.

TT, for the employers, has stated that only wage issues should be discussed in the forthcoming talks. It hopes that the "real" talks will begin with arguments over how beneficial the expiring incomes policy agreement has been for wage earners and society in general.

TT's view is that it is important to develop local (company-level) bargaining, and it therefore:

  • opposes the participation of the higher-level social partners at this level. Employers argue that small companies especially are used to dealing with these matters without such representatives; and
  • considers that opportunities for local bargaining on wage issues should be increased. The use of payment-by-results schemes, which are based on local agreements, has become more popular in recent years and the further development of such schemes requires a growth in local bargaining.

Prime Minister Paavo Lipponen has pushed the social partners to reach an solution before the end of this year, by stating that only the necessary issues should be on the agenda. Mr Lipponen justifies this by pointing to the fact that there must be enough time for the parliamentary proceedings concerning the taxation part of the state Budget for 1998.


The main reason why Finland is trying to achieve a centralised incomes policy solution is probably EU Economic and Monetary Union (EMU) The objective of the Government is to achieve a wage trend which ensures a low inflation rate, and it is calling for consensus in the name of the national interest in order not to put joining EMU at risk. However, we know from experience that a comprehensive incomes policy agreement alone cannot guarantee moderation.

The present incomes policy agreement has brought wage earners a good increase in real wages, and this is going to be used as an argument with which to persuade the main trade unions to take part in the next centralised settlement. However, the conflicts between the social partners seem to be rather severe and as a result it is going to be difficult to bring about a solution.

At this point the positions of the unions still include many qualitative objectives which seem problematic for the employers. The real negotiations start after the income statistics are completed in November, when the employee organisations' wage objectives are put on the table. It remains to be seen for how long objectives other than those related to pay will be discussed in the negotiations, because the fact is that if the talks drag on, the moderation of the solution is under threat. (Juha Hietanen, Ministry of Labour)

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