Centralised labour market solutions have been the norm in Finland for many years, but, according to the experts, the country nevertheless pulled through the first bargaining round in the EMU era relatively well. This was achieved despite wages and salaries being negotiated by individual unions and without, contrary to popular hopes, any centralised incomes policy being reached.

Over 90 per cent of all employees are now bound to a pay settlement which will entitle them, during the current year, to a pay increase of 3.1 per cent. The approach to pay settlements which was first adopted by the metal and construction industries, was quickly accepted as the general rule. This was described by Lauri Ihalainen, the President of SAK, as being both sensible and a sign of solidarity. Mr Ihalainen was particularly satisfied with the fact that the pay rises which were negotiated during this union round remained less diversified than was usual. There was thus no substantial increase in the variations of pay between the different sectors of industry. During this bargaining round there were calls for only three strikes. Workers in the paper and chemical industries, along with those in road transport, achieved pay rises which exceeded the general rule by taking industrial action. The highest pay rises were 4.6 per cent. Those sectors which took industrial action were also searching for solutions to their sector specific problems.

Labour costs higher than the euro norm

Industrial employers are of the opinion that the rise in labour costs in Finland is higher than that of the other euro countries. The increase in costs in Finland, in the industrial sector in the current year, will be some 4½ per cent on average, whilst in the other euro countries it promises to be only some 2½—3 per cent. Mr Seppo Riski, the director of the industrial employers' confederation, says that economic growth in Finland will not be jeopardised by a single year of higher costs, but beyond that the costs must be restrained to that of the level of our competitors.

The service industry employers' confederation has expressed doubts as to whether the purchasing power of employees will improve during the current year to the extent of that of the last few years of the centralised incomes policy. From 1996 to 1999 the purchasing power of those in employment grew some 4 per cent annually. The rate of inflation has risen and is currently over 3 per cent, mainly as a result of the higher prices of oil and property, and there is a threat that the annual inflation rate may remain at a level which exceeds two per cent. Inflation will erode some of the pay rises which have been achieved through the bargaining process, as this time there are no tax reductions to boost purchasing power. But at least the Government did not go ahead with tax increases, which would have further weakened purchasing power.

Sympathy strikes

The recent bargaining round brought a great deal of strong criticism of sympathy strikes. There is no legislation on sympathy strikes in Finland and hence they are legal. Sympathy strikes were used, for example, to bolster the bargaining process of the transport sector. The situation was unusual inasmuch as the transport workers had accepted the agreement as proposed by the National Conciliator, whilst the employers did not accept and declared a lock-out. Transport services came to a halt due to this action by the employers. The employers are now demanding that sympathy strikes should be curtailed, either through a mutual agreement between the social partners or, preferably, by means of legislation. Mr Seppo Riski, the director of the industrial employers' confederation, has put forward the suggestion that the Government should set up a committee, in order to study possible Government regulations on sympathy strikes. Mr Lauri Ihalainen, the President of SAK, the Central Organisation of Finnish Trade Unions, would like to see the rules of play for sympathy strikes being discussed internally within SAK. No legislative restrictions, to the right to take industrial action, would be acceptable to SAK. In the opinion of SAK, the employers actual intention, with their proposal, is to weaken the bargaining power of the workers. In the manifesto of the Finnish Government, it has declared that it will honour the fundamental rights of the working people, and it has additionally emphasised the importance of supporting the tripartite policy of cooperation in all labour market issues.

More driving force from lower taxation

The ink of the signatures on the collective agreements had hardly dried, when the leaders of both the employees' and the employers' confederations began to cast their thoughts to the not so distant future. Mr Ihalainen, the President of SAK, has publicly suggested that reverting, next year, to a centralised incomes policy was at least worthy of consideration. This would guarantee an improvement to the purchasing power of those in employment, a better employment rate and the continued growth of the Finnish economy.

Mr Ihalainen has received tentative support from the employers' camp. The employers would also welcome a sustainable industrial peace which would span several years and which could be achieved by reasonable pay agreements and lower taxation. The industrial employers have stated that during the next bargaining round, it will be necessary for Finland to follow the course taken by the other euro countries.

The service sector employers would also like to see lower taxation, both for the employees and the employers, in support of the next pay settlement. The service sector would particularly like to see a lower level of value added tax on food, a lower tax on alcoholic beverages and lower contributions from the employers.