The labour market in Finland is more flexible than its reputation27.12.2017

International comparison demonstrates that the rigidity of the Finnish labour market is exaggerated.

The universal nature of collective bargaining agreements limits basic rights. Collective bargaining agreements restrict agreements locally. Terminating employees is difficult. The agreement culture erodes companies’ ability to compete.

The lack of flexibility in the labour market and slow economic growth is often attributed to trade unions in public dialogue.

– The prejudices are not true. International comparison demonstrates that Finland has a rather flexible labour market when compared to the most central competing nations, says Heikki Kauppi, Chairman of the Federation of Professional and Managerial Staff (YTN).


Entering local agreements is widely possible

Increasing local agreements has been a hot topic over the past few years on the labour market.

– YTN’s collective bargaining agreements allow for many things to be agreed on locally. Working hours, for example, can be agreed on locally with quite a bit of flexibility. The problem usually is that there has been the lack of will or knowledge to exercise this option or it was not deemed necessary, Kauppi comments.

Rigidity can be looked at from many different perspectives. Kauppi uses terminating employees as an example, which is often seen as expensive and difficult.

However, an OECD indicator indicates that collective termination is easier in Finland than it is in Sweden and Germany.

– Terminating employees on financial or production-related grounds is particularly easy, which is even easier in Finland than it is in Great Britain or the United states.


More fixed-term workers than in Sweden or Germany

The Eurostat statistics reveal that regulation of fixed-term employment contracts is less strict in Finland than in OECD countries on average. Finland has more fixed-term workers than Germany and Denmark, but less than Sweden.

In turn, people work less on a part-time basis in Finland than the EU average.

– The turnover of the labour force is the third highest in Europe, after Denmark and Spain, Kauppi adds.


Europe’s most flexible working hours

Finland is at the top of all of Europe with flexible working hours arrangements. Finland is the country where it is the easiest to vary start and end times at work and use the accrued hours as holidays.

– Working hour practices are often even too flexible and endanger coping at work, some are even in violation of current laws. For example, a managerial employee often works two hours of overtime a week when estimating conservatively, which amounts to a hundred hours a year. The overtime compensation required by the Working Hours Act is only paid to one in four managerial employees, Kauppi estimates.

In one area, however, Finland is at the bottom of the list. According to the World Economic Forum (WEF) Global Competitiveness Report, Finland is the worst of 140 countries in flexibility of wage determination. WEF equates the rigidity of wage determination to centralised agreements. WEF believes that the more centralised agreeing on the terms of work, the more rigid wage determination is.

– This wouldn’t appear to be a very significant factor, however, as Germany and Sweden are ranked 132nd and 133rd in this area, Kauppi compares.

 Text: Aku Karjalainen