NEWS ANALYSIS: Thursday will tell what pay hikes are to come

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By Marjo Ollikainen
     
      Will everyone get pay hikes and tax cuts next year? According to information acquired by Helsingin Sanomat, some kind of answer to this question should come on Thursday.
      The central organisations of labour and management are negotiating on a new labour market solution at the request of the government. They want to get it ready before Friday when the current contracts of the technology industry expire, putting the most important export sector of Finland into a state of no contract, opening the doors to industrial action.
     
The aim on Thursday is to put forward a labour market contract of about two years, with an agreement on guidelines for pay increases as well as a few measures to improve the quality of working life, including a promise by the government for cuts in income tax.
      Before this is achieved, the federations would have to agree on pay hikes and the government needs to agree on tax cuts.
      A group of five leaders of labour union confederations and employers’ organisations last met for talks on Monday. So far progress has mainly been made in qualitative matters, and this only concerns certain headings in the text.
     
Issues that have been put forward have included questions of unemployment security, parental leave for fathers, untypical jobs, and short term labour contracts. If solutions are reached in all of these matters in the next three days, the outcome of the talks will be brought before the labour unions.
     
The central organisations agree only on the framework for pay hikes, and the unions of the different sectors are to agree in their own negotiations on whether or not to accept them.
      But even that is not enough. The employers’ side wants all sectors, in practice, to be involved in the centralised contract, because the upcoming winter is expected to be a period of tense incomes negotiations.
     
So what kinds of pay hikes are to be expected? They certainly should be moderate.
      A couple of weeks ago, income earners of various sectors of the technology industry called for increases of four per cent for next year.
      To avert strikes in the sectors, the employers’ side, represented by the Confederation of Finnish Industry (EK), agreed to hold pay talks at the central organisation level [and not with individual unions]. Consequently pay rises will not be anywhere near four per cent.
     
But what about that tax cut? Martti Hetemäki, undersecretary of state at the Ministry of Finance, has calculated that a one-point cut in income taxes would boost buying power by the same amount as a four per cent pay hike. This would cost the state an estimated EUR 800 million.
      Next year the state plans to cut municipal subsidies by EUR 631 million, so how is it supposed to pay for income tax cuts? Therefore a one percentage point tax cut is unlikely.
     
Another big question mark is what the government has agreed to offer in return for moderation in pay hikes.
      Prime Minister Jyrki Katainen of the main government party, the National Coalition Party, has promised to bring a tax cut to the labour market negotiating table. But has the government itself actually negotiated on the matter. What do the Social Democrats have say about it? And what about the Left Alliance? The taxation question almost caused their cooperation with the National Coalition Party to crumble in the government formation talks.
      So it is still a long, long road to Thursday.
     
Helsingin Sanomat / First published in print 27.9.2011


Previously in HS International Edition:
  Labour unions lash out against Sailas proposal for moratorium on pay hikes (26.9.2011)
  Draft budget raises many already high taxes (16.9.2011)
  New government programme taxes high incomes more heavily than before (20.6.2011)

MARJO OLLIKAINEN / Helsingin Sanomat
marjo.ollikainen@hs.fi