Labor market | Documents seen by HS: Unions' backlash could eat up the benefits of local bargaining

The government the proposal to add locally agreed working conditions cannot be shown to have direct employment or economic-improving effects, according to preparatory documents obtained by Helsingin Sanomat.

Increasing local bargaining is one of the government's central working life changes. The presentation has been outlined in a tripartite working group, and it is planned to go out for comment during February. The government's final proposal will probably arrive in parliament in June.

HS has received the current draft of the presentation and the draft of the impact assessments. Some points can still be clarified and changed during the preparation.

Presentation would change several labor laws that regulate at what level and who can agree on the rules of the game in workplaces.

About 90 percent of Finnish wage earners work in a position that complies with a collective agreement in some field. It is usually concluded between the employer and employee union. Collective agreements define, for example, practices related to salary, working hours, holidays and family leave.

With collective agreements, it is possible to deviate from several regulations of the working life legislation. On the other hand, the provisions of the collective agreement can also be deviated from by local agreements made at workplaces. So far, this has required that it is a national collective agreement and that the employing company belongs to an employers' association.

The government the presentation proposes to expand the possibilities of agreement so that in the future deviations would also be possible in company-specific collective agreements and unorganized companies, i.e. companies that do not belong to an employer's union.

In addition, the Collective Agreement Act is proposed to be amended so that the local agreement could be concluded at workplaces not only by a shop steward belonging to the union, but also by a shop steward chosen by the staff. It could alternatively be done by the entire staff when there is no staff representative required by the collective agreement and the collective agreement has not agreed on how to proceed in the absence of a staff representative.

The legal changes affect an estimated 500,000–700,000 wage earners. The changes presented in the draft received by HS would only apply to the private sector. However, according to HS's information, the working group has considered, at the request of the state labor market institution, whether the section could be applied to at least some of the state employees.

In the ministry according to the prepared estimate, the proposed changes could in the long term bring flexibility to the labor market and possibly improve productivity, which in turn would strengthen economic development.

However, this depends on how labor market organizations and local negotiating parties at workplaces react to the change in the law.

“Therefore, the proposal cannot be considered to have an immediate impact on the national economy”, the ministry estimates.

According to estimates, the employment effects also depend essentially on whether productivity improves along with them. The memo points out that improved productivity in Sweden is “measured out” as wage increases, which again does not strengthen employment. Employment would be strengthened if productivity improvements were channeled into better profitability of companies.

Trade unions have been dissatisfied with the government's project and have also protested it with extensive political strikes.

Several labor market sources have assessed to HS that the unions will try to “take revenge” on the employers in the next rounds of collective agreements, if the government's intentions come true.

The ministry's memoranda also identify the risk that the presentation could cause a backlash.

“The possibility to enter into a local agreement with someone other than the shop steward provided for in the law could, in some situations, lead to the demand of the wage earner to remove the possibility of local agreement from the collective agreement. If the possibilities of local bargaining in collective agreements were to be substantially reduced, it would naturally weaken the flexibility of the labor market and thereby reduce potential productivity gains”, the ministry estimates.

In alliances it has been feared that the changes would reduce the incentives for employer companies to belong to employer unions, which in turn would lead to a reduction in the coverage of collective agreements.

However, the ministry estimates that the changes in the law will not directly lead to such a development.

“The reason for this is that the proposal strengthens the possibilities of even organized companies to take advantage of local bargaining as long as they do not have a shop steward.”

The ministry also considers that the use of company-specific collective agreements will not increase significantly, as their attractiveness is weakened by, for example, the high costs for companies resulting from negotiations.