Strikes have taken place in Finland in opposition to proposed labour reforms. Markku Sippola argues Finland’s present financial scenario gives little justification for the reforms, which may have a big influence on employees and the economic system.
The Finnish authorities, led by Petteri Orpo, is at the moment implementing sweeping labour and social safety reforms. These have been justified as a method to increase employment and competitiveness, however with out real session with commerce unions.
The modifications embody making it simpler to dismiss staff, enjoyable rules on fixed-term contracts, making the primary sick day a day with out pay, decreasing unemployment advantages, limiting political strikes, capping wage will increase primarily based on export sector wages and easing native bargaining. The unprecedented scale of change is paying homage to the reforms pursued by Margaret Thatcher within the UK or by Portugal below stress from the Troika in 2011. Nevertheless, in contrast to these conditions, Finland’s financial scenario doesn’t necessitate such reforms.
The reforms have sparked large strikes from Finnish commerce unions, but the federal government stays steadfast. This implies a deliberate try and weaken union energy. The federal government argues that the present labour market constructions have led to poor financial outcomes, with Finland having excessive unionisation charges and powerful collective agreements.
Whereas Finland has maintained low in-work poverty charges due to its centralised wage-setting system, employer associations see the latter as market rigidity. The federal government goals to not solely scale back social safety protections quickly but in addition dismantle decades-long industrial relations constructions.
Proposed modifications embody permitting non-union representatives for native bargaining, limiting political strikes, rising penalties for participation in “unlawful” strikes and decreasing the nationwide conciliator’s energy to suggest sector-level wage will increase. These modifications goal to undermine union legitimacy, discourage industrial actions and weaken the nationwide conciliator’s function.
How unhealthy is the financial scenario in Finland?
The financial scenario in Finland will not be as catastrophic as throughout the COVID-19 disaster. And whereas the federal government claims its reforms will increase competitiveness and employment, proof is missing. Present productiveness and employment charges are average, and authorities debt, whereas rising, will not be alarming (Desk 1). The federal government has reacted to a rising funds deficit by reducing each taxes and social safety, thus eroding the tax base.
Desk 1: Key indicators for the Finnish economic system in comparison with chosen OECD nations
Notice: All figures from 2022. Sources: GDP per capita: World Financial institution; Debt to GDP ratio: World Inhabitants Assessment; GDP per hour labored: OECD; Employment price: OECD.
Through the COVID-19 disaster, a tripartite effort, involving the federal government, employer associations and commerce unions, helped mitigate financial misery. Nevertheless, the present authorities is unilaterally pushing labour market reforms with out significant dialogue. Comparisons with previous European reforms counsel potential penalties for Finnish competitiveness and employment and may increase issues concerning the future influence on employees and unions.
Classes from the UK and Portugal
The present strikes in Finland have parallels with the UK’s “winter of discontent” throughout the Seventies, which led to Margaret Thatcher’s rise to energy. Thatcher applied stringent measures in opposition to unions, halving membership by the flip of the century. Her robust stance, epitomised by the 1984-1985 miners’ strike, earned her the nickname the “Iron Woman”. Whereas her reforms barely improved productiveness and decreased inflation, they exacerbated inequalities and had minimal influence on unemployment.
Equally, the Finnish authorities views unions as a menace to democracy and is imposing labour reforms that weren’t contained within the marketing campaign pledges made by the governing events on the final election in 2023. The federal government additionally plans to wonderful people and unions for collaborating in “illegal” strikes, which have been additionally a spotlight of Thatcher’s insurance policies.
Portugal applied reforms that have been overseen by the Troika within the 2010s as a result of a fiscal imbalance and financial stagnation. These reforms included labour market modifications like decreased severance funds and elevated flexibility. Regardless of preliminary constructive financial indicators, the reforms extended the nation’s recession and deregulated labour markets. Nevertheless, after left-wing events took energy in 2015, the economic system started to get well steadily with extra pro-labour insurance policies.
Whereas initially profitable, the Troika reforms did little to spice up Portugal’s economic system in the long term. As an alternative, returning to collective bargaining and prioritising well-protected employment since 2015 proved extra useful. Although unionisation charges dropped, post-Troika Portugal reveals how labour-hostile insurance policies may be reversed for extra constructive financial and employment outcomes. This parallels the arguments behind Finland’s present labour reforms, though the outcomes differ considerably.
Employment and productiveness tendencies don’t present exceptional efficiency outcomes for the UK and Portugal throughout their respective reforms. As Determine 1 reveals, Portugal has made important progress on employment charges, however nonetheless lags behind the UK and Finland.
Determine 1: Employment price in chosen OECD nations
Notice: OECD knowledge for folks aged 15-64.
Thatcher’s insurance policies within the UK throughout the Nineteen Eighties didn’t notably enhance the employment price. Sweden outperformed all nations within the Nineteen Eighties, whereas Finland’s employment price plummeted throughout the Nineties recession, however has since rebounded. Latest employment price will increase in Japan, Germany and the UK are attributed to the proliferation of low-paid jobs, resulting in an increase in in-work poverty.
The same image emerges in relation to productiveness. Productiveness in Finland and the UK have adopted comparable trajectories since 1970, with Finland barely outpacing the UK lately. Portugal’s productiveness remained stagnant regardless of the Troika reforms from 2010 to 2014, as proven in Determine 2.
Determine 2: GDP per hour labored in chosen OECD nations
Notice: Figures are in US {dollars} (present costs). Information from OECD.
The above comparability reveals the Finnish authorities’s proposed labour and industrial relations reforms are unsustainable. Finland’s productiveness and employment charges are already secure, negating the necessity for drastic measures. Analogous reforms within the UK and Portugal, pushed by home and worldwide pressures respectively, didn’t notably enhance financial outcomes. Portugal noticed some progress post-Troika reforms, whereas the UK’s employment enhance was pushed by an increase in low-paid jobs.
The federal government’s unilateral “shock-therapy” undermines unions and diverges from the gradual reform method taken by neighbouring Nordic nations, the place reforms contain labour market stakeholders. This unilateral assault on unions dangers destabilising Finland’s comparatively robust financial indicators, together with low in-work poverty charges.
Notice: This text provides the views of the writer, not the place of EUROPP – European Politics and Coverage or the London Faculty of Economics. Featured picture credit score: Alexandros Michailidis / Shutterstock.com
