SPEECH BY MR MARTTI AHTISAARI, PRESIDENT OF THE REPUBLIC OF FINLAND AT WIDER INSTITUTE FUNCTION IN CONNECTION WITH THE WORLD SUMMIT FOR SOCIAL DEVELOPMENT IN COPENHAGEN ON MARCH 11, 1995

As a representative of the WIDER Institute's home country, Finland, I am pleased to be able to attend this function, which marks the publication of an important volume dealing with what is perhaps the most critical socioeconomic problem of our time. With only a very few happy exceptions, unemployment afflicts all UN member countries, and the worst-case scenarios for the future world employment situation are nightmarish.

Soon after my inauguration, I asked some prominent citizens, representing a variety of viewpoints, to prepare a long-term programme for dealing with unemployment in Finland. Joblessness had soared from 3.5 per cent in 1990 to almost 20 per cent in 1994. I would like to take this opportunity to present a brief summary of the results of the Finnish group's work, which may be of interest to other countries in similar positions.

The objective of the programme is to reduce unemployment to about 8 per cent of the labour force by the year 2000. This would mean a reduction at a faster rate than that envisaged for the European Union as a whole in the White Book on growth, competitiveness and employment.

The programme for achieving this ambitious goal rests on three pillars:

- Strong, long-term economic growth;

- Increasing the employment content of growth; and

- Social responsibility for reducing unemployment.

The rate of growth would have to be of the order of 5 per cent per annum. Achieving this high rate presupposes a national commitment by all significant economic and political actors. It also implies sharp cuts in public expenditure in order to achieve a downturn in the public sector borrowing requirement, thereby influencing interest rates. International competitiveness must be maintained to ensure a current account surplus and help keep interest rates low. This places a heavy burden on the social partners in the labour market. The State must do whatever can be done in collaboration with them to raise productivity, increase education and training and improve other aspects of working life.

An increase in the employment content of growth can be accomplished through greater flexibility in the labour market with the aim of lowering the threshold to new employment opportunities. Reducing overall wage bills by cutting taxes and indirect labour costs is possible if the revenue shortfall is replaced by energy- and environment-related taxes and user fees. A feature that is both politically important and controversial is reform of tax and social security legislation with a view to inducing the unemployed to seek work rather than surviving on unemployment benefits and socialsecurity. New features like job rotation, the principle of lifelong education and sabbatical leaves can contribute considerably to enhancing the quality of working life.

Social responsibility in this context means, among other things, special measures to mitigate long-term unemployment and youth unemployment. Special budgetary allocations must be considered for these purposes. In Finland, the particularly depressed sector of housing construction must also receive special attention.

The reception given to these proposals in Finland has been, by and large, encouraging. Both the Cabinet and the labour-market partners have made favourable responses. The real test will come, however, only after the Parliamentary elections a week from now. Unemployment has been a major issue in the campaign.

Thank you for your attention.