Study examines views on wage bargaining system

In June 2003, two research institutes published a joint study of the views of employers, employees and their respective organisations on the problems and future prospects of the Finnish wage bargaining system. The findings of the questionnaire-based survey indicate a relatively wide consensus on the advantages of the present, largely centralised, system

A study published jointly in June 2003 by the Research Institute for the Finnish Economy (Elinkeinoelämän tutkimuslaitos, ETLA) and the Labour Institute for Economic Research (Palkansaajien tutkimuslaitos) examines views on the Finnish wage bargaining system. The study, based on a questionnaire survey, asked employers and three categories of employees - blue-collar workers, white-collar workers and higher-level workers - about their views on the present system and its future development. The same questions were also put to private and public sector social partner organisations. The questions dealt with issues including local bargaining, profit-sharing, taxation and social security. The firms concerned were examined in terms of 12 variables, including size, sector, ownership, international activities, workforce age structure and share of women and temporary employees in the workforce.

Predictability and stabilising effects appreciated

According to the study, in general the social partners on both sides seem to be quite satisfied with the present bargaining system - largely based on central incomes policy agreements (FI0212103F) and subsequent sectoral agreements, with some scope for local bargaining - under which wage developments are considered more predictable than they would be in a system based completely on company-level bargaining. Collective bargaining is also seen to have stabilising effects in terms of restricting wage competition. Around 64% of employers and 75% of employees surveyed expressed their satisfaction with the present system. However, the employers wanted to see more changes in the system than did employees. Employers would like the system to be more flexible and to place more emphasis on wage incentives. Trade unions emphasise the position of the low paid.

One of the questions examined expectations concerning wage adjustments in the event of an economic recession under the conditions of EU Economic and Monetary Union (EMU). It seems that adjustment to recession is still expected to take place first of all through job losses and changes in employment levels. Employees especially do not accept downwards flexibility of wages, even if low wages were compensated by public subsidies. However, it seems to be gradually more widely accepted that, under the conditions of EMU, there is also a need for mechanisms that include partial nominal wage adjustments. Using tax reductions as part of collective wage agreements is considered a positive and effective measure to achieve moderate wage settlements. The employers, however, support larger wage differentials, especially through creating new low-paid jobs. They also think that the social security system has gone too far, in the sense that it has increased incentives to exit the labour market. Employees, and especially industrial workers, disagree.

Factors affecting attitudes towards centralised agreements include the average age of employees and the type of employment relationship (open-ended or temporary). Firms where the average age is low are more positive to an increasing role for individual and company-level agreements as well as 'internationalisation' of wage bargaining. This might be a signal of future change, but its meaning and scope is still difficult to estimate. The present system seems to be especially popular in firms where women make up a high proportion of the workforce and employment relations are largely temporary. Centralised collective agreements might be seen as providing better bargaining power and security for those whose position on the labour market is not very strong.

Disagreement on flexibility and wage differentials

Views on the changes that are needed to the current wage bargaining system differ between employers and employees. There are also differences between different categories of employee as well as between different types of firms and sectors. Employers are typically more critical than employees. An interesting finding is that both trade union and employers' organisations are more critical than their members.

The main disagreement among the trade union is about the acceptability of wage differentials and about solidarity for the low-paid and unemployed. Especially those unions affiliated to the blue-collar Central Organisation of Finnish Trade Unions (Suomen Ammattiliittojen Keskusjärjestö, SAK) and the white-collar Finnish Confederation of Salaried Employees (Toimihenkilöjärjestö, STTK) emphasised the importance of preventing jobs where wages are too low or which are outside the basic protection provided by the collective agreement system. This issue, however, was not given high priority by employers or by members of the Confederation of Unions for Academic Professionals in Finland (Akateemisten Toimihenkilöiden Keskusjärjestö, AKAVA), which would like to increase wage differentials so that higher levels of education would bring better wages than at the moment. Employers criticise the perceived inflexibility of the present system as a whole, and the small incentives provided by the wage system. Performance-related pay is accepted by both employers and employees, as well as by social partner organisations.

No support for fully company-level or European-level bargaining

The research finds that large internationalised firms especially would like to see movement towards a wage bargaining system where the company level has a larger role than at present (FI9812186F). However, the employees of these large firms do not favour such a development. Blue-collar workers and all trade unions support some level of local bargaining conducted by union representatives, while higher-level white-collar workers are more in favour of direct local bargaining by employees. There are also clear differences in views between sectors. For example, employers in the wood industry seem to be most willing and ready to have company-level bargaining (FI9711140N), though their employees mostly favour sectoral bargaining.

There are a few issues on which both employers and employees seem to have the same views. A good example is the negative attitude expressed towards European-level wage negotiations, which are regarded as unrealistic. About 85% of employers and 68% of employers considered this to be an undesirable option. Furthermore, although more flexibility is desired at company level, a fully company-level bargaining system does not receive very much support. Around 56% of employers and 66% of employees were against totally company-level wage bargaining and decision-making on strikes.

Commentary

The survey carried out by the two research institutes has produced no big surprises. The results indicate that there is quite large agreement among social partners on the advantages of the present system. The main difference concerning future prospects is that employers emphasise flexibility and wage incentives, whereas employees emphasise especially the importance of a sufficient minimum wage level. The most interesting disagreement among trade unions is about wage differentials. Wage solidarity and equalisation of income differentials have traditionally been important targets for the unions, but those representing academically-educated professionals would prefer greater wage differential. Among the members of the AKAVA confederation there are large groups of highly-educated but low-paid professionals, such as teachers, who feel that education does not pay enough in Finland. In the survey, the views of AKAVA were often more close to those of the employers than of other employee groups. Another interesting finding is that attitudes among social partner organisations were often more critical of the current bargaining system than those among employees and employers at company level. This might be partly due to the fact that employers’ organisations tend to represent large companies, whereas small firms may regard the present collective bargaining system as easier for them in practical terms. In general, organisations on both sides may see matters more on a macro level than do the individual actors. As a whole, the results indicate that there no major changes are to be expected in the Finnish bargaining system. (Seija Parviainen, Labour Institute for Economic Research)

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