PT criticises new incomes policy agreement

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In January 2001, the Employers' Confederation of Service Industries (PT) published an economic and employment survey, which concludes that the demand for service sector employment is taking a downward turn. The organisation criticises the new national incomes policy agreement for 2001-2 as being too solidarity-oriented and thus making it harder for employers to recruit labour. As a solution, PT proposes changing the incomes policy structures to achieve more flexibility.

In January 2001, the Employers' Confederation of Service Sector Industries (Palvelutyönantajat, PT) published an economic and employment survey, studying expectations of future developments in services.

According to the findings, over half of service sector companies expect an increase in sales during early 2001, but the growth rate is slowing down. Differences seem to be growing between sectors and there are clear signs of weakening in economic expectations. PT gives several reasons for this. The increase in employment costs in private services is estimated at 4%-5% and, in addition, some companies have to contract out expensive overtime work due to lack of human resources. The high level of fuel prices will cause cost pressures in transport services and in the branches that are dependent on transportation. A positive sign is that the purchasing power of consumers is increasing due to wage increases and tax cuts.

The lack of professional labour is a problem. Over half of the service companies consider that their recruiting difficulties are getting worse. It is feared that the situation will worsen especially in real estate maintenance, transport and forwarding companies, social services, pharmacists, insurance companies and the hotel and restaurant sector.

Criticism of incomes policy agreement

The managing director of PT, Arto Ojala, is worried about the fall in employment growth in private services and has criticised the new two-year central incomes policy agreement concluded in 2000 (FI0012170F): "The autumn incomes policy agreement balanced out effectively the wage incomes of wage earners, but increased inequality between areas. The agreement was made following the lead of successful sectors and strong geographical areas. Now we are reaping the harvest. The slowing down of employment growth and the increase in differences between areas are facts that have to be accepted, if we are not going to reform incomes policy, taxation and the structures of working life."

Mr Ojala also addressed the current debate on the growth in income differences, which has arisen mostly from the growth of capital income and share options. He finds it odd that the labour movement is drawing attention to an increase in the capital income of some hundreds or thousands of people (FI9804158F). According to him, it is more important to consider how to find work for unemployed people and what kind of changes this requires in the labour market. This would be the best way to promote equality in income distribution: "The new jobs and the demand for many services are becoming concentrated more and more in the metropolitan area. However, the incomes policy agreement increases labour costs mostly in the second cost of living category (outside the growth centres), where the companies often have the least resources for paying wages. There, the contractual wages will increase in many sectors by as much as 5%" (this is due to special increments for women and low-paid employees).

Agreement structures must be changed

The PT managing director has repeated his hope for reform of incomes policy agreement structures, which he expressed earlier in connection with the recent bargaining round: "We are getting concrete evidence that, in the EMU era, incomes policy cannot be made according to the old formula." He stated that if reform of the structures does not proceed, demands for a reduction of unemployment are mere talk. However, in his opinion, the incomes policy agreement works well as such - "it creates stability and predictability, and is an important part of the economic policy."

Björn Wahlroos, the newly appointed group manager of the Sampo bank (a PT member), where the state is the main shareholder, has recently criticised the incomes policy model and the trade union movement. This criticism has sparked a heated debate; the union movement has reacted strongly and threatened the bank (of which it is a major customer) with countermeasures. Furthermore, Mr Wahlroos' seat on the board of PT is still open. Mr Ojala takes a different view to Mr Wahlroos: "I see the incomes policy as part of the economic policy - it is necessary and good that this sort of instrument exists. It must just be changed in such a way that there is more economic policy and less of the so-called political groping in connection with the labour market." According to him, there is a responsible trade union movement which is not a threat to society. He justifies his view on the grounds that the more difficult the times, the more reasonable the incomes policy that is practised.

Mr Ojala wants more flexibility in the incomes policy agreement, enabling better attention to be given to sectoral and regional differences. He would try to achieve flexibility in the wage system and increase the room for manoeuvre at company level: "Companies should genuinely be given more scope in wages. In the incomes policy agreement, it could then be ensured that the minimum standard would be retained and that the wages of everyone would develop somehow." Mr Ojala refers to the USA, where companies with low productivity and wage levels are subsidised. He believes that, with the help of taxes on the one hand and subsidies on the other, jobs should be created in areas where work is not currently performed (interview referred to in the Kansan Uutiset newspaper on 18 January 2001).

Commentary

The recent incomes policy agreement has generally been considered as very moderate, but the service employers warned during the bargaining round that a wage increase level defined by the successful sectors would lead to problems in the service sector. According to the PT economic survey, this is about to happen now. The competitiveness of companies is partly under threat, and the development of employment is weakening at the same time. The incomes policy agreement does not give enough consideration to sectoral differences. It has been commonly acknowledged, on the other hand, that the wage increases provided by the new agreement are moderate. However, these increases can be difficult to implement outside the growth centres. Companies must find solutions in order to cover the expenses. The easiest way would be dismissals and a raising of the recruiting threshold. However, this would involve the risk of a decrease in the level of services. The accusation that the rigidity of the incomes policy system is jeopardising the survival of the low-productivity sectors is partly justifiable, but a solution can be sought through agreement. The system has already been made more flexible in order to take local-level circumstances into account, so the tools for solving the problems should in fact already exist. (Juha Hietanen, Ministry of Labour)

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