Helsinki (02.07.2019 - Heikki Jokinen) Pay differences in Finland are smaller than in most other countries in Europe, according to a new study conducted by the Labour Institute for Economic Research. The average wage and salary earners monthly income in 2015 was 3,386 euro in Finland.
The study compared pay inequality in 32 European countries. In Finland, full-time wage and salary earners in the highest income decile were paid an average of 2.73 times more than those in the lowest income decile. In Denmark the figure (2.52) was below Finland and in Sweden higher, 3.12.
These are, internationally speaking, relatively low figure. In Estonia, for example, the best paid decile of wage and salary earners got 5.05 times more than the lowest decile.
The Gini coefficient offers the same kind of results. According to the study, pay differences measured according to the Gini ratio that were smaller than in Finland were to be found only in Slovakia, Belgium, Denmark and Romania. The biggest pay differences were to be found in Bulgaria, Portugal, Estonia, Cyprus and the UK.
The share of low-paid workers in Finland was the fourth lowest in Europe, at 11.6 per cent. Low-paid is someone receiving less than two-thirds of the full-time wage and salary earners median pay.
The share was even smaller in Romania, Belgium and Slovakia. The minimum salary has been growing in Romania 216.7 per cent in 2010 - 2018 and this may explain the good position of the country in this index, the report suggests.
Estonia, Luxembourg and Lithuania had the largest share of low-paid workers, between 26 and 28 percent of full time wage and salary earners.
The disparity in incomes is linked to minimum salaries, trade union density and coverage of collective agreements, the report says.
Finland, as well as the other Nordic countries, are examples of countries where wage differences are relatively small in global comparison. "The coverage of collective agreements is broad, the union density is high and wage and salary formation is coordinated," is how the report analyses the situation in the Nordic countries.
In many European countries the development has been recently going, however, in the opposite direction. "The bargaining systems have developed in a more decentralised direction and, simultaneously, the coverage of collective agreements has decreased. This has increased wage disparity in many EU countries."
"In countries with the highest pay disparity such as the Baltic countries and the UK wage and salaries are agreed mainly at company level and the coverage of collective agreements is low."
Average pay 3,386 euro a month
The average full-time wage and salary earners monthly income in 2015 was 3,386 euro in Finland. The EU average was 2,116 euro and in the Euro countries 2,323 euro.
Seven countries of the 32 included in the study had higher pay than in Finland, with Switzerland, Norway and Denmark at the top. Swedish salaries were the same as in Finland, 3,386 euro a month. In Finland’s southern neighbour Estonia the average pay was 1,117 euro a month.
Price levels in Finland are high too, however. When the average incomes are adjusted in relation to purchasing power, Finland slides from eight to tenth position. Austria and Germany ranks ahead of Finland in terms of purchasing power and Sweden falls behind it.
The report by Merja Kauhanen and Olli-Matti Laine was published in June 2019 and it focuses on the Finnish income level in the European comparison. The statistics used are the latest available, mainly from 2015.
The Labour Institute for Economic Research is an independent and non-profit research organisation founded in 1971. Funding comes mainly from the trade union movement.