Lauren Mobertz interviews Aleksi Kuusisto, international affairs advisor of the Finnish union federation SAK.
“There has, for a long time, been a pressure to decentralize bargaining in Finland more and more as well. But time and time again we have shown that with centralized bargaining and consensual decision-making, we can promote economic growth in a very effective and fair way.”
In the face of declining economic growth, Finland’s three-party government is grasping for ways to increase the cost competitiveness of the country’s exports. Recent proposals to boost the economy by cutting overtime and holiday pay sparked the country’s largest worker demonstration in 20 years. On September 18, an estimated 300,000 workers demonstrated around the country against the proposed austerity measures and the threat to their collective bargaining.
Aleksi Kuusisto serves as international affairs advisor of the Central Organization of Finnish Trade Unions (SAK), a 21-member union collective and Finland’s largest lobbying organization. Over Skype, Mr. Kuusisto and I talked about SAK’s counter-proposals to the government’s proposed austerity measures and the trend across Europe toward decentralized collective bargaining.
Could you start by telling me how you contribute to SAK and how you’re connected to the current labor issues?
I’m an advisor of international affairs, and I’m also part of our economic policy team. I’m part of formatting our policies here related to the present standoff with the government. I work with trade policy, development policy, and EU issues; also Finnish economic policy issues, especially if they are related to European economic policy. I am a social scientist, and I studied economics as well.
Thank you. Could you tell me about the source of the current issue? How did Finland arrive at its need to increase competitiveness of its exports, and why is this chosen to be done through a 5 percent reduction in labor costs?
“Then, as the government didn’t get what it wanted, it came out about two weeks ago with their own proposals for how to reach 5 percent. This included things like cutting Sunday benefits, cutting holidays.”
Finland has had several decades of quite strong economic growth, but now we are facing many separate, big problems at the same time: the decline of Nokia and the electronics industry; we have had a big decline in our paper industry, which is one of our main industries; then we have the slowdown in Russia, one of our main export partners; you have the European financial crisis; now there’s a slowdown in emerging economies, which hurts Finland particularly hard because we are reliant on exporting capital goods.
The government sees that there is a gap [in competitiveness], and says we need to solve this issue by decreasing our unit labor costs. At SAK we see that our unit labor costs have risen a bit more than in our competitor countries in the last years, so we see that there is a need to increase our cost competitiveness. But we also see that there are many other structural problems in the economy, problems which we can’t deal with by only lowering labor costs. We have criticized the government for focusing too much on cutting labor costs.
The new right-wing government came to power last spring, and they in their platform agreed that unit labor costs must be cut by 5 percent. On top of this, they want 5 percent improvement in cost competitiveness through moderate pay increases.
[To meet this end], they asked the union federations and the employers to come up with a deal that would achieve this 5 percent reduction in unit labor costs. But we felt that the government was unilaterally imposing their targets on us and breaching our freedom of collective bargaining. We didn’t agree to the 5 percent target.
We want to negotiate terms with the employers without impositions from the government, and that was basically why the attempt to reach the deal that the government wanted failed.
There was another attempt by the government to reach a deal in August. The agenda was similar to the first round, and we couldn’t accept that. Then, as the government didn’t get what it wanted, it came out about two weeks ago with their own proposals for how to reach 5 percent. This included things like cutting Sunday benefits, cutting holidays.
Some [of the government’s proposals] are part of our collective agreements, but most of all they are part of our labor laws. In Finland we are used to negotiating these kinds of things, even labor laws, collectively in tripartite fashion. The government has not unilaterally imposed these kind of things before. So [the government’s proposals] are a big theoretical change to how things have been done before. We also see that the government imposing cuts on wages and benefits in this manner is in breach of international standards like the ones set by the International Labor Organization, the European Convention on Human Rights, and the Charter of Fundamental Human Rights of the European Union. That’s why we organized a demonstration [in September]. It was mainly to demonstrate against the government violating our freedom of collective bargaining.
“We want to negotiate terms with the employers without impositions from the government, and that was basically why the attempt to reach the deal that the government wanted failed.”
Absolutely. Before we get into the strike, I wanted to ask about the government’s proposals. Why the proposed 5 percent reduction? Is that just an arbitrary number, or have they specified reasoning behind that?
15 percent is the number they are actually using. They are saying there is a 15 percent gap in our cost competitiveness with our competitors. This is based on looking at a time series of how our unit labor costs have evolved. Based on this time series, they see that a gap of 15 percent has emerged. And they want 5 percent of this gap to be achieved in these negotiations, another 5 percent in the coming collective bargaining rounds, and 5 percent more to be achieved at the company level.
I should say that 15 percent is somewhat questionable. It depends on which year you start looking at the evolution of unit labor costs. Looking at them from a different point of time, you could argue that our cost competitiveness used to be much stronger than competitor countries, and now it has declined to a level that is closer to our competitors.
But like I said, we agree that there is some gap we need to fill.
And how long have talks about decreasing labor costs been going on?
It’s been talked about for several years now, starting in 2008 when the crisis started and our unit labor costs started going up against our competitors’.
When the government released their proposals earlier this month, it was very obvious that lower wage earners would bear the brunt of the proposed changes. Do you think this was an original goal?
The government is saying that they have very few instruments at their disposal because they can’t directly affect things included in collective agreements. They can do things affecting only labor law, and what you can do with labor law to cut unit labor costs is limited.
We don’t see that the government is actively trying to impose cuts on lower wage earners. While we don’t know what their motivations are, they of course wanted to increase our motivation to negotiate. Imposing very unfair cuts increases our motivation to negotiate for cuts that are more bearable.
There’s also talk that maybe the government’s motivations are ideological. There are certainly some parts of the government that are averse to the way we have done things in Finland before, which is this kind of corporatist system in which the unions and the employers’ organizations had a lot of power. There is this kind of ideological attempt to take that power away and give it to the parliament.
“Imposing very unfair cuts increases our motivation to negotiate for cuts that are more bearable.”
Back to the September demonstrations. Could you tell me about the original goals of the strike?
Yes. The main goal was to defend our internationally-recognized freedom to negotiate collectively, free of government interference. But also it was to demonstrate against the unfair nature of the cuts and defend our tripartite system of negotiating labor law and other issues.
30,000 people are said to have participated–is that the final estimate?
That was the estimate of the police, so that’s the official estimate for the main demonstration in Helsinki. In addition, we estimate that 250,000 of our members took part around the country. It was a nation-wide thing.
It was the biggest demonstration we had since the early ‘90s. In the early ‘90s it was a similar situation. We had a right-wing government imposing labor reforms, and we held several demonstrations, the largest of which was in April of 1992 when we had a one-day road stoppage across the country and 300,000 people in demonstrations. This was pretty much the same magnitude as that.
What effect do you think that September’s strike had on the morale of workers? On the general population in Finland? On the willingness of employers to negotiate?
I think that we have used this weapon quite seldom. But it’s a strategic weapon, of course. We don’t want to use it too often because we are responsible, and we want to keep the economy running. But it’s important, especially after this kind of government proposal, to show that we have the ability to mobilize workers. It was also important in a strategic way to demonstrate our power in the labor market. It definitely has an effect on future negotiations, as the government and the employers now know that we can still mobilize our workers in large numbers.
We saw that there was a lot of demand from membership to show what they think, so it was important for the workers to be able to demonstrate their anger at the government proposals.
Tell me about the proposal that you released.
Yes. We wanted to provide the government with some better, more fair proposals on how to achieve improvements in cost competitiveness. We have proposed not to raise any wages at all in the next bargaining round in one year’s time. We also agree that in 2018 we will continue with very moderate pay increases, and that we will determine those increases based on the competitiveness of the export sector. We calculate that these changes will bring a 1.5 percent improvement in quality of cost competitiveness.
We also propose to cut employers’ social contributions, a much fairer way to impose the cuts because every worker will bear the same burden. We estimate that cutting social contributions will achieve a 3.7 percent improvement in cost competitiveness. So that’s 4.2 percent.
And on top of that, we will negotiate 5 percent more in the next bargaining round. So we get 4.2 plus 5 percent, equaling a 9.2 percent increase, which is very close to the 10 percent desired by the government.
We are able to promise this 9.2 percent, which the government, in practice, can’t really secure. If they impose those cuts on workers now, then we will have the next bargaining round in one year’s time, where they may not actually get the additional 5 percent they aim for.
In addition to the moderate pay increases we are now proposing, we are at the same time promising labor peace for the duration of the agreements. So what we are giving to the government and the employers is a promise of 0 percent wage increases and no strikes for the next year, plus the cuts in social contributions. This is a very exceptional offer from our part. We have never offered anything like this one year in advance of the next negotiations.
Negotiations with the employers on this proposal have started. We will try to get the agreement in the coming weeks.
“This is a very exceptional offer from our part. We have never offered anything like this one year in advance of the next negotiations.”
Are all the trade unions behind SAK’s proposals?
We have our own proposal, and the other union federations have their own proposals at the moment. So first we’ll have to take into account what the other federations want.
What have the other federations put on the table?
They have mostly been talking about cutting holiday pay and increasing working time. We don’t see these as the best measures because both would actually lead to different groups of workers being treated in different ways. So we see that focusing on cutting employers’ social contributions would be a better way to achieve the cuts. But we’ll try to reach a compromise with the others, of course.
What has been their response to your proposals from the members of the unions you represent?
We have received very positive responses from our membership. At the same time, the responses from employers and the government and the other union corporations has been a bit mixed, so we’ll see how things develop.
From the employers’ perspective, what do you believe they have against SAK’s current proposals?
The employers have been very happy with the government proposals because the government has promised drastic cuts in labor costs. But we think our offer has a very strong appeal for the employers, especially in the export industries, because we are proposing that the competitiveness of the export industries determine wages in the future. We hope the employers’ organization, EK, will take our offer.
Sometimes companies tend to offset salary increases with bonuses. When it comes to more professional or knowledge industry-based positions, would the pay freezes also affect the level of bonuses they receive?
Our collective agreements allow a lot of things to be negotiated at a company level, collectively. At a company level, anything can be agreed between the employer and the employee. They can agree on whatever bonuses they want. There’s no limit to that. So there is this kind of flexibility in our system even though we have this centralized bargaining element as well.
I think the critical issue now is whether everyone will try to look for pragmatic solutions or ideological or power politics victories.
Thank you for all this information and your opinions. Do you have anything you want to add about how you see this playing out over the next weeks?
I think the critical issue now is whether everyone will try to look for pragmatic solutions or ideological or power politics victories. The big threat now is that, if we give the best proposals ever, there will be people wanting to take the power away from unions and move away from collective bargaining towards bargaining between workers and employers individually, or move away from centralized and central-level collective bargaining more towards company-level collective bargaining. So these kind of ideological goals may still block the agreement. And then power politics can also come in the way. So if everyone agrees to look for practical solutions, we will get a deal, I think. There are these kind of ideological and political obstacles still in the way.
Our bargaining has been decentralized very strongly across Europe, as you know in the United States as well. There has, for a long time, been a pressure to decentralize bargaining in Finland more and more as well. But time and time again we have shown that with centralized bargaining and consensual decision-making, we can promote economic growth in a very effective and fair way. We hope we can continue doing this in the future in a manner that is beneficial to employers and workers.
This interview has been edited for clarity.
- Banner image: Eduskuntatalo (Parliament House) by Janne Hellsten
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