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8 July 2016

The Competitiveness Pact is endorsed by the industrial trade unions

The Competitiveness Pact proposed by the centre-right government to restore Finland’s competitiveness was endorsed on 3 June after having been approved by the metallurgy union. On 10 June the social partners in that sector formally signed an industry-wide agreement applying the measures in the Pact to their sector.

Note that in order to improve the economy the government had threatened to introduce legislation imposing drastic measures such as reduced leave, lower wages and higher social security contributions for employees. Its aim was to reduce State spending by EUR 10 billion by 2030. Nevertheless, it allowed the social partners to negotiate with one another to decide on measures to achieve this goal.

Wage freeze

In March, after several months of negotiations, the Pact was approved by the three major trade union confederations at national level. It provides for a wage freeze until 2017, a 24-hour increase in annual working time, a 30 % reduction in holiday bonuses in the public sector, an increase in pension and employment insurance contributions for employees, and a reduction of the same for businesses. However, in order to apply these measures they had to be incorporated into the majority of industry-wide agreements.

The approval of the Competitiveness Pact by the metallurgy sector means that the vast majority of industries have now approved it. Around 85 % of employees should be covered by the agreements. The real sticking points in the negotiations were the increase in social security contributions for employees and the 24-hour increase in annual working time without any corresponding increase in salary.

Nevertheless, the government helped the discussion by proposing, on 2 June, significant tax reductions, which compensated for many of the increases in social security contributions for employees. The additional 24 hours of working time has been applied in different ways depending on the industry, as requested by the trade unions.

For the first time in Finland, collective bargaining has resulted in a reduction in real hourly wages, resulting in competitive devaluation within the euro zone.

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