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PM: Exports-led wages deal could pave way for tax cuts

Support for an export sector-led wage model could make it easier for government to introduce tax cuts, according to Prime Minister Juha Sipilä. The premier was responding to a unanimous decision by the country’s largest blue-collar union federation SAK to back the so-called "Finnish pay model".

Pääministeri Juha Sipilä Helsingissä Senaatintorilla 11. maaliskuuta.
Prime Minister Juha Sipilä at Helsinki's Senate Square. Image: Petteri Paalasmaa / AOP

Responding to the SAK's decision to agree to a model whereby national wages would be pegged to the export sector, Prime Minister Juha Sipilä said that the deal could make it easier for the administration to implement tax reductions.

"Certainly this 'Finnish model' gives us room to manoeuvre so that we can even talk about tax cuts," Sipilä commented.

Several of the SAK's member unions such as the service workers’ union PAM and the transport union AKT have rejected a separate deal to try and reduce labour costs in a bid to help make businesses more competitive. Sipilä said that he believed that the four outlier unions might still get on board.

"We will now take our time and go through what this actually means with the unions that are still wavering. I believe that we will also get more comprehensive support," the PM said, adding that he is even prepared to attend a board meeting to be held by PAM, the SAK’s largest member.

Rehn: More backing for social contract needed first

Economic Affairs Minister Olli Rehn was somewhat more specific as he commented on the current state of play. Rehn told Yle that last week’s partially-agreed labour market deal and the export-led pay model agreed Friday create good conditions for government to lower taxes.

"The implementation of the social contract and the stand on the 'Finnish model' mean that we can pull back effective legislated pay cuts. In addition to this it means that additional spending cuts outlined in the government programme can be withdrawn, in other words they will not be implemented," Rehn said.

However Rehn, who has been one of the government’s lead negotiators with labour market organisations, said an important prerequisite to tax relief would be more comprehensive support for the social contract, which aims to reduce employers’ labour costs.

"Unfortunately this [additional austerity] threatens areas such as child allowance, adult education funding, unemployment benefits, parental leave and spending on passenger ships. We would now be able to give them up because the social contract strengthens the competitiveness of Finnish work and production as well as the conditions for growth," the minister added.

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