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Finland needs more labour market reforms, says chamber of commerce

The chamber called for a raft of reforms including easing collective bargaining and redundancy protection agreements and revamping the benefits system.

Siivoaja pesee kaapin ovia
Image: AOP

In a newly-published forecast, the Finland Chamber of Commerce said the country should implement further labour market reforms and other measures to safeguard the economy from the risks a new recession could pose.

In its outlook the Chamber offered several proposals to improve the labour market and help to cut unemployment, particularly among younger people, as well as for the long-term jobless and immigrants.

The lobby group's chief economist, Mauri Kotamäki, said Finland needs more reforms of collective bargaining and redundancy protection agreements as well as an overhaul of the social welfare system.

Mauri Kotamäki.
Mauri Kotamäki Image: Roni Rekomaa

"Now dark clouds have appeared on the horizon. There are many worrying concerns in the global economy and overall economic forecasts have been downgraded," Kotamäki said.

Kotamäki noted the proposed measures are not easy or pleasant, but rather politically weighty ones.

He said Finland needs to consider making changes to "local agreements, reforms to collective agreements redundancy protection measures, a reduction in tax gaps and a renewal of the social welfare system."

Germany, Denmark as role models

Kotamäki called for a more pro-active employment policy, as well. He noted that he would like to see the country's labour market develop along the lines of Germany or Denmark, whose governments have been actively tackling unemployment problems for years.

The outgoing administration of Prime Minister Juha Sipilä implemented several reform measures to boost employment over the past four years.

They included a so-called "competitiveness pact" which rolled back certain worker benefits such as vacation pay and lengthened the working year and covered an estimated 87 percent of workers in Finland.

Government also implemented a highly-controversial activation model aimed at getting unemployed jobseekers off the unemployment record and into work, training or entrepreneurship. At the end of last year, statistics showed that government had indeed reached its 72 percent employment target.

Unemployment still relatively high

But even so, Kotamäki said the employment rate is not what it should be, adding that labour market organisations haven't fulfilled their promises.

"If Finland was hit with a new recession, we'd be in trouble. There's not much wiggle room in the public finances and many structural reforms have not been carried out," he remarked.

However, some positive economic progress has been achieved in recent years, which in turn has helped to reduce unemployment. But in its forecast, the Chamber said that Finland's jobless rate is still high compared to international levels.

"The average unemployment rate over the past three decades has far exceeded nine percent, in other words unbelievably high in international comparisons. This statistical fact shows that the domestic job market is not working properly," Kotamäki said.

He said Finland's recent economic development has been favourable but that it was largely due to global improvements.

Last week the finance ministry upgraded its GDP growth forecast to 1.7 percent this year, saying economic activity would be driven by domestic demand. But the ministry's outlook was not as bright further down the line; the projection is for annual growth of less than 1.5 percent next year. In three or four years, the ministry said it expected that economic growth would drop below one percent per year.

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