According to Finnish central bankers, a longer working week would also strengthen exports. The recommendations were first outlined in an internal memo circulated within the bank in January. The contents of the memo were first revealed Friday in the daily Helsingin Sanomat.
The officials noted that the savings earned by paying workers the same salaries for more work would allow employers to hire more staff. As a result the economy would grow, competitiveness would improve and exports would take off, the document noted.
The memo outlined a situation in which a working year would lengthen, while salaries remained unchanged, as a result reducing average wages. The memo noted that this would bring down the cost of labour for employers, in theory allowing them to hire additional workers.
The bank’s estimates are based on the assumption that employees’ annual working hours would increase by 6 percent by the end of 2017, compared to working hours at the end of 2014. According to these calculations the average work week would increase from 37.5 to 40 hours.
Bank officials believe that longer work weeks would accelerate economic output by 1.2 percentage points annually until the year 2021, on top of the bank’s standing growth estimates. In currency terms, GDP would exceed 11 billion euros by 2021.
Central bank: Salaries would eventually have to catch up
The bank memo envisions long term effects from employees working longer hours for what would essentially be less pay. Officials say that this would also have the effect of kick-starting production and before long investments would also increase, ordinary citizens would spend more and unemployment would decline as employers find themselves able to hire more. This would also have a positive knock-on effect on public finances.
However the memo does mention that salaries would have to rise at some point, once more biting into competitiveness, and slowing exports.
The estimates don’t specifically look at public finances and the writers of the memo stress that the document adopts no specific position on whether or not working hours should be lengthened.
Sipilä government pushing hard for productivity-boosting social accord
The idea of a longer work week without additional pay was floated by Prime Minister Juha Sipilä as a possible element of a social contract between labour and private sector business representatives. The ultimate goal of the accord is the restoration of economic growth through improved business competitiveness.
The government has ruffled the feathers of the labour movement more than a few times in its efforts to push through its economy-boosting social accord. Talks aimed at reaching an agreement on ways to boost productivity have previously stumbled on the question of longer working hours.
Meanwhile tensions between labour organisations and the administration have heightened over reports of a secret government manifesto to bring the labour movement to its knees. Prime Minister Juha Sipilä has strenuously denied the existence of such measures.
Most recently, unions were up in arms over what they say is an unconstitutional proposal to give local employer groups the power to define the terms for discharging workers. Currently employers must cite legal grounds for firing their workers.