Management consulting firm puts forward ideas for securing Finland´s future

McKinsey and Company calls for "personal responsibility and better adaptability"

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The Finnish office of McKinsey & Company, one of the world's largest management consulting firms, presented a report on Monday on the challenges facing the Finnish economy, and on securing competitiveness through 2020.
      The recommendations crystallise into three key areas: Finnish overall output must grow by well over two per cent annually, between 230,000 and 290,000 new jobs need to be created in the next 13 years (which means a net increase of 100,000 jobs), and the rate of employment - the proportion of those with jobs among those of working age - needs to be raised to 75 per cent.
      The report was made at McKinsey's own initiative: it was not commissioned by anyone. Its key goals do not differ much from those of several other studies.
      The report was praised for its readability and clear presentation.
      In addition to advising decision makers, the report appeals to individual citizens. According to the report, societal change is not possible without a change in the attitudes and behaviour of ordinary people.
     
McKinsey bases its recommendations on a compact review of economic development in the past 15 years. After the recession of the 1990s the economy has grown by an average 3.5 per cent a year. The figure is positive on a European scale, but it has not significantly improved Finland's position in the pecking order of industrialised countries, where Finland was in 17th place in 1970, and in 15th place 34 years later.
      One reason for this is that the prices of Finland's two most important exports - paper and electronics - have declined, while that of energy - one of the main imports - has increased.
      The report says that growth in Finland has been fed by rapid developments in information and communications technology, the sharp increase in competitiveness in the private sector, and positive cyclical trends. In spite of these, the employment situation has not kept pace with economic growth.
     
The ageing of the population plays a strong role in the report. Another change that constantly affects everything is the continuity and expansion of international competition.
      From these starting points, the McKinsey consultants have developed a recipe of three parts seen as necessary guarantee the three per cent growth needed to sustain the welfare society.
     
Improved productivity needs to be sought above all in the public sector, in which there should be no increase in jobs. One way to boost efficiency would be to enact more municipal mergers.
      "Tough goals", said Vesa Vihriälä, Secretary-General of the Economic Council of Finland. He noted that the Ministry of Finance has estimated that the number of public sector jobs will grow by 170,000. Finland's public sector is seen as very efficient by international standards, and the reduction in municipalities has not been seen to have a clear correlation with growth in productivity.
      Lauri Ihalainen, chairman of the Central Organisation of Finnish Trade Unions (SAK), criticised the consultants' conception of productivity as "narrow". He also pointed to well-being at the work place as a factor that enhances productivity.
     
McKinsey calculates that about 100,000 jobs will disappear from industry, 80,000 from services, and 20,000 from primary production (agriculture). Nearly 30,000 new jobs need to be created in manufacturing, close to 150,000 in customer services, and 100,000 in industrial services. "The employment goals are quite ambitious", said Ihalainen.
      Increasing the rate of employment is another ambitious goal. According to the report, people's working lives should be increased from both ends, both by encouraging faster completion of studies, and by postponing retirement by at least two years.
      The goal is not impossible. The current rate of employment is about 70 per cent, and the 75 per cent level was exceeded just before the recession of the 1990s took hold.


Links:
  McKinsey website: Finland´s Economy - Achievements, Challenges, and Priorities

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