Mutual Learning Programme

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1 Mutual Learning Programme DG Employment, Social Affairs and Inclusion Peer Country Comments Paper- Finland Flexicurity new challenges arising? Peer Review on Flexicurity Copenhagen (Denmark), November 2014 Written by Timo Spangar November 2014

2 EUROPEAN COMMISSION Directorate-General for Employment, Social Affairs and Inclusion Unit C1 Contact: Emilio Castrillejo European Commission B-1049 Brussels

3 EUROPEAN COMMISSION Mutual Learning Programme DG Employment, Social Affairs and Inclusion November, 2014 Directorate-General for Employment, Social Affairs and Inclusion Peer Review on Flexicurity, Copenhagen, November 2014

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5 Europe Direct is a service to help you find answers to your questions about the European Union. Freephone number (*): (*) The information given is free, as are most calls (though some operators, phone boxes or hotels may charge you). LEGAL NOTICE This document has been prepared for the European Commission however it reflects the views only of the authors, and the Commission cannot be held responsible for any use which may be made of the information contained therein. More information on the European Union is available on the Internet ( Luxembourg: Publications Office of the European Union, 2014 European Union, 2014 Reproduction is authorised provided the source is acknowledged.

6 Table of Contents 1 National approach to flexicurity Assessment of the policy measure Assessment of the success factors and transferability Questions Annex 1: Summary table... 7

7 1 National approach to flexicurity This paper has been prepared for a Peer Review within the framework of the Mutual Learning Programme. It provides information on Finland s approach to flexicurity in comparison with the Host Country for the Peer Review. For information on the policy example, please refer to the Host Country Discussion Paper. Finland might be described as a de facto flexicurity country. The introduction of the flexicurity concept as an EU policy did not have a strong impact in Finland except short actions in to gather policies, promote cooperation, initiatives and monitoring under the umbrella of flexicurity. However, the goal of balancing flexibility and security was and still is highly relevant for Finland. Finland, flagging the Nordic welfare model, had followed social consensus politics already from the first collective wage agreement in the late 1960s. Thus, although not adopting the flexicurity concept ideologically as the starting point for policy making. the elements of the flexicurity concepts have been present in Finnish labour market policies. 1 It might also be argued that in Finland the issue of balancing flexibility and security will remain topical in the near future. Regarding the fiscal crisis starting from 2008, Finland is a country of prolonged recovery. Unemployment is still growing, being 8.2% in September 2014 (7.6% in September 2013) 2 with increasing long-term unemployment 3. According to the forecast by Ministry of Employment and the Economy, unemployment will rise up to 8.6% staying at that level also in A noteworthy observation is that there is also a growing share of disguised unemployment of persons having grown by 14.3% within one year 4. Finland now faces a new phase of economic restructuring with a push towards a more servicebased economy and labour market, amidst the challenges of an ageing labour force, the reorganisation of health care and social services and restructuring employment services, just to name the most obvious ones. 1 (Arnkil & Spangar 2012). Evaluation of the first phase of flexicurity : Finland. 2 Internet: 3 Internet: 4 Internet: November,

8 2 Assessment of the policy measure In order to reflect the similarities and differences between Finland and Denmark the following table highlights some of the key features of the Finnish flexicurity model. Table 1. Major recent Finnish reforms in the four components of flexicurity Flexicurity component Flexible and reliable contractual agreements Comprehensive lifelong learning (LLL) strategies Effective labour market policies Key features Finland is assessed in 25th place by OECD regarding firing employees. No reforms in this respect have taken place in recent years. However, as a response to the fiscal crisis the government offered companies measures to avoid lay-offs and to upgrade the staff skills and competences. The measures introduced were: recruiting training (training for in-takes although not often used during the crisis), change training (supporting the upgrading of vocational skills) and company-specific training (tailored according to the company and staff needs). In 2011 Change Security was reformed and improved security for the employees. The reforms also enhanced transition from work to work by allowing, for example, the employees to look for another job while still on notice of redundancy. Being the traditional strength of Finland, LLL policy has been strengthened recently by a life-long guidance strategy. The current ESF period has been used to spread the guidance provision geographically and competence-wise. The forthcoming ESF period will further strengthen the guidance provision at the regional and local level by developing low threshold one-stop shops. For employees a radical reform was established in 2010 allowing job-seekers to study for two years whilst on unemployment benefit. The measure has become extremely popular. The number of jobseekers participating in VET now nearly equals the number of job-seekers attending labour market training. There have been several waves of reforming labour market policies and public employment services, during and the latest one from 2013 on. The main target has been to better integrate employer services with more targeted services for employees (now divided into three service lines). At the same time, a major pilot project is underway where 20 municipalities test employment service models for the long-term unemployed (jobseekers with more than 500 days of unemployment). Youth Guarantee, the measure aiming at guaranteeing the young educational placement or other active measures. November,

9 Modern, adequate and sustainable social protection systems There was a major initiative to develop and streamline the rather complex social benefit system of Finland (SATA-committee), but it reached only partial reforms. Today a pilot of participatory welfare measure run by the Ministry of Social Affairs and municipalities is going on. The pilot aims at innovating new methods of activation and employment for the long-term unemployed as a collaboration among the municipalities and NGOs. In order to assess the labour market challenges as a whole we have to look also at the demand side. Rikama (2014) 5 asserts that Finland is now facing the most dramatic decline of the industries in the EU while the share of private services and SMEs are still underdeveloped in Finland. The future trend regarding employment seems to emphasise the role of small and even micro enterprises. The former government with Jyrki Katainen as its prime minister developed six financial measures to boost startups (Immonen 2014) 6 and support the growth businesses. Rikama (2014) argues that the statistical evidence indicates that micro enterprises managed to increase the number of jobs while big companies have lowered the number of employees during the recession in 2009 to According to Härkin (2014) 7 the experiences during implementation of the Youth Guarantee indicate that almost one half of the young regard entrepreneurship as a real career option. Jaanu (2014) 8 describes the changes made within the PES to improve especially services for the enterprises comprising of total reform of the service constellation. Thus, the Finnish scenery of the future working life seems to emphasise the competitiveness of the economy as a whole. It is not solely a question of sustaining the current jobs. It is about creating new jobs, a framework within which also the issues of security and flexibility of labour force supply have to be developed. The major challenges of the Finnish economy lie in its capacity to innovate and find global niches in the developing fields like clean-tech and the green economy. This should now take place in the context of an ageing and shrinking labour force as well as growing diversity of businesses where the significance of small and micro enterprises is growing. By implication, and from the flexicurity perspective, it may be concluded that also in the future there will be turbulence in the individuals and the businesses life cycle. The number of (working) life transitions will increase. Instead of working either as a wage earner or a business owner, individuals will have hybrid positions in their working life. The hybrid working life roles will be based on vocational knowledge, business orientation, network capabilities and client orientation. Reaching now, in the growing complexity of the labour market, the win-win among employees and employers is about creating something new and sustainable together. The Finnish 5 Rikama, S. (2014). In Ministry of Employment and the Economy: Business Review 2014 changes and renewals. MEE Publications, Competitiveness 39/ Immonen, S. (2014). In Ministry of Employment and the Economy: Business Review 2014 changes and renewals. MEE Publications, Competitiveness 39/ Härkin, N. (2014). In Ministry of Employment and the Economy: Business Review 2014 changes and renewals. MEE Publications, Competitiveness 39/ Jaanu, A-M. (2014). In Ministry of Employment and the Economy: Business Review 2014 changes and renewals. MEE Publications, Competitiveness 39/2014. November,

10 situation now seems to call forth perhaps a new level collaboration among the labour market partners, where links with working life and economic development would be still closer and immediate. November,

11 3 Assessment of the success factors and transferability Like Denmark the prevailing policy making tradition in Finland relies strongly on aiming at consensus and win-win. There is no doubt that the main political parties in Finland as well as the main social partners are willing to go on with this tradition. Social partners have been active in implementing the Finnish flexicurity model although their interpretation of its fruitfulness decreased as the fiscal crisis emerged. This has not, however, prevented them from taking flexicurity actions after that. All the main political parties are certainly in favour of the Nordic welfare state model. However, debate on the level of necessary regulation of enterprises has now accelerated as Finland is heading for parliamentary elections in April In the case of a win of the de-regulation and populist forces, more controversies might appear. In Finland the Danish flexicurity model is often assessed as an expensive model that Finland, lagging somewhat behind the other Nordic countries in the different flexicurity indicators (Arnkil & Spangar 2012), cannot afford. This might threaten the future of integrating the flexibility and security side of things. As a sign of the current turbulent economic times, National Audit Office of Finland published an assessment that the staff reductions made during the last few years have indicated about a 3% increase to the flow of unemployment spells lasting more than three months 9. As a public service, the employment services have also been part of the budgetary cuts. How to combine the budget cuts, seen as necessary for the public economy, and ensure smooth transitions from both the employee and employer perspective, seems to pose a serious challenge for the flexicurity policies in Finland. Denmark is considered a flexicurity model with a high activation rate. In this respect Finland has now achieved an activation rate of 30%. The activation side of the unemployment benefits has been emphasised by expanding the geographical distance within which a job-seeker must accept a job offer to 80 kilometres. Within the PES services job-seekers are exposed to jobs by increasing job offers as early as possible. On the other hand, the duration of employment required for renewal of the unemployment benefit was shortened to 6 months from the earlier 10 months, that is, the standard 6 month subsidised job will re-qualify the job-seeker for the unemployment benefit. As in Denmark, the participation rate in adult education in Finland is high. Investing in education is seen as a central measure to overcome the economic challenges. The specific Finnish flexicurity measure change security provides employers and employees made redundant with educational opportunities. The reform of allowing job-seekers to study during their unemployment benefits has clearly been a measure of raising the job-seekers skills level. In all, it seems that there are positive general conditions in favour of applying the Danish experiences also in the Finnish context. In that meaning, the latest developments in Denmark will be studied carefully 10 as were the earlier phases. However, learning from each other, is not about copy-pasting. It is about analysis and joint action, aiming at keeping up the spirit of Flexicurity as a means of reforming Europe s labour markets Internet: 10 Interview of Mr. Ruth Madsen, P. (2014). Danish Flexicurity still a beautiful swan? Host Country Comments Paper. Copenhagen November. November,

12 4 Questions Has there been any debate in Denmark about how the flexicurity concept and/or practice should be developed further? Are the four pillars still valid or should they be changed or modified or should there be some new pillars? Is there a threat that either trade unions or employers could say farewell to flexicurity? November,

13 5 Annex 1: Summary table National approach to flexicurity Finland has a de facto flexicurity model meaning that it has not adopted the concept as an overarching organising principle but the four pillars of flexicurity are there and aiming at consensus and win-win is the key to the Finnish political tradition. Assessment of the policy measure Finland is actively developing effective labour market policies, comprehensive life-long learning and social protection systems. Finland is now taking new steps towards a service-based economy. It is about creating new jobs. A new level of collaboration is now called for. Assessment of success factors and transferability Consensus politics is a common feature among Denmark and Finland. Also Finnish flexicurity is under stress because of budgetary factors. However, learning from each other, is not about copy-pasting. Questions Has there been any debate in Denmark about how the flexicurity concept and/or practice should be developed further? Are the four pillars still valid or should they be changed or modified or should there be some new pillars? Is there a threat that either trade unions or employers could say farewell to flexicurity? November,

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