Well-functioning generational policy is crucial to the labor market

At the beginning of August, Nobel Prize winner Bengt Holmström expressed concern over the sustainability of the pension system and called the baby boomers “the selfish generation”. Many people were quick to comment on this statement made by the esteemed economist, including Jaakko Kiander, Senior Vice President of the Ilmarinen Mutual Pension Insurance Company, National Conciliator Minna Helle, and Teemu Muhonen, journalist and second author of the book “Eläketurma” (“Pension Disaster”).

Later on, Antti Rinne, Chairman of the Social Democratic Party of Finland (SDP), suggested that all Finns should “chip in” and start making more babies. This proposal by Rinne was widely seen as old-fashioned and repressive, putting women into the position of mere childbirth machines. The media circus was ready and the social media was in an uproar in an instant.

What is the common denominator between these two themes? In addition to causing an uproar in the social media, both provide a glimpse of the future of Finland, where an ever-decreasing number of people support an ever-increasing part of the population. This so-called dependency ratio is distorted by the fact that the new generations being born are smaller in number than before and life expectancy has increased. The social and health care expenses of the welfare state are expected to grow, for example. The main burden of responsibility for covering the costs lies with the taxpayers.

Concern for the future generations’ burden of cost is therefore very topical. Because the burden of cost lies with the working age population, the terms, incentives and opportunities for work are extremely important. The Sipilä Government has also emphasized that increasing economic growth and raising the employment rate are the Government’s key goals.

In addition to politicians, labor market organizations play a significant role when drawing up the rules of working life. Labor market organizations are organizations that represent employers and employees. The employee side, i.e. the trade union movement, is represented by the Central Organization of Finnish Trade Unions (SAK), the Finnish Confederation of Salaried Employees (STTK) and the Confederation of Unions for Professional and Managerial Staff in Finland (Akava). The employers are organized under the Confederation of Finnish Industries (EK) and the Federation of Finnish Enterprises, for example. These organizations negotiate employee benefits and rights, such as wage levels and working hours.

Let us take a closer look at the previously mentioned pensions and family policy. In addition to wages, labor market organizations are also interested in broader themes related to working life. How can a working-age adult accrue a pension and is pension accumulated from all work? How to fit work and family life together?

At the moment, you can accumulate employment pension from doing gainful work or by working as an entrepreneur. However, the current system has little understanding for the gray area between gainful employment and working as an entrepreneur, where the person does odd jobs or acts as a self-employed worker. Even the most cautious forecasts emphasize that the major changes taking place in working life will inevitably lead to the diversification of our way of working. Labor market organizations must also keep up with these changes. That is why Akava and the Federation of Finnish Enterprises, for example, have proposed a combined insurance model. In this model, pension is accumulated from both gainful employment and entrepreneurship, and people do not have to make an inflexible choice between the two.

Childbirth policy – or to use the less disconcerting name of family policy – is in a tough spot between the private and public sectors. Everyone has the right to choose their own family model, but on the other hand, the state supports having children with various incentives: family leave, child benefits and child home care allowance. By changing how family leave is granted, for example, we can affect how quickly parents return to working life and whether the children have their mother or both parents at home looking after them.

From the point of view of equality and employment, family policy also strongly affects the labor market organizations. For example, just before the budget session held in August, labor market organizations appealed together to the Finnish Government to reform the country’s family leave system. There will be less and less workforce in the future, so it is crucial to make work as meaningful as possible and make combining work and family life easier.

Labor market organizations affect what the Finnish working life is like now and in the future. The decisions that we make today for a more sustainable pension system and a more equal working life can perhaps bear fruit tomorrow, or it may take decades for us to see the results.

The labor market organizations are also responsible for these decisions. That is why they cannot ignore the debate surrounding generational effects – well-functioning generational policy is crucial to them.

Henna Pursiainen
President of Akava Student Council

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