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Think-tank: Jobs remain unfilled because pay is too low

Pellervo Economic Research (PTT) predicts the Finnish economy will expand by 2.8 percent this year and next, and that interest rates, too, will rise.

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The global economy is now seeing the first simultaneous upswing since the financial crisis of 2007-08, the PTT notes. Image: Henrietta Hassinen / Yle

The think-tank Pellervo Economic Research (PTT) dismisses talk that growth is being held back by a labour shortage.

In a forecast released on Tuesday, it predicts that the government’s target of 72 percent employment will be met in 2019, with the employment rate set to climb to 72.5 percent.

The institute says that strong economic growth is spurring job creation in Finland, noting that worker rolls grew by 25,000 last year. It expects this pace to pick up, with more than 50,000 people joining the workforce this year, and about 35,000 next year.

PTT was co-founded by the farmers’ union MTK, which in turn has traditional ties to Prime Minister Juha Sipilä’s Centre Party.

Yle reported in early March that companies are now offering employees permanent contracts more quickly than in the past, driven by tighter competition for skilled workers. The number of people with permanent full-time jobs finally began a clear rise late last year.

No general labour shortage – yet

PTT says that the unemployment rate has declined slowly because a wave of new, active jobseekers has appeared on the labour market. The rapid growth in the workforce indicates that people are ready to enter the labour market if there are jobs available.

Although there are some shortages of skilled labour for specific fields or tasks, the PTT says there is no general labour shortage that would slow growth.

According to the PTT, the number of unfilled jobs is partly a result of firms trying to fill them by offering salaries that are too low. Any shortage of workers is “quite limited,” it says.

The prognosis cites OECD figures suggesting that in 2015 education 23 percent of employees in Finland were working in fields unrelated to their education, while 28 percent held jobs that were not commensurate with their educational level. At the end of last year, 5.6 percent of workers were underemployed, the report says.

Trade war on the horizon?

The global economy is now seeing the first simultaneous upswing since the financial crisis of 2007-08, the PTT notes.

According to the institute, Finland will see economic growth of 2.8 percent this year and in 2019. However, a possible trade war would scupper this positive economic development, it warns. According to the forecast, the biggest threats to the global economy come from the US, where the Trump administration is threatening trade war.

As the PTT sees it, individual import tariffs would primarily hurt the US, but a spiral of counter-measures could halt the worldwide upswing.

“The EU should not start raising its own tariffs. It would be more sensible to let the US stew by itself and to continue developing international trade with other countries,” says PTT’s head of forecasting, Janne Huovari.

Rates poised to rise

Short-term Euribor interest rates will rise this year, the PTT predicts. Long-term rates have already gone up within the eurozone. The European Central Bank (ECB) can be expected to make its first hike in key interest rates early 2019, says the think-tank, pointing out that in most eurozone countries, the recovery is still in its early stages.

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