Tripartite cooperation and coordination required
“Akava strongly supports measures to balance general government finances, but disagrees with the Government on some of its actions to reach this objective. Reaching into employees’ pockets is not the right way. The Government relies heavily on cuts to unemployment benefits and other social security benefits, and on working life reforms. We welcome the additional resources for security actors and the administration of justice, as well as the promotion of combined unemployment insurance. As we suggested, unemployment funds could offer their customers employment support services in the future”, notes Maria Löfgren, President of Akava.
The Government aims to increase employment by at least 100,000 employed people. This growth in employment is envisaged to strengthen general government finances by more than EUR 2 billion. The Government’s long-term target is to achieve an employment rate of 80 per cent by 2031. It also wants to increase the number of hours worked. The Government Programme does not provide a more detailed estimate of the employment growth generated through labour market reforms such as increased local bargaining.
“The Programme recognises labour shortage but offers very limited means to address it. The combined effects of the proposed measures need to be assessed. While we warmly welcome the fact that many entries in the Government Programme call for tripartite cooperation and coordination, there is very little mention of it in the Programme”, Löfgren continues.
Changes to the Employment Contracts Act reduce employee security
“The Government Programme introduces significant reductions in employee security, unfortunately without any counterbalancing elements. In future, an employee can be dismissed on proper grounds instead of proper and weighty grounds as was the case before. A fixed-term employment contract of up to one year could be concluded without a specific reason. This change would obscure the rationale for using fixed-term contracts and would affect women in particular”, says Hannele Fremer, Senior Advisor.
“In future, the first day of sickness absence would be the employee’s own liability for which the employer would not be obligated to pay unless otherwise agreed in the employment contract. This would further divide the labour market since the arrangement would not apply to those covered by collective agreements, and it puts those doing remote work and those working on site in a different position”, Fremer notes.
“The change will shift costs from the employer to the employee and encourage people to work when they are sick. The new practice may affect contract negotiations and increase the burden on the health care system as medical certificates will be required more often. Moreover, the overall sickness rate may rise and sickness absences of more than five days, to which the new arrangement does not apply, may become more common. This begs the question of whether the change will generate any savings”, Fremer comments.
“Extending the scope of the Workers’ Compensation Act to cover accidents that occur while working remotely is an important objective for us. We are very disappointed with the fact that the Government Programme lacks this extension to provide similar protection as with on-site work”, says Miia Kannisto, Senior Advisor.
More local bargaining and less cooperation within companies
According to the Government Programme, the conditions for local bargaining will be expanded to non-organised companies. Labour legislation will be amended to allow a company-specific collective agreement to derogate, by agreement, from the same provisions of labour legislation from which a derogation is now only possible by means of a national collective agreement. Parties to local bargaining at the company level may include shop stewards, elected representatives, other representatives elected by the personnel or the entire personnel.
“The changes put forward in the Government Programme would also affect the way in which the minimum employment conditions will be defined in the future”, Fremer stresses.
“It is important for Akava that the role of employee representatives will be strengthened. We have proposed that the protection of elected representatives be strengthened and extended to their deputies. The objectives of the Government Programme seem to be somewhat contradictory in terms of employee representatives’ access to information and opportunities for influencing. The changes will reduce employees’ power in companies, as the minimum negotiation times for change negotiations will be shortened by half and the number of employees to whom the Act on Co-operation within Undertakings may be applied will be increased”, Kannisto says.
Legislation to limit labour market parties’ contractual autonomy
The Government Programme tightens regulations on solidarity strikes and political demonstrations and increases the level of compensatory fines for unlawful industrial action. The right to political industrial action will be limited to demonstrations of no longer than one day, and solidarity action will become subject to proportionality assessment and the duty to notify in accordance with the Act on Mediation in Labour Disputes.
“Together with our negotiation organisations, we have stressed that changes in the labour market require a reform of the mediation system and allocation of more resources. Given the package of changes included in the Government Programme, there is a growing need in the labour market for impartial data on the economy, wages and earnings development. It is regrettable that the reform of the mediation system is not included in the Programme. Changes to local bargaining and stricter provisions concerning industrial peace will be implemented without any counterbalancing factors”, Kannisto says.
“The Government’s intention to strengthen the export-driven labour market model by amending the Act on Mediation in Labour Disputes contradicts with our international obligations and infringes on the labour market parties’ freedom of contract. Such infringement is quite exceptional in countries where working conditions are negotiated and agreed on through collective agreements. This would affect wage development in the public sector, especially in female-dominated fields”, Kannisto stresses.
Collective bargaining protected as basic and human right
The foundations of collective bargaining, namely the right to conclude collective agreements and to take industrial action, are protected as basic and human rights. Article 13 of the Constitution of Finland provides for freedom of association. Freedom of association and the right to collective bargaining are protected by International Labour Organisation (ILO) Conventions 87 and 98.
The ILO Conventions also require that national legislation may not be drafted or applied in such a way as to infringe on the rights guaranteed by ILO Conventions, such as the right to collective bargaining.
Aiming to boost economic growth, strengthen employment and balance general government finances
“The Government aims to boost economic growth, improve employment and reduce the general government deficit. The focus of taxation is shifting slightly away from labour taxation towards indirect taxation. This is largely in line with our targets”, says Pasi Sorjonen, Chief Economist.
Increases in VAT will play a greater role, while increases in environmental taxes and taxes on harmful goods or services will play a lesser role. The reduction in income taxation will focus on low and middle income earners. In addition, the income threshold for the so-called solidarity and wealth tax will be raised for the first time in a long time. While these are steps in the right direction to create incentives to work and engage in business activities, the scale of the measures remains relatively modest.
Actual tax cuts amount to around EUR 500 million, but, correspondingly, some taxes on consumption and on harmful goods and services will be increased.
“We had hoped for a tax scheme spanning over two electoral terms and a reduction in the highest marginal rate to 50%, but it seems that our hopes will not be fulfilled this time”, Sorjonen says.
“The increase in environmental tax and tax on harmful goods and services that we proposed will be less significant than expected, despite higher taxes on alcohol, tobacco and soft drinks. What will have a bigger impact is the increase in indirect taxation, which will affect the consumption of services. This is not something we hoped for. Goods currently subject to a reduced VAT rate of 10%, such as cultural, sports and accommodation services, newspapers excluded, will be moved to the 14% tax bracket. This will push prices up by 3.6% at most, and will reduce their demand”, Sorjonen predicts.
Subsidy cuts will weaken purchasing power
“The Government Programme entry regarding index-linked adjustments to income tax ensures that wage taxes will not automatically rise following overall wage and price increases, which makes it a very important entry”, says Eugen Koev, labour market economist.
In net terms, the overall tax policy seems to benefit primarily those with minor children whose earnings are below the average salary.
In general, the income level of unemployed persons receiving earnings-related unemployment security will deteriorate as stricter conditions will be imposed on the security in terms of amount and eligibility. The cuts in the consumer and national pension index will weaken the purchasing power of those receiving basic unemployment allowance, labour market support and student financial aid. The index cuts do not affect pension income.
In addition to cuts in earnings-related unemployment security and basic social security, planned cuts in the general housing allowance will further reduce the purchasing power of many unemployed people and students. Similarly, the reduction in the housing allowance may cancel out the benefits of lower taxation in a low-income family.
Higher employment rate with changes to unemployment security?
According to the Government Programme, measures to enhance the incentivising effect of unemployment security will be taken, which means stricter eligibility conditions or less unemployment security. According to the Government Programme, it will be financially more attractive to accept work, more work will be made available, and the employment rate will grow.
Several reforms of unemployment security will be conducted. The Government plans to stagger the earnings-related unemployment allowance and extend the waiting period for unemployment benefits, abolish unemployment security increments based on the number of children, extend the prior work requirement for earnings-related unemployment security to 12 months and make it dependent on the earnings from prior work. Subsidised work will no longer count towards the prior work requirement. By the mid-term policy review session, the Government will complete an analysis of the universal earnings-related model and prepare a model for combined unemployment insurance. The Government will increase the conditionality of the labour market subsidy. The subsidy will be reduced to the level of basic social assistance if the person lacks national language skills. The index increase of benefits will be lower in the future.
“We are in favour of moderately enhancing the incentivising effect of unemployment benefits, but we believe that the scale of measures proposed in the Government Programme is excessive. The amount of the earnings-related allowance is already quite low at the average earnings level of highly-educated employees, and will be further reduced by the proposed staggering. At lower income levels, the proposed cut will dramatically reduce the difference between earnings-related security and basic social security”, says economist Heikki Taulu.
“Instead of staggering the benefit, we propose that a person’s employment history should affect the maximum duration of the earnings-related allowance such that persons with a shorter work history would be entitled to earnings-related allowance for a shorter time than those with a long work history. We believe that this model would treat unemployed persons in different situations more fairly. Moreover, it would not affect the level of earnings-related unemployment security”, Taulu says.
“Of the Government’s proposed measures affecting unemployment security, we support the linkage to earnings from prior work, an analysis of the linear model, and the introduction of a combined unemployment insurance system.
While from the perspective of employment targets and incentivisation, individual measures may be justified, their combined effect creates a risk of increased social problems, severe problems with income for the unemployed, and harder conditions for those already in a vulnerable position”, Taulu says.
The Government is also planning a reform of employment services. The Government will oblige the wellbeing services counties, municipalities and Kela to cooperate locally so that customers can receive the necessary services at the same local service point. Unemployment funds will be allowed to provide employment services to their members. Services offered by private and third sector providers will be used more broadly, and a pay subsidy reform will be carried out to allocate subsidies to the private and third sector. A model will be examined to support the hiring of people who have challenges finding employment.
“Based on this information, the proposals for employment services seem to be well-founded and we in Akava can, by and large, support them. Expanding the role of unemployment funds is something we have proposed ourselves”, Taulu says.
Using a universal credit model to reform social security
According to the Government Programme, the objective of the reform of basic social security is to create a single form of support, universal credit, which will taper against increasing income from work as linearly as possible. The criteria and grounds for being entitled to the basic benefit payment will vary depending on the claimant’s life situation. Claiming the benefit imposes obligations such as applying for jobs, accepting offered services, or fulfilling other specifically mentioned obligations.
The single basic security benefit will be introduced in stages by merging the criteria for determining the forms of support, taking into account the current state of central government finances. The Government will begin the harmonisation of benefits by creating a single application model for clients by the mid-term policy review session.
“Akava stresses the importance of improving the balance between rights and obligations while maintaining the means-testing and partial needs-testing for benefits. Working must always be economically rewarding, even if the share of social security decreases as earnings grow. We believe there are measures that would help to streamline the system, such as the partial combination of basic security benefits. In that sense, the Government’s reasons for the reform are acceptable,” says Katri Ojala, Senior Advisor.
That said, the Government has made rather drastic choices in its Programme with regard to combining basic security benefits. For example, the minimum levels of certain allowances will be harmonised, and increments based on the number of children, increases and exempt amounts will be eliminated. The Government has also outlined reforms of the general housing allowance and social assistance.
The outlined reforms, either separately or together, may have various ramifications. Any decision to combine benefits should only be taken after an appropriate service package has been outlined for the person, taking into account their current circumstances, and after a thorough impact assessment.
“To succeed, the overall reform of social security requires the support of well-functioning health and social services. The Government Programme has failed to adequately address this aspect. Attention should be paid to improving the coordination of services and benefits and to making services more effective and better targeted”, Ojala continues.
Half-baked regulations on occupational safety and health, wellbeing at work and ability to work
The Government aims to improve wellbeing at work and strengthen occupational health services. The Government further aims to halve sick leaves taken due to burn-out and work-related ill health in the next five years.
“Our key objective is to have new regulation in place regarding psychosocial strain. According to the Programme, the Government will enhance the management of employees’ psychosocial strain by clarifying and compiling the relevant rules and by intensifying cooperation between the workplace and occupational healthcare. It is our interpretation that this refers to regulations concerning strain”, says Lotta Savinko, Manager, Working Life Affairs.
“We consider the entries on intensified cooperation between the workplace and occupational healthcare and on promoting mental wellbeing, early support and treatment services to be a step in the right direction. Relevant measures include promoting access to short-term psychotherapy through occupational healthcare. The access of persons in remote, platform, short-term and temporary agency work to occupational healthcare services and the promotion of their wellbeing at work is also addressed. More detailed analyses must be launched quickly to enable us to take the necessary measures”, says Savinko.
The Government will promote occupational safety and the prevention of violence in working life, and, among other things, improve the legal protection of care and rescue personnel in work-related situations involving violence to correspond with the legal protection of public officials.
“This is a much-needed entry. Attention must be paid to ensuring the prevention of violence and the threat of violence and improvements in safety at work in all sectors and workplaces. Equally necessary are the entries on the early detection and good treatment of symptoms caused by indoor air problems and measures to develop support for those who have become ill due to indoor air. More severe punishments will be enforced for the exploitation of labour, and steps will be taken to combat labour exploitation related to immigration”, Savinko continues.
The Government will prepare a multi-year work ability programme, which will also include older people. The programme for working life and good mental health will be continued and the implementation of the national Development Programme for Work and Wellbeing at Work (TYÖ2030) will continue.
Entries on equality are a zero-sum game
According to the Government Programme, determined action will be taken to promote non-discrimination and equality in society and to eliminate discrimination in working life.
“According to the Programme, the Government will monitor the results of the family leave reform, continue to work for a more even distribution of family leave and promote the use of family leave by fathers. The new family leave scheme will weaken the parental allowance by abolishing the increased parental allowance for the first 16 working days of parental leave. It was intended as an incentive for male-dominated sectors and employers in male-dominated sectors. The family leave reform has been in effect for just 10 months and it is a shame that measures are already being taken to undermine it. At the same time, it will become more difficult to monitor the effects”, Savinko says.
“The costs of family leave are largely financed from the earned income insurance component of health insurance, but according to the Government Programme, ways to share the costs of parenthood between the employers of both parents more evenly will be explored. The existing system works well, and we fail to understand the need for a reform and what it aims to achieve”, Savinko continues.
“The Government proposes more effective measures to prevent discrimination based on pregnancy leave and family leave, but the Programme contains no concrete measures. In fact, now that a fixed-term employment contract of up to one year may be concluded without a specific reason, it will become even more difficult to address discrimination. Discrimination based on pregnancy is particularly common among those employed on a fixed-term contract”, Savinko notes.
The Government will promote pay transparency in accordance with the minimum provisions of the EU Directive. In other words, minimum requirements on employers will be enforced when the directive is transposed into national legislation.
“Overall, gender equality entries in the Government Programme’s lack ambition and leave many questions unanswered. The entries on working life and bargaining have a major effect on gender equality and equal pay”, Savinko says.
New Government is committed to raising skills levels and the RDI target
“The entries on education, training and skills in the Government Programme are largely positive. During negotiations, promises were made to not apply cuts to education. This was not entirely true, but from our perspective, the selected investments target the right areas: raising the level of education, RDI activities and strengthening basic skills”, says Emmi Venäläinen, Senior Advisor.
We will insist on adherence to the targeted RDI funding, which is 4% of GDP. The Government is committed to increasing public funding for RDI every year. Areas to which funding will be allocated include basic and applied research conducted at universities and universities of applied sciences. This is very positive news.
The new Government is committed to raising the level of education and increasing the intake of students in higher education institutions. Action will be taken to ensure that half of our young people complete a higher education degree. According to the Programme, new student places will be made available particularly in urban growth centres and sectors experiencing a significant labour shortage, but no numbers are mentioned. Similarly, no specific information is provided on how the new places will be funded.
“The Government aims to increase the proportion of first-time entrants to higher education and to reduce overlapping education. Exactly how it plans to do this remains unclear in the Government Programme. Possible measures could include limiting the right to study, growing the quota for first-time applicants, or more stringent financial steering. The strictest measure would be to introduce a tuition fee for the second degree programme. Akava does not support limiting the right to complete more than one degree or introducing tuitions”, Venäläinen underlines.
The Government plans to reform the system of providing support for learning and to ease the administrative burden on teaching staff. Additional 2-3 weekly hours will be made available in comprehensive school education for strengthening basic skills. Efforts will be made to foster children’s cultural rights by introducing quality criteria for early childhood education and care and for primary and lower secondary education.
“When it comes to continuous learning, the Government Programme sends mixed messages. While the Government recognises the lack of skilled labour, it offers very few measures to resolve the issue”, Venäläinen says.
Uncertainty about achievement of the carbon neutrality target, the role of competence in driving the green transition almost ignored
“The Government Programme does not fully support Finland’s ability to achieve the carbon neutrality target for 2035 as set out in the Climate Change Act. However, the climate section of the Government Programme is broadly in line with our policies for a green transition, which emphasise clean energy, including hydrogen, easier licensing processes, and RDI activities”, says Piia Rekilä, Head of Society and Community Affairs.
“With all major transformations in society, it is essential to ensure that the skills people have match the labour market’s demand”, Rekilä continues.
Promoting the immigration of skilled workforce while imposing stricter requirements on others
“The Government Programme recognises the shortage of skilled labour in our labour market. The Government will respond to this shortage by investing in international recruitment, training in workers’ countries of origin, recognition of foreign qualifications and promoting the learning of our national languages. The aim is to facilitate the return of Finns living abroad and improve the availability of English-language early childhood education”, says Miika Sahamies, Senior Advisor.
The move towards implementing full costing of tuition fees for non-EU and non-EEA students, i.e., substantially increasing them, is in stark contrast with the objective, even though the Government says it is considering the creation of a national scholarship system.
The Government is clearly tightening its immigration policy by increasing immigrants’ own responsibility for integration and by introducing obligations into the system. The conditions for obtaining a work-based residence permit will be tightened and additional requirements will be imposed for obtaining a permanent residence permit and citizenship. Humanitarian migration will also be subject to significantly stricter conditions.
“The overarching goal apparently is to have different social security and benefit systems for immigrants and those residing permanently in Finland, taking into account the constraints of the Constitution. It remains to be seen what the Government’s so-called ‘backstop’ for all these immigration policy objectives means in practice. According to the Government Programme, “In migration policy, Finland will comply with human rights and other international treaties, its obligations under EU legislation and the rule of law.”
Sahamies underlines that Akava supports a significant increase in immigration with equal treatment and non-discrimination of all people.
EU policy focuses on the economy and EU funding issues
“The key principles of the new Government Programme are broadly the same as those espoused by previous Finnish governments: Being proactive and constructive and pursuing a strong and well-functioning Union. The emphasis of the new Government is on the economy and EU funding issues. They would like to see the rules of the economic and monetary union revised with the objective of driving national reforms forward. Their aim is to eliminate the need to give aid packages to different countries, with the exception of Ukraine”, says Markus Penttinen, Head of International Affairs.
“The Government links the development of strategic competitiveness with the internal market and trade policy, and the Union’s role in promoting clean energy solutions. Increasingly, the Government wants to link the distribution of EU funds with the rule of law. According to the Government Programme, the Union’s budget priorities must be refocused on areas such as competence and research.”
“The Government wants to make the discussion of EU affairs in Finland more proactive, but fails to explain how it would engage Parliament and organisations in the process. The EU section of the Government Programme shares many of our objectives but Akava’s priorities are more equally divided between working life, competences, the economy and the green transition”, Penttinen continues.
Entries on the earnings-related pension scheme are partly off the mark
“The Government says it will prepare the earnings-related pension aspects on a tripartite basis with the principal labour market organisations. This is the basic premise that we have communicated to the Government as the joint position of the labour market organisations”, says Katri Ojala, Senior Advisor.
“However, we feel the Government Programme gets sidetracked when proposing that the pension scheme development should be made an element of general government finances. Decisions on the earnings-related pension system should be made first and foremost with the sustainability of the system and adequate pension cover in mind. The purpose of the pension system is not to support general government finances”, Ojala notes.
“To maintain trust in the intergenerational system and the promise of future pensions, responsible decision-making and balanced consideration of different stakeholders is needed. Trade union confederations are committed to engaging in negotiations and proposing the necessary measures to achieve the objectives of the earnings-related pension policy. It is essential that trade union confederations will be able to develop pension policy in the long term, taking into account the requirements of the earnings-related pension scheme itself”, Ojala says.
“It takes time to prepare things carefully and responsibly. Pension policy is something that requires a 50-year horizon, not half a government term. The shorter the time used to prepare the policy, the smaller the chances of comprehensive and justified reforms”, Ojala notes.
Strengthening the rule of law, investing in internal and external security
The Government emphasises the need to improve the operational capacity of internal and external security actors (Police, Emergency Response Centres, Customs, courts, Border Guard and Defence Forces) and to increase their resources and powers.
The Government promises to ensure that the Defence Forces have sufficient personnel and that the personnel are able to cope in the changed operating environment. What this means in practice remains unclear. The best way to ensure employees’ ability to cope at work and compliance with working hours regulation would be to implement a reform of the Act on the working hours of Defence Force civil servants.
The number of police officers will be increased towards Nordic levels, i.e., to 8,000, by the end of the electoral term, which translates into an increase in core funding of EUR 70 million per year. The Government wants to step up the fight against crime, relieve the police of duties that do not need to be handled by the police and introduce a police reserve.
From 2025 onwards, funding for the administration of justice will be increased by EUR 25 million per year, i.e., about half of the ‘crisis funding’ needed. Akava welcomes the promise to increase the number of permanent positions of judges and trainee judges. The Government aims to accelerate the civil procedure, the criminal procedure and the procedure for considering petitionary matters by streamlining judicial proceedings.
Sufficiency of resources for social and health services is a question mark
“The objectives set for the implementation of the health and social services reform are, by and large, commendable. It is our opinion in Akava that the focus of services should shift from reactive to proactive, and more attention should be paid to mental health problems among young people. Action must be taken to secure adequate human resources and appropriate skills. The Government wants to radically curb the growth of costs. It is in line with our objectives that wellbeing services counties will not have the right to levy taxes”, says Katri Ojala, Senior Advisor.
Text: Ritva Siikamäki
Photos: Liisa Takala