Helsinki (08.04.2004 – Juhani Artto) Estonia’s accession to the European Union on 1 May 2004 will have no significant impact on employment in the Finnish graphical industry. Thus conclude the three experts interviewed at the end of January by Kirjatyö, the magazine of the Media Union, which represents wage and salary earners in the graphical industry.
The substantial difference in average pay between Finland and Estonia will not mean the export of jobs and work in the graphical industry to the southern side of the Gulf of Finland. “Estonia still lacks the production capacity necessary to enable production of more demanding works,” argues Esa Honka, CEO of Hansaprint, one of the leading graphic media service providers in the Baltic Sea Region.
New rotation capacity
The pay differential alone is insufficient to tempt businesses to export production operations, as there is no corresponding difference in overall production costs. “The higher wages in Finland are balanced by much higher productivity at Finnish plants. Raw materials and capital costs are no higher in Finland than in Estonia.”
According to Honka, Estonia has little modern sheet printing capacity, and the first decisions to acquire commercial heatset rotation capacity were taken only recently. A few rotation machines capable of 16-page 4-colour printing have been ordered, however. Printall, Estonia’s largest printing plant with over 200 employees, is one undertaking that has taken this step.
“There is a steep learning curve to traverse before all of the features of this kind of rotation machine can be utilised. It will take years before the rotation skills of the Estonians become competitive in the Finnish market,” Honka reasons. He also believes that accession to the EU will increase pressure in Estonia to increase pay levels. “These will inevitably approach Finnish levels, and so the labour cost differential will shrink.”
Severe shortage of rotation printers in Moscow
There is some evidence of this already happening in Moscow. Over the last two years modern rotation printing machines have been installed, but this has resulted in a severe shortage of skilled rotation printers. According to Honka, competition for the most skilled labour has increased wages to a level to which Finnish printers are accustomed.
“No western enterprise has yet seen fit to invest in heatset print production in Russia,” the Hansaprint manager points out. Several western graphical industry enterprises have investment plans in Russia, but at least so far none of them has begun to implement its plans. “Also in Moscow the main problems concern the skills of the workforce. Few employees have both thorough schooling and long work experience.”
Little importation of Estonian graphical products
Over the last few years the main market for Estonian graphical product exports has been in Russia. Finland has clearly lagged behind Russia as a marketing area. The total value of Estonian printed products imported to Finland in 2001 was only EUR 5.9 million. Since then the volume of imports has been even smaller. In 2002 their total value was only EUR 2.3 million. Import statistics for the period from January to October 2003 show a small recovery. By contrast the total value of printed products exported from Finland to Estonia in January-October 2003 was EUR 4.1 million, which was slightly down on the previous year.
As an export market Estonia will remain small even after accession. The Estonian GNP related to purchasing power is only eleven per cent of the corresponding Finnish figure. There are no magazines in Estonia that can be classified as large by circulation and size.
The distance between Finland and Estonia has no decisive impact on their mutual competitiveness in one another’s home markets. According to Honka, the rule of thumb in such matters is that the export radius for graphical industry services is defined by two days of truck driving.
Exports by Finnish enterprises are currently hampered by rivals from Germany and its neighbouring region. To compensate for the weak domestic business cycle, these operators seek orders from new markets, including the Nordic countries and Russia, Honka explains. “The price level has sunk to a miserable level, as these companies are selling at the margins of their capacity. So far, however, they have not begun to compete in the Finnish market.”
Some small and medium-size businesses may decamp to Estonia
Pertti Lindroos, CEO of Graafinen Teollisuus ry – the graphical industry enterprises’ association – offers a similar analysis to Honka's. “Finnish enterprises have long sought for advantageous alternatives to their high production costs, but all exports of work have remained isolated cases”, Lindroos says. “For some reason enterprises have always shunned the alternatives.”
He considers it possible, however, that some Finnish small and medium-size enterprises may shift their production in part or entirely to Estonia. The impact of this on employment in Finland would nevertheless remain minor.
Lindroos stresses the limits of Estonian capacity. “If Estonia’s graphical industry were competitive in the Finnish market, then the Estonians would also succeed in other Baltic countries, and in Russia, Poland and markets to the west of Poland.” This would limit their influence in the Finnish market, Lindroos concludes.
Skilled workers enjoy pay levels set in wealthier nations
Timo Siivonen, a senior researcher at the Technical Research Centre of Finland – VTT, agrees with Honka on the point that pay levels rise as skills improve. “The latest statistics from Estonia indicate that real professionals in the IT industry are well aware of the salaries that they can command in wealthy countries, and they are able to frame their own pay claims accordingly.”
Siivonen believes that Estonian companies may prove more competitive than Finnish enterprises in making labour intensive products and products that are produced in small series. “Leading printers in Estonia earn EUR 1,200 per month,” Siivonen reports, referring to a new study. The competitive edge of Estonian enterprises has narrowed due to price cuts in the Finnish graphical industry. This downward trend is due to overcapacity.
There are no signs of Estonians seeking jobs in the Finnish graphical industry. It is probable that the situation will remain calm for the coming few years. There is an oversupply of Finnish labour and, unlike the construction industry, there is no low-pay labour market in the graphical industry.