For Finnish Workers, the Euro Means Longer Hours and Lower Pay

Few Finns probably thought that adopting the euro would mean more work for less pay.Yet trade unions are now...

Few Finns probably thought that adopting the euro would mean more work for less pay.

Yet trade unions are now getting ready to sign off on a deal that will cut workers’ income and raise working hours. Unveiled last week, it’s designed to boost competitiveness as the Nordic nation struggles within the constraints of the euro zone.

The board of Finland’s biggest union, SAK, convenes on Monday to give it its final blessing, which would drive forward a painful process first kicked off by Prime Minister Juha Sipila after he took power in May. But it could be a tight vote. Four of SAK’s most influential members, representing 40 percent of its members, have already said they will reject the deal.

For the unions, the deal is “dramatic” since it’s the first time that the effect of a labor accord has been negative for its members, said Lauri Lyly.

“This is a heavy decision for us,’’ Lyly said in an interview on Friday. Nonetheless, the union boss will back the plan because “jobs could be created,’’ he said.

Changing Direction

The pact involves making Finns work 24 hours more a year without extra pay, cuts in holiday bonuses for government workers, and a shift of some payroll taxes to workers. These measures should lower Finnish labor costs by about 4 percent by 2019 — slightly below the 5 percent reduction demanded by Sipila — and create 35,000 jobs by 2020. The unions have also committed to zero wage increases next year. 

“For decades we have shortened the time we work,” said Jyri Hakamies, leader of Confederation of Finnish Industries EK, in interview on Thursday. “Now we’ve changed direction.”

Finland has been rocked by the slump of its paper industry, the demise of Nokia Oyj’s mobile phone business and a decline in trade with its struggling neighbor, Russia. The competitiveness gap with Germany has widened to at least 15 percent, and Finance Minister Alexander Stubb now refers to his country as the “sick man of Europe.”

Non-euro member Sweden, by contrast, has seen growth surge ahead at its fastest pace in five years as the central bank was able to drive down its currency by cutting rates deep below zero.

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While Sipila has applauded the deal, saying it will go a long way in restoring competitiveness, it has proved hard to swallow for unions.

Lyly said that the support of “a clear majority” of the 20 unions represented on its board will be enough to send it on to the final negotiations stage. The government, unions and employers plan to sign off on the pact by June, based on last week’s preliminary agreement. 

Tax Cuts

Sture Fjader, who heads the second-biggest union, Akava, has already backed the deal, saying workers should now be compensated for their loss in purchasing power. Akava is calling for a 1 billion-euro ($1.1-billion) tax cut. SAK also wants a tax cut.

That’s a non-starter for now, according to Economy Minister Olli Rehn. The government is seeking to hold down its deficit, which is estimated by the European Commission at 2.8 percent this year and 2.5 percent the next.

“We can’t afford massive tax breaks because of the situation in public finances,” Rehn said in an interview Friday. The government will only look at cutting taxes if the country moves ahead with more local setting of working conditions and wages and a stricter focus on using the export sector as a base case in the collective bargaining process, he said.

To contact the reporter on this story: Raine Tiessalo in Helsinki at rtiessalo@bloomberg.net. To contact the editors responsible for this story: Jonas Bergman at jbergman@bloomberg.net, Nick Rigillo

By: Raine Tiessalo

©2016 Bloomberg News

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