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Aging Labor Market Could Hurt Finland

OECD suggests lowering employment taxes and encouraging workers to stay longer

Finland's aging population combined with a rigid labor market could pose a threat to the country's future economic development and competitiveness, the Organization for Economic Cooperation and Development (OECD) said June 3. While the Nordic country's economy has performed well in recent years, it should lower employment taxes and try to entice people at retirement age to continue working for longer, the OECD said.

Finland is the world's third-fastest aging nation, after Japan and Italy, according to United Nations statistics. Its labor force is expected to begin declining by 2010 and in 2015 about 20% of Finns will be aged 65 or older.

"Different ways of encouraging retired people to take up part-time work should be explored," the OECD said, suggesting that Finland weaken its unemployment benefits and adjust its generous pension system.

The organization also warned that the Finnish labor market was not flexible enough, cautioning that high wage increases negotiated in 2007 could push up wage inflation in coming years and undermine competitiveness. And while Finland's unemployment rate is relatively high, 6.9% last year, according to Statistics Finland, some sectors are suffering from labor shortages. One solution suggested by the OECD was for the government to increase resources for educating and training migrant workers in order to make it easier for them to settle in Finland.

Copyright Agence France-Presse, 2008

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