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Union: Employers pocketed nearly €6bn from competitiveness pact

One union chief says workers have done their share to improve national competitiveness, unlike employers.

Metallityöntekijä työssään.
Image: Ville Välimäki / Yle

As a previous government’s competitiveness-boosting deal casts a shadow over present-day collective bargaining agreements a labour union study claims that employers the measure has benefitted employers to the tune of nearly six billion euros.

One still-contested aspect of the Juha Sipilä government’s competitiveness pact requires workers to put in an additional 24 hours of effort annually without compensation. Unions are currently pushing to have the measure rolled back, arguing that economic conditions have improved and it is no longer required.

However another facet of the tripartite deal involving the then-government, unions and employer organisations involved shifting more of the burden for paying pensions, social security and unemployment contributions from employers to workers.

According to the Confederation of Salaried Employees, STTK, while little has been said about the latter measure, it has also disproportionately benefitted employers.

"It has represented an annual transfer of billions of euros from workers to employers. It certainly has played a significant role in improving competitiveness," said confederation chair Antti Palola.

The 2016 deal brokered by the government of the day and labour market organisations would have left wage-earners with less cash in hand, so the government agreed to ease income taxes between 2017 and 2019. However that period of tax relief ended when income taxes inched up again in 2020, according to the Taxpayers’ Association.

The STTK calculated that the net benefit to both public and private sector employers of the social contributions transfer amounted to 5.8 billion euros between 2017 and 2020. The union said the measure resulted in a 2.6-perentage-point decline in payroll costs for employers.

Business lobby: Significant benefits for industry

Employer representatives have acknowledged that the initiative amounted to a significant benefit.

"This was an effective measure and that was the intention. More than half of the benefit of the competitiveness pact came from the re-allocation of social security contributions," observed Vesa Rantahalvari of the business-backed Confederation of Finnish Industries, EK.

STTK’s Palola pointed out that forcing workers to shoulder a higher burden for social contributions was a measure that even affected sectors that were not part of the competitiveness pact, such as construction and transportation.

"All workers felt the pinch in their pockets," he added.

The union head said that it was more difficult to measure the financial impact of the additional 24 annual working hours, because it was not uniformly implemented. The goal of that measure was to cut payroll costs by 1.4 billion euros annually, but it was not fully accomplished.

"The competitiveness pact aimed to reduce the unit cost of labour by five percent. It didn’t quite get there, but major changes were introduced that resulted in improved competitiveness and employment," the business lobby’s Rantahalvari commented.

Workers' higher social contributions here to stay

Despite what the numbers say, the issue of workers’ increased social contributions is not up for discussion during ongoing collective bargaining talks.

"The legislation on this is permanent, so there is nothing unclear about it. Employers’ [social] contributions were permanently cut by 2.63 percentage points," Rantahalvari added.

This means that workers will continue to pay higher social contributions as agreed in the 2016 pact, while employers will continue to benefit from lower payroll costs.

"People probably see social contributions as a kind of tax so the symbolism is not as strong. Uncompensated longer working hours are symbolically more significant and more acute for the people affected by it," Palola speculated.

"Since it has been permanently enacted, the idea is to continue with it. There is still a difference with competitor countries in terms of unit labour costs, so there is still some catching up to do," Rantahalvari pointed out.

Union head: Business community still to follow through

The Sipilä government wanted to improve national competitiveness by 15 percent. Five percent was meant to come from the re-allocation of social contributions and the addition of 24 unpaid hours of work annually. In addition, public sector workers had vacation pay reduced, a measure that ended in 2019.

Another five percent improvement would have come from moderate pay rises and the final five percent from business productivity and improved efficiency.

According to the STTK, while workers contributed their fare share to meeting these goals, employers have not done the same.

"We’ve been left with the impression that the third jump fell short. The first two leaps were taken care of, in other words there was an internal devaluation by reducing the cost of Finnish work and implementing moderate pay increases. The third was not achieved and that involved the business community’s own measures to improve productivity and increase jobs," Palola declared.

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