Independent unemployment insurance fund 'undermining unions'

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Until 1992, trade unions administered all unemployment insurance funds in Finland - becoming a member of a fund simultaneously meant joining a union. Since 1992, unions have had to compete with an independent fund, YTK, whose membership reached a quarter of a million, or 10% of the labour force, in October 2005 and continues to grow. The link between union membership and the entitlement to earnings-related unemployment benefits is being increasingly eroded by the success of YTK, recent research indicates.

Finland is one of the countries with a so-called 'Ghent system' (others being Sweden, Denmark and, arguably, Belgium) whereby trade unions administer government-subsidised unemployment insurance funds. Membership of an unemployment insurance fund is required in order to obtain access to earnings related unemployment benefits, which are considerably above the level of the state-guaranteed basic unemployment allowance that is paid by the Social Insurance Institution (Kansaneläkelaitos, KELA). Theoretically, it is possible to become a member of a union-administered fund without joining the trade union in question but in practice the two memberships have been inseparable. Furthermore, several surveys have suggested that the entitlement to earnings-related unemployment benefits is one of the principal reasons for belonging to a union in Finland. The Ghent system has thereby contributed to a high level of unionisation, which in Finland is thought to be the second highest in the world after Sweden, at 83% of all wage and salary earners (2004). In third place is Denmark, another Ghent country.

Emergence of independent fund

The YTK unemployment fund (Yleinen työttömyyskassa, YTK) was founded in 1992 to compete with the union-administered unemployment insurance funds. It continues to be the only non-union organisation offering the service. Its aim was to provide earnings-related unemployment benefit coverage for a price considerably below the level of union membership fees. To begin with it accepted only private sector workers as members but later on public sector workers were also allowed to join in. In spring 2005, YTK started accepting church employees, thus extending the coverage of its service to all workers in Finland.

Percentage shares of the labour force belonging to the union confederations and to YTK, 1990-2004.
. SAK Akava STTK YTK
1990 41.9 10.9 - -
1991 42.9 11.7 - -
1992 44.5 12.5 7.0 0.7
1993 45.9 12.9 25.0 1.5
1994 45.3 13.2 25.3 2.0
1995 44.8 13.3 25.6 2.6
1996 44.6 13.6 25.5 3.4
1997 44.3 14.0 25.7 4.2
1998 43.2 14.4 25.4 4.9
1999 42.0 14.7 24.5 5.4
2000 41.4 15.1 24.1 6.1
2001 41.0 15.7 24.9 6.9
2002 40.7 16.2 24.6 7.7
2003 40.4 16.8 24.6 8.6
2004 N/A N/A N/A 9.2

Sources: Statistics Finland, YTK.

Notes: SAK = Central Organisation of Finnish Trade Unions (Suomen Ammattiliittojen Keskusjärjestö, SAK); Akava = Confederation of Unions for Academic Professionals; STTK = Finnish Confederation of Salaried Employees (Toimihenkilökeskusjärjestö).

YTK has proved a success - see the table above - and it still continues to grow; in October 2005 its membership surpassed a quarter of a million, or 10% of the labour force. A cross-section of YTK’s membership was examined as part of a study by Petri Böckerman and Roope Uusitalo at the Labour Institute for Economic Research, which was published in October 2005. They found that in 2000 YTK members tended to be relatively young workers in private services in the south of Finland. Their wages or salaries were considerably higher than the national average but they tended not to have higher education. Only 6% of females in the labour force were members of YTK that year compared with 8% of males, which reflects the fact that YTK membership was quite rare in the public sector, where female workers predominate.

YTK and union density

While the independent YTK unemployment fund grew rapidly in 1990s, union density simultaneously fell. In 1993, union members accounted for 85% of all wage and salary earners but by 2000 union density had dropped to 79%, according to the Working Life Barometer of the Ministry of Labour. In 2001, however, the level of organisation bounced back to 83% where it remained in 2004. The figures from the Working Life Barometer are based in samples of wage and salary earners. As such they are not compatible with the figures presented in the table above, as the latter also include the unemployed members of the different organisations.

The rise of 4 percentage points in union density in one year (2001) took place after the bursting of the 'IT bubble' in 2000. This demonstrates that union membership levels in Finland tend to correlate strongly with cyclical fluctuations; demand for union membership becomes stronger in economic downturns while in economic upturns union density tends to fall. During the second half of the 1990s, the latter was the case as union density fell to below 80%. According to a study by the Ministry of Labour (FI0302204F), the fall in union density in the second half of the 1990s was, in addition to the cyclical upturn, caused by several other factors. First, private service sector jobs, in which the level of union organisation is very low by Finnish standards, increased almost three times as fast as employment as a whole. Second, the level of unionisation fell considerably faster than average among young people and unemployed people. Third, the share of atypical employment increased while the level of organisation among these workers fell from already low levels.

As noted above, much of YTK’s membership had come in the 1990s from the private services sector and from among young people. In the light of the study by the Ministry of Labour, the fall in union density in the latter part of the 1990s was thus evidently connected to the simultaneous rise in the membership of YTK. According to the study by the Labour Institute for Economic Research mentioned above, about half of the flow into YTK in the 1990s came in fact directly from unions. There was, however, also flow into the other direction and the total number of union members remained roughly the same throughout the 1990s; the number of STTK members changed little, while SAK lost about as many members as Akava gained, which was largely the result of a fall in blue-collar employment and an increase in upper white-collar positions. Much of the growth of YTK came in fact from the increase in potential members which happened mainly through job creation; between 1993 and 2003 the size of the labour force grew by 124,000, or 5%.

Commentary

The growth of YTK membership throughout upturns and downturns since 1992 demonstrates the fact that there has been strong demand for a non-union solution to unemployment insurance provision. The demand has largely come from private services where most new jobs are nowadays created. Unions have certainly realised this challenge and are building new strategies to increase the level of organisation in this sector. The Federation of Special Service and Clerical Employees (Erityisalojen Toimihenkilöliitto, ERTO), for instance, began an aggressive recruiting campaign in 2002 in certain private services sub-sectors where the level of union organisation is as low as 20%. By spring 2005, it had acquired about 10,000 new members, and a third of these came from YTK, according to ERTO's chair, Antti Rinne. To compete effectively with YTK, whose membership still continues to grow, many more successes such as this are needed from unions, not just in private services but also among young people, atypical workers and other segments of the labour market where union density has fallen. (Aleksi Kuusisto, Labour Institute for Economic Research)

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