Finland - Industrial Relations

Industrial relations

Although trade unionization had started somewhat later in Finland than it had throughout the rest of the continent, in the 1980s the country's workers and employers were the most highly organized in Western Europe. According to the Ministry of Labor, about 80 percent of the work force belonged to unions, although the rate varied significantly among industries. Employers' federations also represented most enterprises.

Conflict between labor and management was fierce during the interwar years because tensions resulting from the civil war had soured industrial relations. Labor-management collaboration improved in 1940 when the Central Organization of Finnish Trade Unions (Suomen Ammattiyhdistysten Keskusliitto--SAK) and the Confederation of Finnish Employers (Suomen Ty�nantajain Keskusliitto--STK) recognized each other and agreed to cooperate during the national emergency. Industrial relations languished immediately after World War II, however, in part because government regulations tied wages to the cost-of-living index. Despite a general strike in 1956, occasioned by conflicts of interest among farmers, workers, and management, a spirit of compromise gradually developed in the late 1950s and early 1960s.

Finland's industrial relations took an important turn for the better in 1968, when a system of centralized incomes agreements was instigated by the government, which hoped to curb inflation and improve competitiveness after a major currency devaluation. After that date, regular negotiations, involving the government, labor, and employers, led to central agreements on wages, benefits, work conditions, and social policy. Negotiations usually started in the fall and ended in March. Senior civil servants acted as mediators between labor and management. The government often offered concessions, such as tax reductions, longer vacations, or reduced employer social security contributions, in exchange for wage restraint or increased investment. The central agreement among the national federations was not binding on individual unions. In practice, however, the central agreement provided guidelines for contracts made between unions and employers or, if necessary, between workers and management at individual factories. Contracts affecting civil servants and professionals were usually negotiated after settlements in industry, as were settlements concerning prices paid for agricultural commodities and lumber. In this way, wages in private enterprises exposed to international competition influenced the protected sectors of the economy.

Many observers feared renewed labor conflict during the 1980s as slower growth, stiff foreign competition, and austerity policies put pressures on the negotiation process. Strikes did occur, mostly during the spring negotiation season. In 1986, for example, unions representing salaried employees, technicians, and professional personnel accepted the central agreement, but SAK held out for shortened work hours. When the STK demanded greater flexibility in setting work schedules in exchange for the proposed reduction in work time, SAK responded with the first general strike since 1956. As a result, SAK gained a larger wage increase than the other federations and a provision that by 1990 would reduce the work week in industry to 37.5 hours. Moreover, a number of local unions refused to follow the central agreement, preferring to negotiate on their own.

In 1988 the government was unable to implement a national agreement, largely because of opposition from employers. Unions and employers reached agreements industry by industry, generally following the settlement reached in the paper industry. In this industry, blue-collar workers had achieved wage increases of about 4 percent for the first year of their two-year agreement, while white-collar workers had received higher raises; the parties had agreed to delay negotiations for the second year. Although its proposals had been rejected, the government still intervened in the negotiation process by introducing legislation on retraining programs, security against dismissal, and worker representation on company boards. The fact that important service branches, such as banking, insurance, and trade, had opted for multiyear agreements in which wage increases were to be negotiated a year at a time, further indicated that the centralized negotiation process was becoming fragmented. Despite these apparent setbacks, most Finns supported an incomes policy as a way to restrain wages, thereby protecting real earnings.

Despite widespread consensus on incomes policy, Finland continued to experience more strikes and lockouts than other Nordic states. In principle, Finnish legislation blocked strike actions during periods governed by incomes agreements. Moreover, according to the law regulating strikes, unions were required to give two weeks' notice to both employers and the state before initiating a strike, and the government could delay a strike and could require mediation. Despite these controls, illegal work stoppages occurred regularly, often involving small, but wellplaced , groups of workers. In 1986, for example, air traffic controllers shut down the Helsinki airport for two weeks. The number of strikes had declined, however, after 1984, when the central incomes agreement had included a ninefold increase in the fines for illegal strikes.

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Industrial relations in Finland: background summary