Finland’s Left Turn

Finland has a left-wing government for the first time in decades – and it plans to breathe new life into the country's famous welfare state.

Finland, for the first time in decades, has a left-wing government. April’s parliamentary election saw the Social Democrats top the poll for the first time since 1999 and, following protracted negotiations, they now lead a five-party coalition with the Greens, the agrarian Centre Party, the socialist Left Alliance and the minority Swedish People’s Party.

The government aims to undo the damage caused by the previous right-wing administration’s austerity and to move away from a policy programme which routinely hit the most vulnerable. In his first speech to the Finnish parliament the new Prime Minister, Antti Rinne, observed that “in a Nordic welfare state the economy is managed for the people, not the other way around.  

So what change can Finns expect to see under the new regime? The new government promises to increase public spending by €1.2 billion, ending cuts on low-income individuals and households. In a year in which Finland saw record temperatures, the environment has also emerged as a focus, with the government aiming to make the country carbon free by 2035. But probably the most important change will be in employment, where the plan is to raise employment rates from 72% to 75%. According to new Employment Minister Timo Harakka, “employment policy returns as the government’s key focus.” 

Increasing employment is important for Finland which, in common with the rest of the developed world, faces a demographic timebomb. The population is ageing and the number of working-age people is decreasing, with big implications for public finances. “The most sustainable and effective way to strengthen the economy is the increase of employment,” argues Harakka, “this is the thinking behind the government programme.”

Economist Patrizio Lainà, from the Central Organisation of Finnish Trade Unions, sums up the change in approach between the last government and this one, “this time, the government wants to improve employment by developing people’s skills and supporting them, instead of blaming and punishing the unemployed.” The previous Prime Minister Juha Sipilä’s employment policies included a so-called “competitiveness pact” which rolled back workers’ rights such as holiday pay and introduced benefit cuts. It also added obstacles to claiming unemployment support and lengthened the working year.

The tone under the new government is different. We need genuine opportunities for continuous competence development,” Harakka argued as he took office, “and significantly more comprehensive support for employment for people who have fallen from the labour market due to one reason or another.” He pledged to increase wage subsidies, offer part-time workers a greater degree of support, and to improve public services. 

Also set to change is the government’s approach to industrial relations. Finland has a long tradition of bargaining in industrial relations, with tripartite agreements between the trade unions, employers’ representatives and the government. The last government sought to move away from this, privileging the interests of employers above workers. The new Employment Minister takes a different line, stating that “labour market organisations” have a “key role” to play in achieving the goal of 75% employment. New tripartite negotiations are already underway.

Critics of the new government have rounded on what is alleged to be an over-optimistic projection of growth in the economy. The Bank of Finland believes that the 75% employment target would require a faster pace of growth than the economy is currently experiencing. In Autumn, the Labour Institute for Economic Research estimated growth at 2.3%, but now the forecast has declined to a considerably smaller 1.4%.  

However, Patrizio Lainà rejects this negativity. “The government programme is based on the slowing down of economic growth predicted by the Ministry of Finance… In addition, the objectives of the programme are expressed as conditional to normal cyclical developments, when in economic downturn the employment and economic objectives will not be interpreted as failed, nor will downturn automatically mean cuts.” After four years of austerity, these are reassuring words.

The new government programme is avowedly Keynesian, according to Lainà. “The programme is strongly committed to counter-cyclical fiscal policy. For the first time, it includes €1billion cyclical buffer incase of a recession, which is intended to be used as a stimulus for recovery. This has been found to be a more effective means of stimulus in recession than tax cuts.”

Other critics argue that success for the government’s economic policies is too reliant on the achievement of the 75 percent employment target. But, in reality, only €300 million of the additional spending will be financed this way. The implementation of the government’s employment target will be the subject of six monthly monitoring, every spring and autumn. And, according to Harakka, these won’t be the only metrics for success. “The government intends to monitor sustainability shortages not only through traditional economic indicators, but also by monitoring the development of ecological and social well-being.”

An optimist might take this new government’s approach as a sign that the Nordic welfare state model is making a comeback. The key features of that model are comprehensive and generous welfare provision alongside a strong role for collective bargaining at the industrial level. The new government’s programme embraces both elements, while broadening provision in areas such as education and social security. Additionally, its policies encompass infrastructure improvements such as new rail capacity, and environmental pledges which it argues are the most ambitious of any government programme worldwide. 

The new government has also made education a priority. This is particularly welcome when set against the backdrop of a sustained increase in educational inequality. It seeks to address this by extending compulsory education to include upper secondary and vocational schooling, which it will make free of charge. It also seeks to increase investment more broadly in education and in research. It has pledged to reverse cuts on university funding, as well as giving local municipalities a total of €235 million over five years to hire more teachers and meet the increased demand for vocational education.

Following Iceland’s lead, the new Finnish government has also placed gender equality high on its agenda. It will introduce a new equal pay law which aims to increase wage transparency, making it far more difficult for employers to underpay female staff. There will also be long overdue parental leave reform, encouraging the equal distribution of parental responsibilities as well as expanding provision in general. Business groups and political opponents argue that this will compromise efforts to improve employment rates — and it remains to be seen how social and employment reforms will work together.

But, after years of austerity, Finland is now beating a different path. Public spending will increase, the bashing of the unemployed will no longer be a government priority, real collective bargaining is returning and cuts are being reversed. Bold new environmental, education and gender equality goals are on the horizon. However, it won’t all be plain sailing from a left perspective — there are plans to sell off state-owned assets, and taxation plans are nowhere near as radical as they should be. There are, undoubtedly, battles around the corner. Nonetheless, in Finland, the left is back. And it is putting working people’s concerns at the heart of government once more.