Finland seeks to cut labour costs

GMT 19:37 2015 Monday ,03 August

Arab Today, arab today Finland seeks to cut labour costs

Finland's Prime Minister Juha Sipila
Helsinki - AFP

Finland's centre-right government announced on Monday plans to cut the cost of labour by five percent to boost competitiveness and revive Finland's slumping economy.

"The goal is to improve competitiveness by reducing unit labour costs by five percent and to improve employee security" in dismissal situations, Prime Minister Juha Sipila said at a press conference.

Unit labour cost is an economic indicator used by the Organisation for Economic Cooperation and Development (OECD), and it measures the average cost of labour per unit of output.

Sipila's pro-austerity government summoned Finland's major labour unions to negotiate the measures needed to achieve the intended five-percent cut, as a possible deal could include cutting back employees' holidays and extending working hours without compensation.

Sipila said the harsh measures were necessary as Finland was "in the midst of one of the weakest periods of its economic history."

Sipila also warned the Nordic eurozone member's competitiveness had slumped to a level where it was "up to 15 percent lower than that of key competing countries", such as Sweden and Germany.

But in order to achieve the leap, the government still needs to convince the reluctant labour unions to participate in the deal it has dubbed a "Social Contract".

Finland has a four-decade long tradition of forging tripartite compromises, in which employers' organisations, labour unions and the government sit down to agree on taxes, wages and other conditions such as working hours.

Sipila said the government would not dictate the measures to be taken, and has asked the unions to come up with their own proposals.

Yet the unions and opposition parties have accused Sipila of blackmailing them, as he has threatened to push through 1.5 billion euros ($1.65 billion) worth of spending cuts and tax increases if the unions fail to reach an agreement.

Sipila said he expected to set the goals and a schedule for the reforms by August 21.

Finland was long a top performer in the eurozone, but it has failed to adapt to a rapidly changing economic climate. In 2014 it suffered a year of economic stagnation after two years of recession.

"The Greek way cannot be our way. I don't want Finland ever to be in the same situation in which Greece is now," Finance Minister Alexander Stubb said at the press conference.

In recent years two main pillars of the Finnish economy, the forestry sector and technology industry led by one-time giant Nokia, have shrunk dramatically. At the same time two of Finland's biggest trading partners, Russia and the eurozone, are slogging through their own economic woes.


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