Observations on wage formation in the corporate sector at the individual level

Finnish labour markets are often characterised as rigid and as a central source of the country’s economic problems. It is frequently argued that wage adjustments do not respond sufficiently to cyclical conditions, and that wages do not vary enough across worker groups to support efficient economic adjustment. However, analysis of employee-level data from the corporate sector suggests that such claims are, at a minimum, overstated.

Observed annual wage changes have adjusted with considerable sensitivity to major shifts in labour market conditions throughout the 2000s. In addition, wage growth varies substantially across groups, for example by level of education. In recent years, the relative labour market position of highly educated workers compared with less educated workers has converged significantly. This development is likely cyclical in nature. (AI translation)

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