COMMENTARY: Companies entering wage talks to pay for Katainen gaffe

Municipalities point the way as government raises inflationary pressure

Jyrki Katainen

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By Jarmo Aaltonen
     
      The pre-election promise blurted out by Minister of Finance Jyrki Katainen (Nat. Coalition Party) for big pay hikes for nurses is boomeranging back onto the table of the money minister.
      Although the difficult round of wage negotiations with municipal workers has been seen in public largely as a context involving the state, local authorities, and their labour unions, the generosity of Markku Jalonen (Nat. Coalition Party), the new leader of the Local Authority Employers in Finland, has undoubtedly been watched in horror at the bastion of the private employers, the Confederation of Finnish Industry (EK), in Helsinki’s Eteläranta.
      The bill may trickle down from the municipal table to be paid by the corporations.
     
The chemical and forest industries managed to reach agreement on terms of employment already before the summer holiday period, but already now, workers in the sectors appear to have feelings of regret. There are still plenty on the private side that remain open, who would prefer to take as their point of comparison the pay hikes of 11-12 per cent in the municipal contracts, rather than the 8-9 per cent contracts of the chemical and technology industries.
      Those still without a contract include office employees of the manufacturing and construction industries, the energy sector, commerce, hotels, building maintenance services, sawmills, paper refining, and the post - or Itella, as it is now called.
      Next spring could be even more difficult, because that is when negotiations for contracts are scheduled for paper and construction workers, road transport, harbour stevedores, navigation, and Finnair pilots.
     
The Federation of Finnish Technology Industries, which scrapped a broad-based incomes agreement, rejoiced already in the summer, when it showed the way for dispersing pay agreements to individual companies.
      The employers’ organisation broke the long-standing solidarity policy of the Finnish Metalworkers’ Union by pushing through what amounted to pay hikes that were determined purely on a percentage basis, for all practical purposes - a move which increases pay differentials. The incentive for local contracts is a model in which the percentage of the pay increase varies according to whether or not agreement is reached at work places on how the local money is distributed.
      For instance, this year management and labour in different companies can divide a one per cent increase within each company in any way that they choose to negotiate. If they cannot reach agreement, the employees will get an increase of just 0.7 per cent.
      There are already rumours that bosses in large companies have instructed their representatives to cut through the talk and to pay according to the lower percentage.
     
Prime Minister Matti Vanhanen (Centre) warned in Parliament last week that pay deals that exceed growth in productivity spur inflation. At the same time, the country’s government is spurring the weakening of the value of money so that many believe that the inflation rate next year will be a figure beginning with a three.
      Municipal personnel costs of about EUR 17 billion are increasing by a couple of billion thanks to pay agreements blessed by the centre-right government, which is likely to lead to outsourcing of services and/or higher municipal taxes in communities dominated by the Centre Party. Along with inflation, these will also eat away at pay increases.
      According to wise economists, companies in the open sector need to be leaders in pay levels in a country that is dependent on exports. Now the pay leader is the municipal sector, just as it was before the recession at the end of the 1980s and beginning of the 1990s. Then, as well, nurses were the ones clamouring for the highest increases.
     
Helsingin Sanomat / First published in print 24.9.2007


Previously in HS International Edition:
  White collar union leader wants more flexibility in municipal pay levels (24.9.2007)
  Labour leader hopes for good cooperation with new government (30.3.2007)

JARMO AALTONEN / Helsingin Sanomat
jarmo.aaltonen@hs.fi