Why labor market reforms need to be implemented

Why labor market reforms need to be implemented

Labor unions argue against Finland's labor markets that should not be reformed by the government. Finland wants to continue down the path of avoiding reforms and complicated business operations, primarily to protect their power, a path that Finland has followed for decades.

Why is there a need for reforms?

Secondly, Finland's public finances are heavily indebted. We need stronger growth, budget-saving measures, and reforms that don't exacerbate the crisis in public finances. In a multi-generational approach to policymaking, the creation of billions of dollars in debt year after year is unsustainable. Every reform that enhances employment and reduces expenses that contribute to public spending is worth its weight in gold.

Secondly, Finland still faces high structural unemployment, despite recent changes in the country's economy. Finland's structural unemployment rate is about seven percent, while in Denmark, for example, it is about three percent. Structural reforms can reduce unemployment by reducing the number of jobs available.

In the past few years, Finland has lost around 10,000 employer entrepreneurs, about every eighth employer company. Small businesses are closing up or transitioning to sole proprietorship due to the risk of hiring becoming too high. Small employer companies are not in the interest of employees if they disappear.

There are about 300,000 individuals between the ages of 25 and 59 who are outside the labor market, either employed or unemployed. For those who can't join the labor force, we need stronger incentives for labor force participation to ensure that resources are available to care for those who truly cannot participate in the workforce, for one reason or another. This is crucial as our dependency ratio worsens.

In a free society, people and businesses are equal before the law, irrespective of their background or whether they are union members. In Finland's labor markets, equality is not achieved. We have two tiers: organized and unorganized labor. This cannot be done, as people should be treated equally under the law. One may join a union, but one must also not belong in a free country.

While there is a lot of good in the government program, some aspects, such as local bargaining, fall short.

The program's implementation is vital for restoring the health of Finland's public finances and boosting employment. Small and medium-sized companies need to be equipped for competition, which is crucial for them.

When labor unions attack the government and its labor market reforms, they are also attacking Finnish businesses, as these reforms are vital for companies to thrive.

Workers are also benefitting from functional labor markets and competitive companies. If your employer fails to generate enough revenue to cover their employees, job security is at risk. Bankruptcies are more common than ever, and many are painfully aware of this right now, as numerous businesses face challenges, and bankruptcies are more common. This is a compelling reason to pursue labor market reforms, which are a key component of the government's ongoing efforts to reform the labor market.

The author, Mikael Pentikäinen, is the CEO of the Federation of Finnish Enterprises.