Finland: Unions and the construction industry join forces to fight shadow economy

It takes two hours to travel to Tallinn from Helsinki. A construction worker’s average salary is 1,150 euro in Estonia, while in Finland it is more than 2,500 euro. No wonder thousands of Estonian construction workers have taken the 80 kilometres ferry trip north to work in Finland in later years. But the large salary gap between the countries, married with the fact that only seven percent of workers are organised in Estonia (compared to 74 percent in Finland), has led to many challenges. Five to six years ago, Finnish newspapers were writing about how Estonian construction workers were paid two euro an hour, too low according to local contracts. Today things have improved. 

Authorities, employers and unions have acted

Since 2015, the Regional State Administrative Agency for Southern Finland, which is responsible for working environment inspections in the region, has intensified their cooperation with their Estonian colleagues. The main focus of their cooperation has been to make sure Estonian companies that send workers to Finland pay the correct salaries, but also that they follow the rules for overtime and holiday pay. Finnish authorities now report to Estonia if they discover cheating or low wages during their inspections. Estonian construction industry inspectors also take part in inspections in Finland. 

The Finnish construction industry is often held up as a good example of cross-border cooperation in the fight against social dumping and the shadow economy. Both the Confederation of Finnish Construction Industries RT and the Finnish Construction Trade Union have been active in Estonia.

The Finnish construction employers have organised courses for their Estonian colleagues, while the construction trade union has been active spreading information about salaries and trade union rights onboard ferries between Estonia and Finland. Already ten years ago, the Finnish trade union employed an ombudsman in Tallinn who could provide information in Estonian. A few years ago the construction union published numbers showing more than 3,000 Estonian construction workers had joined the Finnish trade union – some of the workers have set up home in Finland. 

Nordic inspector exchanges

Another example of cross-border cooperation against unfair competition and the shadow economy between Nordic authorities has been made possible within the framework of the Nordic Undeclared Work Project.

Riku Rajamäki is the head inspector at the Occupational Safety and Health Administration at the Regional State Administrative Agency for Southern Finland. He plays a central role for Finland in the project, which is financed by the EU Commission.

“One of the project’s most important tasks has been an exchange programme for the different countries’ working environment inspectors. We have sent inspectors both to Norway and Iceland. We have later welcomed inspectors from Norway and Iceland who have had a chance to learn about our work,” he says.

These inspector exchanges give participants a perspective and a reference point for their work in their home countries. Riku Rajamäki says the most important lesson the Finnish authorities can learn is to create proper, national coordination of efforts to protect the working environment. 

“In my opinion, Finland also has good examples of cooperation on a local level, between the occupational health and safety administration, the police and tax authorities. What I hope we might improve on is national coordination – that we can create some sort of an umbrella."

Rajamäki thinks Finland could learn from Norway:

“The system adopted in several Norwegian cities, where six different authorities have worked together in the same offices, seems to be working well.”

The Nordic Labour Journal wrote about the Norwegian cooperation model three years ago. Five control agencies work together with police in shared offices.

“If for example we at the Occupational Safety and Health Administration get a tip, we investigate the issue and can then inform police and tax authorities about our findings. The Norwegian model seems to make more sense, and it looks like an efficient use of resources – that authorities immediately analyse which agencies are relevant and should carry out the investigation.”

In late August 2018, Riku Rajamäki participated at the Swedish Ministry of Employment’s Nordic-Baltic experts’ seminar on work-related crime and unfair competition in the labour market. The Confederation of Finnish Construction Industries’ expert on the shadow economy, legal council Ville Wartiovaara, also took part.

“The cooperation and the exchange of information across national borders, and cooperation between the social partners and authorities is all important.”

Demand for a visible ID card

When the Nordic Labour Journal speak to the Occupational Safety and Health Administration, employers and trade unions, they all point to the special agreement within the Finnish construction industry. In 2007 the Contractor's Obligations Act came into force – the law also covers all subcontractors, and was reach with a lot of support from both employers and trade unions. 

“We are very content with the fact that we now also have a demand for all who visit a construction site to be carrying a visible ID card with an official tax reference number,” says Ville Wartiovaara.

Riku Rajamäki confirms that it is less common today to find construction workers with no tax reference numbers during inspections at Finnish construction sites. Ten years ago, inspections in Southern Finland might end up finding up to 30 percent of workers lacking the proper personal ID. In later years the number has fallen below 10 percent, says Rajamäki.

Nina Kreutzman, International Secretary at the Finnish Construction Trade Union, says the good cooperation against the shadow economy has long traditions.

“We have a joint goal, so we cooperate. The employers want to get rid of unfair competition between companies. They know what happens if you don’t pay attention to what is going on out on the construction sites. And we in the trade unions see it as incredibly important to fight social dumping,” says Kreutzman.

But she also knows that it is not a given in all countries that trade unions and employers have the opportunity to cooperate.

“We know the situation is different in some of our neighbouring countries. But we have good experience from cooperation on this particular issue.”