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Industrial Changes, Labour

Corporate social responsibility in the face of structural change - Working group report
The report provides a summary of socially responsible practices in case of redundancies and highlights a number ofcircumstances related to legislation and current policies that may hamper the more extensive adoption of therecommended measures in Finland.

Economy and Finance

The nature of Finland’s economic crisis and the prerequisites for growth
Briefly, our assessment of the background to the crisis can be summed up as follows: the success ofthe Nokia-led ICT cluster maintained favourable, even deceptively favourable, economic growth inFinland for a long time. The budget surpluses were large and unemployment was on a downwardpath. As is now apparent, these conditions created a setting in which wages rose more – and publicspending grew faster – than was desirable in terms of sustainable development.With the collapse of the electronics industry, exports and output have declined sharply at the sametime as the contraction of the paper industry has continued and metals processing has suffered fromlow market prices. All this has been reflected in a deterioration of profitability in manufacturing.In the good years, Finland accumulated a high level of general-purpose expertise and internationalexperience, which the country should be able to utilise in future. Finland has the prerequisites toreturn to the pre-crisis growth path – if the crisis provokes an adequate response. There is no singleand fast way, however, to recover from the crisis and return to rapid growth. In economic policy, agoal-directed, long-term and patient approach is required.The state can make a real contribution to economic growth by improving general operatingconditions for business, promoting labour mobility and supporting research and innovation. We alsounderline the significance of high-growth enterprises in economic renewal and the public sector’srole in encouraging such enterprises.Anticipated public spending cannot be sustainably funded at the current tax rates. The growthobjective means that there is no scope for increasing taxation. The target level (services, incometransfers) of the welfare state must therefore be set in accordance with financial sustainability.Restating the promise of the welfare state would clarify both public and private decision-making. Itis important to try and improve the productivity of public services and to raise the labourparticipation rate.This time, the main reasons for Finland’s economic plight lie largely outside its borders; correctivemeasures, however, must be found at home. Raising productivity and accelerating economic growthis an imperative of Finland’s economic policy. Based on good preparation, economic policy mustmake painful choices, set targets in order of importance and act in accordance with priorities.

Climate Change

The effects of climate change and climate abatement policies on the value of natural resources in Northern Europe and in the Arctic Sea area
The impact of the climate on the Arctic plays a crucial role for Finland’s, as well as other Nordic countries’ current and future climatic conditions. Far-reaching and multi-faceted changes are taking place in the Arctic, which have profound consequences for the region’s economic and political significance in international relations. The review analyses the effects of climate change and likely climate abatement policies on the accessibility and value of natural resources in Northern Europe in the Arctic Sea area and on the logistical position of Northern Europe with a special emphasis on Finland.


Local public sector in transition: A Nordic perspective
This book is intended to serve as a resource for those who want to understand the recent reforms of local government organisation, tasks and funding in Finland, Denmark, Norway and Sweden. A special focus of the book is on Finnish local government and how the present Finnish situation compares with developments in other countries. However, this book also offers a more general view of localgovernment reforms and in the way that fiscal federalism has been affected by the global fiscal crisis.

Economy and Finance, Europe 2020

Finland 2020 – From Thought to Action. Final report by the Growth Initiative working group
The Growth Initiative working group, a working group seeking to strengthen long-term economicgrowth, proposes measures to boost productivity growth in Finland in the 2010s. In the long term,beyond the current economic cycle, growth in productivity will be the only driver of the nation'saverage income growth or GDP per capita. In the short term, improving the employment rate is alsoimportant.The Growth Initiative working group's final report begins by providing a brief introduction to issuesvital to productivity growth. It then presents the working group's policy recommendations, dividedunder the following ten headings: 1) Science and innovation policy, 2) Education policy, 3) Life phasepolicy, 4) Competition policy, 5) Enterprise policy, 6) Public sector operating policy, 7) Public sectorinformation system policy, 8) Public sector procurement policy and the general availability of publiclycollected information, 9) Broadband network and intelligent transport policy and 10) Transportinfrastructure policy.

Economy and Finance, Europe 2020

Sustainable growth – towards well-being and better quality of life. Interim report by the Growth Initiative working group
The working group to strengthen long-term economic growth is engaged in identifying measures to boost productivitygrowth in Finland. In the long term, growth in productivity will be the primary, and perhaps the only, driver of the nation's income growth.The background section of this interim report considers the meaning of GDP and labour productivity, sources of their growth and the importance of such growth. The analysis section is divided into six policy baskets: efficient and wellfunctioning markets, generation and utilisation of information, human and social capital and the labour market, productivity and efficiency in the public sector, business and private investments, and public investments.Finland’s success will depend on a high level of skills and innovative solutions in all sectors of society. The information society is an important instrument in creating opportunities to boost productivity and increase production, while taking account of ecological restrictions. Research and innovation policies and the education system must support the information society's development and place a greater focus on quality and internationality. In addition, the ability of Finns to capitalise on the opportunities offered by the more stringent international environmental policy must beenhanced. A modern broadband infrastructure is an imperative.In addition to the broad-based use of information and communication technologies (ICT), the ability to changepractices plays a key role in promoting public sector productivity. In the private sector, effective markets andcompetition form another important aspect, given that human and economic resources are most effectively targetedon market terms.The information society does not mean technology only. Unless our working methods are changed, the benefits ofnew technology may largely remain out of reach. In addition to information society skills, the adoption of newpractices can be supported by investments in citizens’ mental and physical well-being and in the prevention of social exclusion. Society's support network must provide support for individuals rather than organisations, within the context of change.The modernisation of the public sector's own working methods means, for example, directing the development ofelectronic services and systems on a centralised basis; more centralised and professional management of publicprocurement; and the reform of the structure of services and the administrative system. Innovative use of ICT willhelp achieve these targets.

Europe 2020

The Economic Council in a New Economic Policy Setting. Evaluation of the Economic Council of Finland. Final Report
The Economic Council is a cooperation body, chaired by the Prime Minister, where the ministers with the most influence on economic policy and representatives of the Bank of Finland and the principal economic interest groups discuss the main challenges of economic policy. Above all, the Council serves as a representative organ for collaboration between the Government and other bodies having direct economic influence, ensuring a regular, transparent and well-prepared platform for deliberations.The independent evaluation group appointed by the Prime Minister’s Office considers that formal and regular cooperation and communication on issues dealing with economic policy and society benefit both the nation at large and the parties involved in the dialogue. Long-term international and national challenges underline the importance of interaction between the Government and interest groups. Giving up collective incomes policy agreements at the central level highlights rather than diminishes the importance of regular and established dialogue between the Government and organisations. The evaluation group recommends, with a few specifications, that the Economic Council continue in its role as a representative body between the Government and interest groups, supporting the preparation of decision-making in a changing economic policy environment.In the second part of the evaluation project, Niko van Niekerk, former Secretary-General of the Socialand Economic Council of the Netherlands, presents his own assessment of the Finnish Economic Council by comparing it with other three European national institutions.

Economy and Finance, Immigration, Labour, Social Policies

Ageing report - Overall assessment of the effects of ageing and the adequacy of preparation for demographic changes
The ageing report reviews developments in the ageing of the population, the effects of ageing and Finland’s ageing policy, on which basis it assesses the adequacy of the preparations for this, and the need for new policy measures. In addition to the established fiscal sustainability, social and political sustainability form the perspective of this assessment.

Social Policies

Ageing Report. Overall assessment of the effects of ageing and the adequacy of preparation for demographic changes. Abstract

Europe 2020, Labour

Pension system, unemployment insurance, and employment at older ages in Finland
We analyse the labour supply and retirement incentives of the Finnish social security system with a numerical life cycle model with endogenous labour supply and retirement decisions. The model features a detailed description of the benefit rules of the pension and unemployment insurance systems and takes into account various early retirement options. Our main aim is to find policy reforms that would postpone labour market withdrawals and reduce the fiscal cost of the social security system without having too regressive distributional effects.

Economy and Finance

Cost Competitiveness of Chinese Manufacturing Industries from the Finnish Perspective
This study examines the cost competitiveness of the manufacturing sectors of China and Estonia withregard to Finland, Germany and the United States. The analysis is based on national accounts data,mainly relative unit labour costs in manufacturing.

Economy and Finance

The Baltic Sea region as Finland's economic environment
The report describes the current status and future outlook for the Baltic Sea economic area, as well asthe special role of the region for Finland. The degree of mutual economic dependence among the eightcoastal states belonging to the European Union and the northwestern areas of Russia varies from onecountry to the next. The small Baltic countries have the strongest economic links to the Baltic Searegion, while the links of the largest countries, Germany and Russia, are the loosest. The economicfocus in the Baltic Sea region is predicted to shift eastwards from the Stockholm?Hamburg axis. Inconsequence, Finland is well situated to utilise the increasing potential of the region.


Recruitment problems, labour supply and workers' mobility
This summary report analyses the matching of labour supply and demand, as well as workers? mobility and labour supply for the unemployed and other groups currently outside the labour force in Finland. The report, compiled by the Secretariat of the Economic Council, contains an ssessment of the current situation regarding recruitment problems, as well as an overall review of the factors affecting job-matching, occupational and regional worker mobility and general incentives for easing labour supply problems. In addition, the policy response to mismatch problems is discussed. The report draws upon three independent studies commissioned by the secretariat for this purpose.

Economy and Finance

Globalisation challenges for Europe. Report by the Secretariat of the Economic Council - PART I
The report analyses globalisation and the policy challenges it poses for Europe. The report comprises13 articles by European experts, the first describing the globalisation phenomenon and itsconsequences in the light of latest economic research, followed by three commentary articles tosupplement the globalisation analysis. EU competitiveness and EU countries? structural policy are thensurveyed in general. Two articles examine the EU internal market, while four articles analyseinnovation policy widely. The final two articles discuss political governance of global and Europeaneconomic policy issues.

Economy and Finance

Finland's response to the challenge of globalisation. Report by the Secretariat of the Economic Council - PART II
The report examines the adjustment of the Finnish economy to globalisation, Finland?s economicstrategy and the need to re-assess the strategy. The first six chapters analyse the way in which theFinnish economy has been developing in recent years and the challenges that will result from thatdevelopment. The analysis focuses on key economic-adjustment phenomena, an assessment of thescale of offshoring of jobs, and the functioning of the labour market. It also discusses issues posingparticular challenges for Finland, i.e. the situation of an energy-intensive economy at a time of risingenergy prices, agriculture and the regional structure of a sparsely populated country. The analysis inChapters 1-6 is based largely on contributions by Finnish economic research institutes, which theSecretariat of the Economic Council has turned into a consistent whole.The last two chapters of the report deal with Finland?s economic strategy, the pressures for change itfaces as a result of globalisation, the way these pressures have been taken into account in recentyears and, lastly, the key aspects of Finland?s competitiveness strategy and the need to develop it.The conclusions drawn reflect the views of the Secretariat of the Economic Council.

Lisbon Strategy - Growth and Jobs

Competitiveness and structural policies:where does the EU stand?
Average EU growth performance has been disappointing over recent decades.This picture is not uniform across countries, however, some having done betterthan others. We argue that EU policy debate, rather than focusing oncompetitiveness, ought to address the reasons for disappointing aggregategrowth outcomes as well as intra-EU heterogeneity. On the whole, weaknessesin growth performance can to a large extent be ascribed to inadequacies in thestructural policy framework. The policy shortcomings that we identify based on asubstantial body of OECD evidence are not really surprising. Rather, they havebeen around for a considerable period of time, which raises the question whyreform has been insufficient. Based on the emerging empirical literatureconcerning the political economy of structural reform, we suggest a number ofactions governments can take to facilitate the reform process. For example,structural reform may be helped by having scope for macroeconomicaccommodation of any negative short-term impacts, which is an addedargument for establishing more sound fiscal positions. As well, the tendency forstructural reforms to have ripple effects across different markets suggests thattrade liberalisation, which is desirable in itself, could help reform in other areas.Finally, we also emphasise the role that analysis by institutions seen asindependent and credible can have in terms of unblocking the reform process.

Single Market

Dynamic effects of European servicesliberalisation: more to be gained
Europe?s market for services is fragmented by many regulatory barriers. TheServices directive proposed by the European Commission aims to integratenational services markets by reducing these barriers. Several studies indicatethat bilateral trade and foreign direct investment in services could boostsubstantially. GDP and consumption could increase by 0.5% to about 1% onaverage in Europe. The effects for the Member States vary depending on thesize of the barriers in their services markets and specialization. These resultstake account of scale effects, and forward and backward linkages in theeconomy, but ignore the effects of more competition on productivity andinnovation in the long term. This paper assesses the channels though which anintegrated European services market may generate these dynamic gains.Improved market access will stimulate competitive selection and productivitygrowth. Through trade and investment, knowledge spillovers will increase andinnovation will be fostered. These channels are illustrated with scarcequantitative evidence.


Globalisation challenges for Europe ?labour market perspectives
Concerns over the effects of globalisation are mainly related to the labourmarket effects. How will jobs and wages be affected? Will there be enoughjobs? What should we live on?While globalisation creates aggregate gains, it is also a process which entailsadjustment. Therefore, there will be both losers and winners. The maindeterminant of the relative net-gain is not necessarily closely related to the levelof education, but rather to the extent to which economic activities can berelocated over borders. Increasing globalisation effectively creates increased jobmobility, and the direction of job movements depends on comparativeadvantages relative to the scope for relocating production and jobs. Empiricalevidence shows that export opportunities tend to improve labour marketprospects, while the import threat does the opposite.A key policy challenge is to support structural change and adjustment withoutleaving a disproportional amount of risk on individuals. This can be done in theshort run in the form of income insurance, and in the medium to long run interms of re-education and training. Increased investments in education is apopular remedy. While the return ? private and social ? in general is high, thereis a danger for over-investment in education if it is perceived that all labourmarket problems can be solved by adopting an education policy based on theview ?the longer, the better?.

Lisbon Strategy - Growth and Jobs

Globalisation: the great unbundling(s)
Three eminent economists from Princeton University have recently argued thatglobalisation has entered a new phase that requires a new paradigmunderstand. This paper examines what is new in the new paradigm andconsiders the policy implications for Europe. Roughly speaking new-paradigmglobalisation differs from the old in that it is occurring at a much finer level ofdisaggregation. Due to radical reductions in international communication andcoordination costs, EU firms can offshore many tasks that were previouslyconsidered non-traded. This means that international competition ? which usedto be primarily between firms and sectors in different nations ? now occursbetween individual workers performing similar tasks in different nations. Thereally new feature is that deeper new-paradigm globalisation will seem quiteunpredictable from the perspective of firms and sectors. Since individual taskscan be offshored, globalisation may help some workers in a given firm whileharming others. Moreover, old-globalisation?s correlation between skill groupsand winners and losers breaks down. Certain highly skilled tasks may turn out tobe offshore-able, while other highly skilled tasks are not. Increased offshoringwill therefore not systematically help or hurt skilled workers in the EU. Inparticular, many ?Information Society? jobs are prone to offshoring so EUpolicies aimed at moving workers into Information Society jobs may be wastedsince those jobs are only ?good jobs? because they do not yet face directinternational competition. The paper argues that this has important implicationsfor the EU?s competitiveness strategy, education strategy, welfare states, andindustrial policy. The underlying theme is that the increased unpredictabilityshould make EU leaders more cautious about moving workers or skills in aparticular direction. Flexibility is, as always, the key to allowing Europe to seizethe opportunities of globalisation while minimizing the adjustment costs.

International Policies

The EU and the governance of globalisation
The system of multilateral rules and institutions that constitutes the globaleconomic governance regime trails the rapid transformation of the worldeconomy and the rise of pressing global issues. It faces significant challengessuch as the resurgence of economic nationalism. It needs to adapt to changes inthe geopolitical background and to a growing number and diversity ofparticipants in global economic integration. It must learn to coexist withregionalism and the market-led governance.It is possible for globalisation to proceed with weak global governance, but notwithout significant risks to its sustainability. The EU, which has a stake in themultilateral system and most likely a comparative advantage in institutionaldesign, should be a key player in its reform agenda. The difficulty of the task isno excuse for avoiding it and for hiding behind US leadership. To equip itselfwith the ability to take initiatives towards reform, the EU requires changes in itsown internal governance and its external representation. Contrary toconventional wisdom, these changes need not imply a federalisation of externalrelations.