In the 1950s, a large proportion of Finnish employment was in the primary sector and national income per capita was relatively low. From the 1960s, rapid industrialisation took place: the forests formed the basis for an important wood processing industry and trade with the former Soviet Union contributed to growth in metal-working and engineering. From the beginning of the 1980s, with relatively low unemployment, robust productivity and employment growth, per capita income stayed above the EC (12) average level for about 10 years.
Finland has, to some extent, not had the build-up of public sector employment experienced in other Nordic countries: the share in general government employment (not including public enterprises) was 22% in 1989, compared with over 30% in Sweden and Denmark [8].
The employment rate [9] in 1994 was 56.5% compared to an EU average of 58.2%. This relatively low employment rate is however a result of the recession which began in 1991. In 1990, the employment rate in Finland was 70.1% compared with an EU average of 61%.
The highest employment rates in the EU are in Luxembourg with 76.6%, Sweden (71.7%) and Denmark (71.1%). The lowest employment rates are in Spain (46.1%) and Italy (50.5%) [10].
In 1994, 91.6% of the employed population was in full-time employment and 8.4% in part-time employment. This compares to 84.4% and 15.6% for the EU as a whole. The Netherlands has the highest proportion of part-time employees with 36.4% of the employed population. Greece the lowest with only 4.8% of the employed population [11].
A very noticeable change has occurred with new employment contracts in Finland. "In 1989, the majority of new employment contracts were full time and permanent. By 1993 such contracts had declined to just 28% of new employment relations. In the public sector, only 10% of new employment contracts were full time and permanent, and among young workers the corresponding share was 15%" [12].
The percentage of employees in the service sector (64%), in agriculture (9%) and in industry (27%), is very similar to the EU average (63%, 6% and 31%, respectively). Reflecting economies of scale in the wood and metal-based industries, and considerable state ownership, much industrial sector employment is in large firms. In 1990, around 65% of employees were in firms with more than 500 employees [13]. SMEs account on average for about 4% more of employment in other EU Member States than in Finland. In the case of small firms with under 10 employees, the difference is even greater. In EU Member States, small companies account for approximately 29% of all jobs while in Finland only for 23%" [14].
The growth of the economy and welfare in Finland was rapid by international comparison until the recession hit Finland in the 1990s. During the entire 1980s, growth in production was consistent, about 4% annually and the employment rate remained high [15].
In 1990, Finland began its longest and deepest recession this century. Pentti Vuorinen, a senior advisor to the Ministry of Trade and Industry in Finland, identified a number of developments which caused the crisis [16]. Firstly, Finland experienced a decline in economic output for four consecutive years. Trade with the Soviet Union in the 1980s had represented 15-20% of Finland's exports. With the dramatic political changes in Eastern Europe and the Soviet Union at the turn of the decade, this trade all but disappeared. In addition, western european countries were struggling with their own economies and had decreased their imports.
Secondly, Finland's exports suffered from competitivity problems. Between 1987 and 1990, the international competitiveness of Finnish industry declined by well over 10%, a result of fast-rising costs and the ever-stronger Mark. Moreover, by far the most important sector of the economy, pulp and paper industry, was simultaneously hit by world-wide overproduction and a cost crisis.
Thirdly, the rapid deregulation of the financial markets and of capital imports in the mid-1980s allowed both companies and private households to take out risky loans which eventually could not be repaid. This led to a crisis in the financial sector, particularly in banking. As the demand for domestic services and consequently production collapsed, there were massive lay-offs, especially in the construction industry. This explains the disproportionately high unemployment figure of 36.7% in that sector of industry in 1994, compared to figures ranging between 11% and 17% for the other sectors of industry such as manufacturing, trade, finance and insurance, services, and agriculture [17].
Vuorinen concedes that "Although the fundamental reasons behind the severe unemployment problems were clearly cyclical, structural features have grown more important as the situation has deteriorated" [18]. He backs this up firstly, by pointing out that skilled high-technology sectors of the economy weathered the economic storm relatively well, whereas labour intensive low-skilled jobs disappeared without a trace. Secondly, as a result of the recession, a number of new taxes had been introduced. Employers found themselves paying much more in the form social security contributions related to pay, and thus were much more reluctant to hire new staff.
The following table shows the dramatic effect the recession had on unemployment.
| 1989 | 1990 | 1991 | 1992 | 1993 | 1994 | 1995
(a) | 1996
(b) | 1997
(b) |
|
| GDP per head (1000 $) | 22.8 | 27.0 | 23.6 | 21.1 | 16.6 | 19.2 | 24.4 | 25.5 | 27.8 |
| Unemployment (%) | 3.5 | 3.4 | 7.6 | 13.0 | 17.7 | 18.4 | 17.2 | 15.8 | 14.4 |
(a) estimate (b) forecast
Source: Economist Intelligence Unit, Country Forecasts, 1995
Before the recession, the proportion of unemployed persons who were long-term unemployed was in the region of 10% to 14%. In 1995, there were 140,000 long-term unemployed, i.e. 30% of all the unemployed. The majority of the long-term unemployed have no vocational qualifications. Moreover, over half the unemployed over 55 years of age are long-term unemployed [19].
It is nevertheless important to note that unemployment among young people remains very high indeed. In 1993, 33.3% of those under 25 were unemployed. This figure is the second highest in the EU (behind Spain with 37.8%). The EU average in 1993 stood at 19% [20]. The figure has since dropped to 29.5% in 1995 [21].
With the recession deepening, there was a sharp drop in labour supply, mainly caused by young people opting to continue higher education rather than to enter the unfavourable labour market. As the economy picks up they will probably enter the market thus slowing any future reduction in unemployment levels.
2.4. Measures to reduce unemployment [22]
By 1991, Finland had lost a considerable amount of its price-competitiveness, there was a record deficit in the balance of payments and inflation was accelerating. This led to bankruptcies, bank crises and increasing unemployment. Therefore, a devaluation of the FIM by 12.3% was decided and a new incomes policy solution was agreed for 1991-1992 with no pay rises. In addition to these measures, there were to be a number of increases in the contributions to social security to be paid by employees. This, however, did not appear to solve Finland's problems, as unemployment rose further.
Many of the other EU Member States had similar problems and the Essen summit in December 1994, took stock of the recent developments in the labour market. In the conclusions of the summit, the Member States were urged to improve the employability of people via:
1) education and training, more particularly by promoting life-long learning and access to continuing training for all;
2) increase the employment intensity of growth by promoting flexible work organization arrangements, wage restraint and new job opportunities to meet new needs through local development;
3) reduce indirect labour costs, especially towards the bottom end of the labour market;
4) improve employment policies and public employment services, with special reference to the long-term unemployed; and
5) offer a better future for young people by way of specially targeted schemes [23].
The new Finnish five-party government in April 1995 presented an overall Governmental Programme for 1995-1999 the main goal of which was to halve the unemployment rate, strong economic growth and stabile prices. The main strategies and measures to achieve this target are:
To implement the Governmental Programme from April 1995, a more specific employment Programme 1996-1999 with the aims of halving unemployment and reducing long-term and youth unemployment was approved in October 1995. The Programme identifies 52 different measures. The main measures are grouped into the following six categories:
1. Measures to ease employee taxation, especially on low and medium income groups, and to lower employer contributions so as to reduce the fiscal burden on the use of labour. This aims mainly to revive domestic demand. The employers' and the wager-earners' unemployment insurance contribution will be reduced. The fiscal burden on use of labour will be reduced further in 1997-1999.
2. Measures to improve working life, increase productivity, by reducing the threshold for hiring and by encouraging work sharing.
3. Measures to increase the supply of vocational training and make it respond more closely to labour market needs. Training provisions will be improved in 1996, 1997 and 1998 by offering 5,000 new starting places in basic vocational training. In addition, the incomes policy agreement of 1995 provides for an intake of 4,000 new students annually in 1996-1998 and for an increase of 10,000-20,000 adult education places from 1997 onwards.
4. Measures to create favourable conditions for entrepreneurship.
5. Increasing investments in the building sector and environmental protection both with private and public funding.
6. A shift in the focus of labour market policy from passive unemployment security to active measures. The target is to have 5% of the labour force (125,000) involved in active labour market measures by 1997.
2.5. Women in the Labour Market [25]
The labour force participation rate of Finnish women is relatively high compared with many of the other EU Member States: the employment rate (% of working-age population) for women in Finland was in 1994, 55.4% compared with 48.6% for the EU 12, although it was higher in Denmark, Sweden, UK and Portugal. However, the employment rate for men in Finland was nearly the same as for women, namely 57.6%. This is quite unusual compared with the other EU Member States. In Denmark, which has the highest employment rate for women at 66%, the employment rate for men was 76% in 1994.
In Finland the unemployment rate for women 16.7% (1994) is lower than for men 19.9% (1994). The figures for EU 12 were 13% for women (1994) and 10% for men (1994). The higher rate of unemployment for women than for men is evident in all Member States except Finland, Sweden and the UK.
Finnish women also tend to work full-time. In 1994 only 11% had part-time jobs compared with 30% in EU 12, Denmark with 34%, Sweden 17%, UK 44% and Portugal with 12%. Finnish rates of female participation in full-time work are probably the highest in the EU.
As regards recent measures for unemployed women, cooperation between the labour and education authorities has been intensified in order to reduce female unemployment. Regional cooperation networks have been established to provide innovation in the field of employment for women. The emphasis is on the creation of businesses and self-employment [26].
Finnish women are well educated. This is especially true of the younger age groups, where women have on average received more education than men. Thus 59% of those graduating from vocational and professional institutions in 1992 were women, while the corresponding figure for universities was 55% [27].
The prohibition of either direct or indirect discrimination on grounds of sex is enacted in the Equality Act from 1986. This Act was amended in 1992, when discrimination based on pregnancy or parenthood was prohibited, and amended again in 1995.
The purpose of the Act is to promote gender equality and to prevent discrimination, thus improving the position of women in working life. The Act includes provisions to promote equality, to ban discrimination and guarantee recourse to the law. It also includes provisions on active promotion of equality: the authorities and employers have an obligation to promote equality in a goal-oriented and planned way. The renewed Act also contains a provision for 40% quotas of both sexes in government committees, advisory boards and the like.
In order to see if the Equality Act is observed and to promote its implementation, an Equality Ombudsman has been created. The Equality Ombudsman is empowered to take initiatives and give instructions in cases where the law is applied as well as to inspect the work place if there are grounds of suspicion of violation of the Equality Act [28].
2.6.1. Trade Unions
Union density has risen rapidly since the 1960s. In 1994, roughly 90% of all Finnish employees belonged to a trade union (this figure also include the retired, students and non-paying members). This is one of the highest levels in the EU, along with Denmark, Sweden. The figures of unionisation for France, Italy and Germany were 11%, 66%, and 42%, respectively [29].
The biggest union is the SAK (Central Organisation of Finnish Trade Unions) which has a membership of 1.1 million. 24 unions are affiliated to it, of which those representing metal workers, municipal staff, state employees and construction workers are the most important. The SAK can trace its antecedents back to 1907. The whole history of Finland's blue-collar trade union movement has been characterised by rivalry between, on one hand, social democrats and, on the other, communists. The SAK and most affiliates are led by social democrats. However, the Left-Wing alliance retain a significant and at times disruptive presence.
There are two white-collar union groups, both organised by occupation rather than industry. STTK, the Finnish Confederation of Salaried Employees has 28 member-unions and about 600,000 members. AKAVA, the Confederation of Unions for Academic Professionals in Finland has 32 member-unions and 320,000 members, mainly people with a university education [30].
2.6.2. Employers Organisations [31]
Employers are organised in four major central organisations of which two represent the public and two the private sector. The biggest employer's organisations are the TT (The Confederation of Finnish Industries and Employers) which, in 1993, counted roughly 6000 member companies employing 420,000 employees, and the LTK (Employer's Confederation of Service Industries in Finland) which has 5800 member companies employing 280,000 employees. The KT (The Commission for Local Authority Employers), the largest public sector organisation, cover 455 municipalities and 260 federations, employing 420,000 people. The VTML State Employers Office signs collective agreements for 140,000 employers and officials employed by the State. In addition, there are some minor organisations. The MTL, the Federation of Agricultural Employers, has about a thousand member-companies [32].
2.7. The role of the social partners [33]
Collective bargaining was slow to develop in Finland. It is only since 1946 that collective bargaining has played an all-pervasive role in Finland. In addition to pay, there are a whole range of national agreements, usually of indefinite length, dealing with non-wage topics. These non-wage pacts, involving central labour market organisations, may elaborate on issues covered by statute law, be a precursor to statute, or deal with matters not the subject of statute at all (see 3. below for the most important central agreements).
As regards wage-setting, centralised collective agreements have dominated bargaining in the Finnish labour market since the early 1960s. From 1968 to 1992, collective agreements were generally based on a centralised incomes policy. The parties to the agreements were the wage-earners' and employers' central organisation. The government called for moderate wage solutions and promised reforms in labour and social policy. As part of an overall incomes policy it was possible to implement even expensive social policy reforms aimed at developing the welfare society.
Incomes policy agreements have typically been signed for two years at a time. Settlements concerning incomes have been made since 1971 by the government's and labour market organisations' joint incomes policy settlement committee. It was a period with good relations between the social partners. But the situation changed with the recession. The parties had different views on how to cope with the problems. Employers asked for decentralisation of bargaining and also wanted increased flexibility of wages and hours.
This led to a change in the early 1990s, in the system of established negotiating practice. The government remained outside the negotiating process and decentralised industry-level agreements were made. This was certainly welcomed by the employers' side, and while the Trade Unions were eager to continue the incomes policy, they also did not fully support the continuation of the centralised agreements. In 1995, after complicated and conflict-ridden negotiations, renewed calls for a return to centralised nation-wide negotiations were made [34].
European Parliament: October 1996