Bargaining on Pensions: The Finnish Pension Reform of 2001–2002

Abstract

A major reform of the Finnish private-sector earnings-related pension system was negotiated in 2001–2002 between central organisations of employers and trade unions and representatives of the central government. This paper describes the reform, views it in the light of previous reforms, and analyses the effects of the reform on the welfare of different cohorts and different educational groups. The analysis of the reform showed that current old workers generally kept their positions, and even improved them. Younger workers lost somewhat. Future workers will gain. Early retirement in general was punished, which on average will hit low-educated employees harder than more educated groups. The reform process also showed that the relative positions of trade unions and between-union comparisons were important.

This paper is part of the research project “Rules of the game in the labour market: Industrial relations, the bargaining system and income policies in the 2000s”, financed by the Finnish Work Environment Fund, and carried out jointly by ETLA, The Research Institute of the Finnish Economy, and the Labour Institute for Economic Research. I wish to thank Kari Alho, Eero Lehto, Ismo Risku and Eila Tuominen for comments.