The reduction of the social security contributions is an attempt by the Government to lower the labour costs of businesses and, thereby, to improve their competitiveness. The Government expects the unit labour costs of businesses to consequently decline by five per cent.
Unit labour costs are calculated by dividing total labour costs by real output.
Uusitalo, who serves as the chairperson of the Economic Policy Council, believes a key question is be what will be the outcome of the changes in the terms and conditions of employment proposed by the Government. The changes in the terms and conditions of employment will, either directly or indirectly, translate to a decline in wages.
“Trade unions will probably seek to compensate for the changes in the terms and conditions with wage hikes. The outcome may consequently be that labour costs don't fall and competitiveness doesn't improve by as much as expected by the Government,” Uusitalo reminds.
Improving competitiveness is only a temporary cure for the ills of Finland.
It is of utmost importance to improve the productivity of labour in the long term, which is neither in the hands of the Government nor those of trade unions. The productivity of labour typically improves as a result of new innovations, business ideas and more effective operational methods.
“The Government ultimately has only few means at its disposal to encourage economic growth, because no edict can generate economic growth in a market economy,” explains Uusitalo.
The productivity of labour is calculated by dividing the gross domestic product, or the value of finished products and services, by the number of hours worked.
Petri Sajari – HS
Aleksi Teivainen – HT
© HELSINGIN SANOMAT
Photo: Rio Gandara / HS