Aki Kangasharju, CEO of the Finnish Business Research Institute (Etla), knocks out the idea of a minimum wage in Finland.
In his article, Kangasharju refers to the EU Commission's recommendation to increase minimum wages.
In Kangasharju's opinion, it is not worthwhile for Finland to try to raise the labor costs of the less educated, nor to introduce minimum wage legislation.
The Minimum Wage Act is now in force in 21 EU member states.
According to Kangasharju, an increase in the minimum wages would reduce the use of labor input in companies, as employer contributions have raised the price of low-wage labor to a high level relative to the expected productivity of labor input.
According to Kangasharju, the Minimum Wage Act could be in place if wages were negotiated at the company level.
- In the United States, it has been found that raising the minimum wage can in some cases even increase employment.
The research result is based on the fact that too low a wage level has not encouraged people to take up work and higher wages have made it more attractive to accept a job offer, Kangasharju writes.
In Finland, the lowest wages in collective agreements are high when compared to other countries, Kangasharju says.
- If the minimum wages were to be regulated by law, the decision-making power on minimum wages would be transferred from the labor unions and companies to Parliament, with political passions leading to an increase in the minimum wages.
According to him, there is also an incentive problem in Finland, which, however, is not solved by raising the minimum wages.
- The income transfer system should ensure that the net income of the unemployed does not change much under the reform, so the impact on income disparities would be relatively small.
However, public spending would increase, the sustainability gap would worsen, and declining employment would increase the exclusion of the low-skilled.
According to Kangasharju, the most inequality in Finland is caused by the fact that many less educated working-age people are driven out of the labor market.
According to Kangasharju, more work should be left to receive work and education should be increased so that more Finns would do high-paid work.
In this way, there would be better jobs for the less educated.