Supporting Wage Earners’ Purchasing Power
The development of wage earners’ purchasing power in Finland has been weak since the early 2010s. Economic challenges have resulted in poor growth in purchasing power. In recent years, purchasing power has been further strained by the cost-of-living crisis and international developments.
The purchasing power of wages collapsed historically in 2022–2023. For economic recovery, it is essential that wage earners can afford to consume, as private consumption is the largest component of GDP.
STTK publishes a purchasing power review twice a year.
Measures to Strengthen Purchasing Power
- Wage increases must be high enough compared to inflation to ensure real income growth.
- Employers should bear a greater share of wage-related costs.
- Low- and middle-income earners should be supported through taxation.Indirect taxes (e.g., VAT) should not accelerate inflation.
Taxation must be sustainable
Taxation is an effective tool for balancing the economy and curbing indebtedness. It is also a strong instrument for societal reform and promoting desired behaviors. Effective and guiding taxation requires continuous evaluation of its impact and political will to implement changes.
A fair distribution of income is a core value for STTK. Large income and wealth disparities hinder growth. A sufficiently even distribution ensures social mobility, an equal and just society, and a stable business environment. Keeping the tax base broad allows tax rates to remain moderate.
Taxation of work should better support employment and job creation. Work should always be more profitable than social security. These principles are the foundation of the welfare state.
Measures to Develop Taxation
- Maintain the overall tax rate at Nordic levels to safeguard the welfare state.
- Shift the tax burden from labor to capital income and wealth.
- Strengthen the steering effect of taxation, even if it reduces the tax base.
- Grant regional governments taxation rights to improve services.
- Use EU-level taxation to replace member state contributions and curb tax competition.
Actions to Increase Employment
The Finnish welfare model is built on high employment. The employment rate reached a historic high in 2023 but has slightly declined in recent years. We need measures to raise the employment rate.
High employment requires active investment in labor market policy and efficient, well-targeted, high-quality employment services. For groups facing difficulties, such as older workers, youth, immigrants, and people with partial work ability, personalized services must be strengthened. Resources for employment services should reach Nordic levels.
In a rapidly changing economy, better transition security is needed to speed up re-employment after layoffs. International recruitment should be seen as a way to support employment. Active counter-cyclical fiscal policy improves employment both short- and long-term.
The growing number of long-term unemployed, especially among youth, is alarming. Between 2007 and 2025, the number of long-term unemployed aged 15–24 has increased more than tenfold. Unemployment weakens income security and can harm mental and physical well-being.
Measures to Boost Employment
- Active counter-cyclical economic policy.
- Support for part-time work.
- Well-targeted and efficient employment services.
- Improved transition security for laid-off workers.
- Increased international recruitment.
- Support for long-term unemployed.
Strengthening Economic Vitality
The recipe for growth is simple: investments in skills, high-quality education, research and innovation policy, and higher value-added production. Innovation and new practices require broad cooperation between universities, vocational education, and both public and private sectors.
Labor productivity must be world-class in a small, remote country like Finland. Our comparative advantage lies in high-tech products requiring innovation and product development.
Finland has significant opportunities in the green transition. Clean energy production strengthens energy self-sufficiency and enables growth in exports of green products.
Developing skills is key to addressing labor shortages in emerging sectors, raising industrial value-added, and keeping wage earners involved in change. Innovation and product development do not happen alone.
Measures to Strengthen Economic Vitality
- Enhance industrial policy.Develop RDI policy and invest in skilled labor supply.
- Address low competition in consumer-facing sectors.
- Reform state ownership strategy.
- Ensure 60% of working-age adults participate in annual continuing education.
- Invest in skills for the green transition.
- Expand service export sectors.
- Invest in infrastructure.
A Just Green Transition
Climate change has long been a central theme in international cooperation and politics, and its importance will continue to grow. The green transition will transform the economy and working life, creating new opportunities for investment and jobs.
For Finland, the green transition offers a chance to replace fossil energy imports with exports of new products and services. This requires bold political decisions and investments in skills.
Finland is a global leader in clean and affordable energy production, giving us a competitive edge for building an attractive investment environment.
For wage earners, fairness in the green transition is crucial. A just transition ensures workers can update skills for new jobs, costs do not fall disproportionately on any group, and benefits are shared fairly.
Measures for a Fair Green Transition
- A comprehensive energy strategy and review of energy taxation.
- Support and develop workers’ skills.
- Increase investments in balancing power and energy storage.
- Upgrade distribution networks and heavy transport charging infrastructure.
- Increase R&D investments in smart energy infrastructure.
- Strengthen EU-level energy regulation.
- Deepen Nordic energy cooperation.
Combating the Grey Economy
The grey economy refers to economic activity that avoids legal obligations such as taxes and social security contributions or provides false information. A common form is labor exploitation, such as underpayment, which may also involve human trafficking. Finland has developed measures against the grey economy since 1996 through cooperation and information exchange between authorities. STTK participates in the program’s steering group.
Undeclared work occurs in all sectors but especially in those employing foreign labor. Foreign workers may not know their rights or employers’ obligations, making them vulnerable to exploitation. The tax number system used in construction and shipyards has proven effective in preventing tax evasion and grey economy practices.
The tax number also helps combat underpayment and exploitation of foreign workers and illegal employment. Expanding the system to other high-risk sectors, such as cleaning, seasonal work, tourism, and transport, should be considered.
Measures to Combat the Grey Economy
- Improve information exchange between authorities.
- Implement an action plan against grey economy and economic crime.
- Increase use of employee tax numbers.
- Expand the tax number system to high-risk sectors.