Incomes Policy in Finland: Economic and Social Effects in a Comparative Perspective

This paper examines the performance of the Finnish economy during the so-called incomes policy period, 1969-80. For this purpose Finland is compared with the other OECD countries both before and during the incomes policy period. The results suggest that in terms of economic growth, inflation and unemployment, Finnish economy has improved its performance, particularly before the economic recession of the mid-seventies. Cross-national comparisons point out that the recession has been met in various ways: some countries have restrained inflation, some unemployment. Secondly, the paper examines the effects of incomes policy agreements on the growth of social expenditure, the result being that incomes policy cannot be regarded as responsible for the growth of social expenditure in Finland. Thirdly, effects on income distribution are analyzed. Here incomes policy has played a role: income inequalities diminished during the first five years of incomes policy. Since then, they have not changed. The paper ends by discussing the impact and nature of incomes policy.