4.1.1 Pay rises in the latest bargaining round

Finland

Monthly pay in the chemical industry was raised by EUR 35.75, and by no less than 2.2 per cent. New wage scales were introduced on 1 October 2002 in the plastic and chemical products industry. These effected an average 1.2 per cent increase in incomes. Average income in the chemical industry is about EUR 30,000 per annum. The hourly wage rate in the paper industry was increased by EUR 0.24 and individual pay increased by 2.2 per cent. The sum to be distributed in local negotiations was EUR 0.04 and the gender equality element was EUR 0.07. A business cycle bonus of EUR 142 was paid as a lump sum in June 2002. According to official statistics, the average income in the paper industry is about EUR 37,300 per annum. The negotiating parties in the energy sector agreed on a raise of EUR 0.27, or about 2.2 per cent for 2002. According to official statistics, the average income in the energy sector is about EUR 30,000 per annum.

Sweden

Pay in the chemical industry is governed by a three-year agreement concluded in winter 2001. This provides for a general pay rise of 2.7 per cent in 2001, 2.2 per cent in 2002 and 2 per cent in 2003, making about 7 per cent altogether . Pay scales increased during the agreement period by an average  of 13 per cent. Working hours were reduced by one day in 2002, 2003 and 2004, making three shifts in all. However, this reduction in working hours may be commuted into an hourly pay rise or used to reorganise the individual working hour account. In the chemical industry, where the emphasis is on light industry, pay statistics indicate an average monthly income of less than EUR 2,000, rising to about EUR 27,000 per annum when other allowances are included.

A three year agreement was also negotiated  in the paper industry in winter 2001. The general pay rise for the agreement period totalled about 7 per cent. These increases are distributed in local negotiations, but all employees are guaranteed a minimum monthly pay rise of SEK 281 in 2001, SEK 227 in 2002 and SEK 216 in 2003. These sums amount to only 1.2 to 1.6 per cent of the average monthly income, leaving part of the rise to be shared in local negotiations. The system seems to function, as in 2001 the average income growth was 3.7 per cent. Pay statistics for 2002 indicate that the average income of employees was slightly more than SEK 250,000 (EUR 27,600) per annum. Employer statistics, however, indicate a total income of EUR 30,100. A study by the Swedish paperworkers' union indicates that a machinist can receive EUR 41,400 per annum after ten years of service.

The energy sector also participated in the three year settlement of winter 2001. The SEKO trade union thereby received a pay increase of 2.6 per cent, both in the municipal and private sectors, in each of the three years from 2001 to 2003. The minimum pay was increased by about 10 per cent during the agreement period. Working hours in municipal electricity plants were reduced by 9 hours in each of the three years. In another private sector agreement the SEF trade union won a 3 per cent pay rise for each year in 2001 to 2003. The cost impact, compared to the SEKO municipal sector agreement, was equalised because SEF concluded no agreement to reduce working hours. Typical monthly income is SEK 20,000 (EUR 2,200). Inclusive of standby time, overtime and other compensation incomes may reach EUR 29,000 per annum or more.

Norway

In the chemical-technical industry agreement of spring 2002 the pay rise is NOK 2.75 (EUR 0.37) per hour. Based on an average pay rate excluding allowances of NOK 115.62, this rise is 2.4 per cent. Minimum pay was increased by NOK 6.50, i.e. by 6.8 per cent, and the shift allowance was increased by 5 per cent. Pay statistics show that total pay with bonuses rose by 4.1 per cent in 2001. Average earnings in the chemical-technical industry are about EUR 32,900. Rates in the process industry are clearly higher.

The general rise in the paper industry was also NOK 2.75 (EUR 0.37) per hour. Based on an average pay rate excluding allowances of NOK 118.90, this amounts to 2.3 per cent. One interesting point is that the Chemical Workers' Union and Fellesforbundet only counted the absolute and not the percentage rise. Another interesting detail is the low-pay clause at point 2.13 of the collective agreement. According to this, enterprises in which average pay has fallen below 90 per cent of the industry average must increase pay to at least the 90 per cent level. Shift allowances were raised by 5.3 per cent. According to pay statistics, pre-tax wages and allowances rose by 5.8 per cent in 2001. Employer statistics suggest that the average income is EUR 27,400 per annum. The Fellesforbundet trade union estimates a figure of about NOK 270,000 (EUR 37,000e), especially in major enterprises such as Norske Skog. As this difference is huge and the estimate provided by the employee side seems to be more reliable, in comparison with general Norwegian pay levels, it has been used in the calculations of this study.

The energy sector settlements in the spring were first reached with KS, representing municipal electricity plants. The general rise for 2002 was NOK 7,100 (EUR 959) per annum. Based on the industry's average income, this rise was about 2.6 per cent. The minimum wages per annum listed in the agreement, were increased by between NOK 20,000 and 24,000, meaning an increase of 10.0 to 11.3 per cent. Pay statistics indicate that annual incomes rose by 3.9 per cent in 2001, and labour costs increased by 4.7 per cent as the annual leaves were extended by two days in 2002. Mediator-assisted negotiations with the private sector organisation EBL lasted until June, and resulted in a pay rise of NOK 3.75 crowns (EUR 0.50) per hour, corresponding to an increase of about 2.4 per cent. Allowances rose by 11 per cent, and minimum wages by over 10 per cent. The minimum pay of a skilled worker, for example, rose from NOK 207,000 to NOK 239,000. All employees were moreover guaranteed an enterprise-specific pension arrangement, subject to further negotiations as to its conditions. Skilled employees in the energy sector earn about NOK 270,000 (EUR 37,000) per annum.

Germany

In the chemical industry negotiations of spring 2002 the IG BCE trade union claimed a 5.5 per cent pay rise in the Western states and received 3.3 per cent as of 1 May 2002. The agreement also awarded a lump sum of EUR 85 for April and 0.3 per cent for modernisation of the pay system. This included increases in the shift and foreman allowances in higher wage classes. The level of increases was clearly higher than in 2001 (2.0 per cent) and 2000 (2.2 per cent). In Eastern Germany the parties agreed on a programme to increase Eastern wages and salaries to the Western level by 1 October 2009. The level is currently 84 per cent. The next extra rise will be 2.8 per cent on 1 October 2002. The Christmas bonus was made more flexible, and may now vary from 80 to 125 per cent of the monthly pay in the West, and from 50 to 95 per cent in the East. According to the employer association BAVC, productivity in the chemical industry rose by 4.5 per cent in 2000 but fell because of a production fall of 1.7 per cent in 2001. The association has also compared turnover per employee over the period from 1999 to 2002. The comparison shows growth except for the first quarter of 2002, when falling sales led to a decline. The share of wages and salaries was less than 14 per cent. According to the BAVC association, the average pay of industry staff was EUR 42,668 in 2001. The rise over the previous year was 2.2 per cent. The figures for 2003 show a reduction, reflecting the loss of almost 7,000 employees since 2001. The average income of employees may be about EUR 35,000 per annum.

In the paper industry the IG BCE trade union won a general pay rise of 3.3 per cent as of 1 April 2002, plus a lump sum payment of EUR 75 in March 7. "The capital formation charges", which are mainly invested in the industry's pension fund, will increase in two instalments, so that the charge will be EUR 478.57 per annum at the start of 2003. The general rise was 2.0 per cent in 2001. In Eastern Germany the parties agreed on a programme to increase Eastern wages and salaries to the level of the West by 1 October 2009. The level is currently 88 per cent. The next extra increases will occur on 1 October 2002 with 2.8 per cent, and on 1 April 2003 with 1.2 per cent. "The capital formation charge" is a novelty in the industry. As of 1 March 2003 it has been EUR 79.80 per annum. IG BCE offers no figures on pay or productivity progress in the paper industry. The latest figures published by the industry and employer association VAP date from 2000. According to these, the pay per employee and per annum rose by 2.6 per cent in 2000, by 3.1 per cent in 1999, and by only 0.1 per cent in 1998. The last figure was influenced by major changes in staffing levels, as over 2,500 new employees appeared in the statistics. There have been no major changes in other years, although the total number of employees has fallen by a couple of thousand since 1995. According to VAP statistics, turnover per wage and salary earner was EUR 35,063 in 2000. The employer statistics indicate that the average income was EUR 37,500 in 2001, and this figure may be considered to be rather reliable.

In the energy sector the pay structure of the TV-V-agreement for municipal utilities was unified and reformed in 2001, when wages and salaries were increased in January and September by varying percentages, depending on the reference date. The increases varied from 2.9 per cent (Rheinland Pfalz) to 3.9 per cent (Nordrhein-Westfalen, RWE concern). According to the trade union ver.di, the average rise was about 3.5 per cent. The agreement at E.ON increased pay by 2.5 per cent as of 1 January 2002, but restructuring also provided more cash. In 2002 the average rise was 3 per cent. The latest bargaining round in Eastern Germany took place in autumn 2001, when IG BCE and ver.di secured a total general pay rise of 4.1 per cent payable in two instalments. Energy sector wages and salaries in Eastern Germany are now 86 per cent of the average Western German level. Industrial unrest, falling staffing levels and restructuring of agreements currently hamper efforts to present comparable pay and productivity figures. According to ver.di and the statistical yearbook, the average pay of the energy sector employees was about EUR 40,000 in 2001, and the average for blue-collar workers about EUR 35,000.

France

The hourly pay of French employees rose 4 per cent between December 2000 and December 2001. Purchasing power rose by 2.7 per cent. The corresponding percentages for salaried employees were 2.6 and 1.3. Growth was influenced by low inflation and the end of the pay rise moderation that had been associated in 2000 with the transition to a 35-hour working week. Pay claims in 2001 were higher than in 2000. The minimum pay (SMIC) was raised by 4 per cent. In the chemical industry the employer association UIC and five trade unions could not agree on pay rises in 2001 or in 2002. The UIC therefore issued a unilateral recommendation on pay rises. In January 2002 this was 1.55 per cent, and for 2003 it was 1.5 per cent. The recommended minimum pay was EUR 13,156 per annum. This presented no major problem for large enterprise employees, as according to the FCE-CFDT the unions in such workplaces could pressure for pay rises of between 2.5 and 3 per cent. Typical was the solution at Atofina. Here pay was increased by 2.1 per cent but at least EUR 35 per month. Average pay in the chemical industry may be about EUR 28,000.

The 2001collective agreement in the paper industry was signed by the employers' association UNIPAS and the second largest union FCE-CFDT. This was enough to make the agreement binding. The basic wage scales were increased by an average of 3.8 per cent. In 2002 the parties concluded no pay agreements but 1 to 2 per cent increases were agreed at enterprises, with an average of perhaps 1.7 per cent matching the inflation rate. According to both Filpac and employer figures, the average income in the paper industry is about EUR 22,400 per annum. Eurostat, however, reaches a figure of EUR 37,000 for the paper and graphical industry. The differential between these estimates is huge, but the first figure is more reliable, as it does not include the graphical industry.

In the energy sector the parties agreed on a rise of 0.6 per cent in January and July. The total of 1.2 per cent amounted to inflation compensation. In the State-owned electricity giant EdF the parties also agreed on a profit bonus. Its maximum was defined as 3.5 per cent of the total sum of wages and salaries. While employees in the energy sector may earn an average of about EUR 28,000, in the State enterprises that dominate the industry there are numerous worthy social benefits that are not included in this figure.

Italy

In the chemical industry the spring 2002 collective agreement included an average pay rise of EUR 88.00 or 5.6 per cent over two years. The smallest increases were EUR 60 and the largest were EUR 130. A rise of EUR 28e rise occurred in March 2002, in September 2002 there was a rise of EUR 30, and in January 2003 the rise was again EUR 30. The employees also secured a lump sum payment of EUR 62 for January-February 2002 when the agreement was not yet in force. The average income in the industry may be about EUR 25,000, but differentials between enterprises and regions are huge.

The paper industry pay scales were increased by 5 per cent in October 2002. Because of the pay structure, these increases influence wages and salaries almost as such, although not all elements were increased in the same way. The average income of EUR 23,500 per annum quoted in employer statistics seems to be reliable.

In the energy sector the parties concluded a historic first industry-specific collective agreement in summer 2001. In March 2002 the parties agreed on pay rises for 2002 and 2003. The increase is payable in three parts in January and October 2002 and in June 2003. The total rise averages EUR 104, varying from EUR 66.50 at the low end of the scale to EUR 140.50 at the high end. While the 2002 increases in the pay scale are as much as 6.6 per cent, these increases are partly due to earlier integration and restructuring of the pay scales. The real rise in total incomes may be over 4 per cent. The unions estimate that average income is EUR 22,000 per annum in the sector. This is supplemented by generous social benefits that are worth several thousand euros and are typical of the State sector.

United Kingdom

According to the IDS research institute, the chemical industry enterprise-specific agreements signed in 2002 provided general wage rises ranging from 2.5 to 3.5 per cent, with a rough average of 3 per cent. Varying allowances were also paid, shift allowances were increased, and new bonus systems were developed. IDS and the trade unions estimate that the average annual pay is about EUR 30,000. Eurostat has reached a significantly higher figure, as the institute says that UK wages and salaries are 25 per cent higher than those in Finland.

In the paper industry the two-stage increase of the national agreement meant an overall pay rise of 2.75 per cent. The employers estimate that employees earn an average of about EUR 37,000 per annum. Eurostat statistics indicate a slightly higher income level, but these figures include the graphical industry.

In the energy sector the pay award averaged 2.5 per cent, as defined in the second year of mainly two or three year agreements. According to estimates by Eurostat and the unions, average income is about EUR 33,000 per annum. A summary of the pay rises and other significant improvements in the 2002 agreements is show in the following table:

4.1.2. Progress of inflation

Eurostat statistics on price rises indicate that the reference countries were similar in October 2002. Besides Eurostat findings, the inflation estimates of the European Commission for 2003 are also shown. Allowing for these inflation figures, something remained in real terms for wage and salary earners from their nominal pay increases.
 

Sources: Eurostat, European Commission

4.1.3. Present level of nominal wages and salaries

In few matters is there so much "disinformation" as in pay statistics. Comparing such pay statistics is fraught with difficulty. The search for information reveals that outside of the Nordic region there are hardly any reliable pay statistics. Data are not collected in the same comprehensive and systematic manner as in the Nordic countries. Our sister organisations do not know exactly how much their rank and file members earn. There are also enterprises that regard wages and salary data as competition factors of such importance that these materials cannot even be given in confidence to statisticians, still less published.

Another diffdiculty lies in what to compare. Comparison of hourly or monthly pay risks ignoring such factors as 13th month pay, leave allowances and Christmas bonuses, all of which have a significant impact on labour costs.

This means that the most relevant comparative figures are annual incomes. However, it should be admitted at the outset that even this, referring to everything stated so far, is only an enlightened guess.

A good picture of the unrealibility of sources and reckoning criteria comes from another guess. Seppo Kouvonen of Statistics Finland compiled a statistical summary, dated October 8th 2002, for the incomes policy investigation commission entitled "the income level and purchasing power of Finnish wage and salary earners from the European point of view".

Kouvonen's starting points are monthly incomes, and he draws comparisons between data from countries selected in a slightly odd manner. These are Denmark-Spain, Portugal-UK and France-Austria. For some reason Finland's important trading partners Sweden and Germany are not included in the comparison.

The graphs prepared by Kouvonen include industry-specific estimates concerning the paper, electricity and chemical industries. It is claimed in one graph that the pay level of the UK electricity and chemical industries is 25 per cent higher than in Finland. The corresponding difference in favour of Britain in the paper and graphical industry would be over 10 per cent.

According to another graph, the pay level in the French paper industry matches that of Finland but average monthly pay in the French chemical industry is 25 per cent higher than in Finland. The paper industry figures totally contradict the statistics of European employers, which indicate that pay in France is 40 per cent lower than in Finland.

As for the paper industry, the best explanation is that the proportion of the graphical industry in France is much larger than that of the paper industry. The paper industry dominates pay development in Finland but not in France.

The unions consider that the data on average employee income in 2001 collected by the European paper industry organisation CEPI seem realistic. These data are therefore used as the starting point for this study. Only in the case of Norway has the figure provided by the union been used, as this seems to be the most reliable, considering the country's general pay level and existing pay statistics.

No European productivity statistics are available in the chemical and energy industries. The paper industry has data available through CEPI. Productivity in the paper industry grew rapidly in the latter half of the 1990s. According to CEPI, productivity increased between 1995 and 2001 by 6.5 per cent in Finland, 6.7 per cent in Sweden, 3.9 per cent in Germany and 4.4 per cent in France, but by only 1.8 per cent in the USA.

The conclusion of the research into nominal pay data is that it is wise to be critical of data provided by all sources, whether highly-esteemed, influential, official or unofficial, and to use such figures only as rough estimates.

4.2 Taxation and prices

4.2.1 Income tax percentages in 2002

The integration of the European Union took a long step forward at the beginning of 2002 when the people of 12 Member States began to use the euro. The common currency greatly facilitates comparison. Price differences of all kind of products, not least alcohol and motor vehicles stir up the passions. In the same way pressure to reduce taxes has grown.

What is Finland's place in the European comparison?

Clarity in the issue of wage and salary taxation came when the study "International pay taxation comparison 2002", by chief economist Jaana Kurjenoja of the Taxpayers Association of Finland, was published in May 2002. In 17 OECD countries in 2002 the tax percentages of a single wage or salary earner earning the average industrial wage were as follows:

Income tax percentages in 2002 of a single person,
earning EUR 27,500 per annum

Sources: Taxpayers Association of Finland, OECD

Finland, with its 32.5 per cent income tax percentage, falls in the middle group when taxing average incomes of EUR 27,500 per annum in industry. Attention is drawn to Germany's high figure (38 per cent) and at the low end to the UK (22.2 per cent) and Norwegian (26.6 per cent) figures. Sweden is close to the level of Finland.

The graph does not change essentially when targeting a two-child family in which one parent earns the industrial average and the other earns less.

Income tax percentages in 2002 of a two-child family with parents earning EUR 27,500 and EUR 18,000 per annum

Sources: Taxpayers Association of Finland, OECD

One frequently cited problem in Finland is the size of marginal tax. The following graph seems to confirm the existence of this problem. Even  at the level of average incomes in industry a rate of 46.6 per cent is payable on additional income. This removes Finland towards the top in European statistics.

Marginal tax percentages in 2002 of a single person
earning EUR 27,500 per annum

In the marginal tax graph attention is drawn to Sweden, a high taxation country that has been able to define its tax scales so that additional income at the level of average incomes has a marginal tax rate of only 32 per cent. This is a question of the steepness of tax rate progression. In Sweden the curve slopes more gently than in Finland. Therefore those on small incomes pay relatively more tax in Sweden than in Finland.

4.2.2 Price levels in various countries

Price comparisons have become more common and easier since the euro was introduced. When analysing the purchasing power of wages and salaries, the influence of price differences must be included in the calculation. The following table considers the price level for private consumers in various countries. The OECD updates these data on a monthly basis.

Price level of private consumption in June 2002 (Finland = 100)
 

Thus, Norway is 17 percentage points more expensive than Finland, but Germany and France are 14 percentage units cheaper. Italy is as much as 27 percentage points below the Finnish level. Finland and Sweden are almost equal but the relation varies with changes in the exchange rate between the Swedish crown and the euro.

4.3 Purchasing power

By combining pre-tax incomes per annum, income tax percentages and purchasing power parity corresponding to the relative price level (marking the average price level in the EU as 100) we can compare the purchasing power of chemical, paper and energy industry employees in the countries covered by this study.

Chemical industy  

Paper industry  

Energy sector  

By nominal pay the Finnish paper industry employees fall in the top group of paper industry employees in the reference countries, but Finnish chemical industry and energy sector employees fall in the middle group.

The situation alters radically when taxation and price levels are taken into account. The tax percentage is estimated according to income per annum. At the level of these incomes the tax rate in Finland is much lower than in Germany but a little higher than in Sweden and Norway. Employees in the UK rise strongly, thanks to a low income tax rate.

The price level in Finland is the second highest of the reference countries, falling 17 percentage points below the most expensive country Norway but a full 27 percentage points higher than Italy. Italians do not do well in their nominal pay figures, but their lower prices result in a dramatic recovery. The UK also does well in the last column: purchasing power, even though UK prices are 10 per cent higher than the EU15 average.

This comparison is only a general guide, but it shows how the real purchasing power of wage and salary earners is influenced by the nominal pay paid by the employer, by income tax and by the prices of products and services.