Government proposal for agreeing a social contract and its implementation

One of the Government Programme's main objectives include raising the employment rate to 72% and increasing the number of people in employment by 110,000. The Government also seeks to achieve a situation where investment exceeds depreciation. Achievement of these objectives calls for structural reforms, with a special emphasis on efforts to reform working life.

Finland's competitiveness has deteriorated in comparison to its key competitor countries. Increasing the employment rate to 72% requires significant improvements to competitiveness in cooperation with social partners. With a social contract, the Government aims to achieve a 5% improvement in competitiveness. The net effect of the social contract and agreed pay settlements must strengthen the general government budgetary balance by at least half a percentage point of GDP at 2019, taking into account the tax reductions linked to them.

In June, the Government held discussions with the social partners. The aim was to assess their readiness to conclude a social contract. An objective of the Government Programme is to improve competitiveness by reducing unit labour costs by at least 5%, while at the same time improving employees' change security.

Based on the consultations, the Government proposes to the labour market organisations that the following process be initiated. By 21 August 2015, the parties to the negotiations will agree on:

1. A precise objective to be achieved by the social partners, taking into account the Government's conditions regarding improved competitiveness and change security. The Government will assess the impact of the measures on competitiveness, based on a measurement procedure agreed with the labour market organisations.
2. A process for the period between 22 August 2015 and 31 January 2017
3. An agenda setting out practical level measures by which to achieve the objective
4. A precise schedule and interim objectives

The Government has assigned Juhani Salonius to examine the prerequisites for concluding on a social contract. If the social partners accept a negotiation result by 21 August 2015, the process described above will be initiated to conclude the contract. If the measures are clearly having a sufficient effect in March 2017, the Government will withdraw the conditional expenditure savings and tax increases it had decided. In addition, the Government is prepared to support the above-mentioned contract with significant income tax reductions.

Inquiries: Markus Lahtinen, Special Adviser (Economic Policy Affairs), tel. +358 50 491 3842 and Riina Nevamäki, Special Adviser (Political Affairs), tel. +358 40 705 2593, Prime Minister's Office