Helsinki (20.04.1998 - UP/Kari Leppänen*) The Finnish labour market has moved into the era of EMU and of EMU incomes policy agreements, says Timo Kauppinen, research director of the Dublin-based European Foundation for the Improvement of Living and Working Conditions.

Kauppinen claims that a clear qualitative change began with the 1995 incomes policy agreement. The new direction was confirmed by the December 1997 incomes policy settlement.

"The essential difference with the past is that Finland clearly adapted to economic policy goals which were defined outside of the country, i.e. in the EMU criteria."

Kauppinen emphasises that the framework for the 1995 incomes policy settlement was already obtained directly from EMU convergence criteria. The aims were low inflation and interest rates coupled with a healthy national economy. The latter was defined in terms of two goals: the deficit had to be less than three per cent and the State debt was not to exceed 60 per cent of GNP. Moreover, currency devaluation was no longer to be allowed as a means of restoring price competitiveness.

"These criteria are goals of general economic policy and the national economy must adapt to them."

There are various mechanisms available.

"In Finland these pressures create a spirit of national unity. The Finns adapt to such pressures by means of a concerted labour market settlement."

Kauppinen observes that even in past labour market settlements the parties made allowances for the surrounding world, seeking to safeguard price competitiveness and operating conditions for the export sector. However, problems of internal policy such as industrial disputes, wage drift and runaway inflation tended to negate these efforts.

"Devaluation was always used to correct the situation. Now it can no longer be used, which means that the economy must be managed with greater precision than before."

The parties have responded to external pressures by means of concerted labour market settlements, but such unity has also been accompanied by internal disintegration. Local negotiations have become much more common.

"Local agreements had to be made in the early 1990s because of the need to survive the recession and preserve jobs."

Local agreement has subsequently been approved in national agreements. Almost all collective agreements made in the 1990s authorise local agreements, especially in respect of working hours and timetabling.

"The engineering industry showed the direction and soon authority to negotiate and agree locally spread to practically all agreements."

Kauppinen believes that this trend will continue. The scope for local agreement is encroaching onto wage and salary issues as well as into other conditions of employment.

He feels that national agreements and labour market organisations will preserve their significance, even though local agreement will become more common and the general goals of economic and labour market policy will be formulated abroad. Decision-making power has not slipped away from organisations at national level.

"Agreement on frameworks and general guidelines is still possible at national level. National agreements are needed, especially in order to achieve the general objectives of economic policy."

Neither does Kauppinen believe in cooling down the income distribution struggle, although the margins of the wage and salary settlements will become narrower.

"If the economy is sound, there will also be room for an internal income distribution struggle. One can always ask how incomes are distributed between labour and capital and between earners."

Kauppinen assumes that organisations have not lost their influence, even though labour market policy has in many respects been adapted to the general goals of economic policy.

"Radical structural change will continue and strong lobbying organisations will also be needed in future to defend the rights of various interest groups. In spite of all this, democratic modes of influencing development will remain."

Almost all EU countries are suffering from high unemployment while trying to adapt to the EMU criteria. Different countries have sought solutions moving in similar directions. Kauppinen feels that concerted structures are making a comeback as one alternative among labour market policy approaches.

"In many countries the social partners have responded with employment agreements. This has been done, for instance, in Ireland, Spain, Portugal and Italy. In Germany and Belgium such efforts were made but were not successful."

New, EU level structures are emerging above the national decision-making level. The Maastricht and Amsterdam agreements opened up opportunities for labour market organisations to negotiate at European level about issues pertaining to working life. The employers are represented by Unice, and the employees by the European Trade Union Confederation ETUC.

Now the parties are beginning to negotiate about fixed-term labour relations. The employers have refused to negotiate about hearing the employees at national level.

The organisations already participated in the 1995 talks pertaining to an EU directive on works councils. After this, they agreed on part-time work and parental leave.

Weak though they still are at present, Kauppinen believes that the European-level structures will get stronger as time goes by.

"The role of the organisations is strengthening. As the social dialogue has now begun, its sudden end would be surprising."

According to Kauppinen, the EU Commission would prefer issues pertaining to working life to be agreed upon between the social partners.

"The Commission needs organisations at EU-level to support its own decision-making. It is much easier to discuss with organisations than with everyone separately."

* Kari Leppänen is a journalist working for the independent Finnish news service Uutispalvelu (UP). Kauppinen's interview was originally made for seven trade union magazines in Finland.