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Helsinki (16.08.1998 - Kimmo Kiljunen*) The average Finn has a higher income level nowadays than ever before. It is therefore incredible that the economy and ordinary welfare service provision should be in such a critical condition. The problem cannot be lack of material resources. Rather it is a question of finding the political will for social development.

The main problem is a tendency to make employees pay for economic problems in the public sector. In many municipalities, decision-makers try to balance their budgets by temporarily laying off staff and in the worst cases even though redundancies.

This policy undermines morale among employees, making efforts to improve the economy still more difficult. Expertise and co-operation between municipal staff is essential if local government functions are to be made more effective and rationalised. Lay-offs and the threat of redundancies are poorly suited to this aim.

Furthermore, when public sector employees are laid off or made redundant, they do not merely vanish from the public sector. Instead, an active employee becomes a passive consumer of unemployment compensation and income support. To make matters worse, the public sector also loses tax revenues. There is no sense in such policies.

The government of Prime Minister Paavo Lipponen is trying to reduce unemployment by one half - and some positive results have been achieved through this effort. The unemployment rate has slowly fallen. How much better the situation would be if the public sector, and especially the municipalities, could adopt a firmer role as employers instead of decreasing their interest in employing people. Demand for public services has steadily increased.

During the 1990s the municipalities have cut their staffing levels by 50,000 and they currently have about 400,000 employees. The State has reduced its staff even more drastically, from 210,000 to less than 130,000. This reduction is partly due to changes in the status of several public sector organisations which have become privatised commercial institutions and companies. Even so, this process has led to the loss of 25,000 jobs.

If the State sector had not axed 75,000 jobs, we would clearly be on the path to halving unemployment. This figure is equivalent to three percentage points of the rate of unemployment.

It must be remembered that the State and municipalities are not commercial enterprises. Problems of management in the economy cannot be solved through business economics, nor does this provide a basis for evaluating results.

The task of the public sector is to provide public services, which both increase our well-being and equalise our life opportunities.

The success or failure of municipal functions cannot be read on a balance sheet. The only measure of success is the quality of the service provided. This is something which we subsidise by paying taxes. Ultimately public sector resources will suffice for what we want to have. The State and the municipalities have the right to use coercive measures to acquire resources. Business enterprises have no such right.

Economic problems have undoubtedly also forced the public sector to make savings. There are also circumstances which demand staff cuts for the public good. In such cases cuts are beneficial to the public.

However, we are all taxpayers and social security clients. Those in weaker positions are more dependant on public services.

This means that a demand to cut back on public services is also a political demand. Some people seek to improve society in a manner which mainly favours those in a more privileged position.

* Kimmo Kiljunen is a researcher specialised in third world development issues. He has been a Social Democratic Party Member of Parliament since 1995.

This article was originally published in "Auto- ja Kuljetusala" 1-98, the magazine of the Transport Workers Union.