Finnish employers signal backtracking on wage agreements

Finnish businesses and society have suffered under corona just like the rest of the world has. Still, the country does not seem to have been as hard hit as feared it would be.

Preliminary figures from Statistics Finland show that GDP shrank by 4.5% between April and June compared to the previous quarter. Compared to Q2 in 2019, the working-day adjusted GDP shrank by 6.4%. 

Finland is an exporting country. Even if Finland and the rest of the Nordics manage a second wave well, some export markets are further afield, in countries that struggle more with the spread of the coronavirus. 

Both exports, imports and private consumption fell by some 10% in Finland in Q2. 

“Not all companies can afford to pay higher wages”

The Finnish economy has managed better than expected. In terms of the number of infections and fatalities, Finland has also done well compared to the rest of Europe.  

Jarkko Eloranta, SAK President. Photo: Cata Portin.

The hope is that things will continue to go well, says Jarkko Eloranta, President of the Central Organisation of Finnish Trade Unions SAK.

But many others warn about future waves of infection resulting in a continued crisis.

Former National Conciliator Minna Helle, now Executive Director for industrial relations at the  Federation of Finnish Technology Industries, wants to change or renegotiate the agreement. She has been telling Finnish media that some businesses simply cannot afford to pay higher wages this winter.

“Employers won’t let a good crisis go to waste”

Employers will of course exploit all crises as best they can, says Eloranta at SAK. He believes it is far too early to start cancelling, moving or postponing the 2% wage increase due to come into effect next year. 

Taking to the Nordic Labour Journal, Eloranta underlines that it is possible to enter into local agreements on the coming wage increase. But employers cannot stop or reduce wage levels.

He is not yet saying no to the proposal, however, but perhaps. The situation is different for different businesses and trades, and prognoses are uncertain. There is no need to offer discounts or help to businesses which do well or even benefit from the coronavirus. But weaker businesses might need support. 

Negotiations for the next wage agreement start in 2021, when it will be easier to grasp the full consequences of the corona crisis. 

Eloranta does not want to create fear among employees that wage levels might fall. It is very important to maintain domestic purchasing power, he underlines. There is no imminent need to open up to new negotiations.

“Finnish competitiveness under threat”

Both the Bank of Finland and other actors warn that Finnish wages have risen too much – a general 3.3% increase over two years. This increases the risk for Finland to become less competitive in the global market.  

A few years back, this problem was solved through a historic “competitiveness agreement”. The collective agreement and the service sector’s collective agreement were expanded to last a further 12 months, with unchanged wage levels. An extra 24 hours were added to annual full-time working contracts, with no extra pay. Holiday pay for public sector workers was reduced by 30% between 2017 and 2019. 

Minna Helle, Executive Director for industrial relations at the Federation of Finnish Technology Industries. Photo: Federation of Finnish Technology Industries

The aim was to improve the Finnish labour market’s and companies’ competitiveness, create more jobs and increase growth. 

Employees have now been spared the unpopular extra working hours. Employers see how the corona crisis means they might have to give new ground in order to secure profitability, jobs and Finland’s competitiveness. 

No concrete work has been made to create a template for such a new agreement. SAK President Jarkko Eloranta is keen to stress that the central organisations are not taking part in discussions about wage costs or the cost of labour. 

But he is very happy to talk about better job protection, welfare and wellbeing at work, as well as new models for work division that can help increase employment figures.  

New agreements in place before corona hit

Finland has its new agreements, which were reached before the corona crisis hit. Unlike the situation in Sweden, where the entire agreement negotiation was postponed in the hope that the crisis would be over by the autumn. 

Yet two sectors in Finland ended up with no agreements this spring – tourism and hospitality, which later became the worst-hit sectors during corona. Jarkko Eloranta believes it might be difficult to reach agreements for these trades.

But most Finnish workers have agreements and can plan their future for a year to come at least. 

“In one way I am happy the agreements are there. But many of them end in a year’s time, so we will soon be back to negotiating. Soon we will know more about the state of the Finnish economy and which agreements are possible,” says Jarkko Eloranta 

He does not give advice to the Swedish trade union movement representing millions of workers. But he notes that the healthcare sector is under enormous pressure.

“Both at the Swedish Trade Union Confederation LO and at SAK it is our members who have been maintaining important social functions. But the applause fades and the lights go off when one day it is time to pay,” points out Jarkko Eloranta.

It might be difficult to promise large wage increases or corona compensation to Finnish healthcare workers, believes Jarkko Eloranta. Some municipalities nevertheless pay extra to key workers within healthcare, care for the elderly and other sectors.

Troubled budget for government 

Finland’s five-party coalition presents its budget proposal in parliament in mid-September. The government has already presented five amended budgets so far in 2020. Many problems have been pushed back to the final budget, and by early September this was far from finished. 

So far there is no disagreement on how much money to borrow. The state’s net borrowing is estimated to be around 17.6 billion euro in 2020. Public debt will stand at around 124 billion euro by the end of the year. This represents around 54% of the country’s GDP.

Employment and competitiveness are believed to be the most important themes in the government’s budget, but addressing climate change is also going to be important.

Questions around the timing of six-hour day

There has been a lively debate about employment and unemployment since the government came to power. It gained momentum during the Social Democratic Party’s congress in late August, where Prime Minister Sanna Marin was formally elected party leader after Antti Rinne.

Prime Minister Sanna Marin. Photo: Laura Kotila

During the congress, Marin again brought up the vision of a six-hour working day with no reduction in pay. Both the opposition – the National Coalition Party and the Finns Party – and representatives from the private sector are critical to the Social Democratic vision. 

They think it is being put forward at the wrong time while being far too expensive and a threat to competitiveness.

At SAK, President Jarkko Eloranta argues, just like the Prime Minister herself, that the issue is not at all relevant in the next few years. The proposal is not part of this government’s programme nor can it be found in the collective agreement. The working hours bill was recently rewritten and is unlikely to be changed again any time soon.

Eloranta tells the Nordic Labour Journal that he is not foreign to the idea, but underlines that there are many other issues which are more pressing – like working conditions for part-time employees, the shortening of working hours for the oldest employees and trying out of new models for the division of labour.

Prime Minister Sanna Marin has been criticised for not helping and for not understanding the business sector. She was sharply critical of the forest industry company UPM’s decision to shut down the country’s last print media paper factory in Jämsä. 450 people will lose their jobs in the small town when the factory, which has been profitable, is closed down. 

The Social Democratic Party is wondering why factories turning a profit are shut down and what kind of social responsibility private business is showing.