The power of the economic outlook: An ideational explanation of the distinct pattern of Finnish wage setting within the Nordic context

Abstract

Industrial relations scholars are paying increasing attention to the role of ideas in explaining shifts in bargaining systems and wage policies. This article contributes to this growing body of literature by conducting a meso-level analysis of the uses and impacts of ideas in wage regulation policy processes in coordinated market economies. Through our in-depth case study of the Finnish policy process leading to the Competitiveness Pact of 2016, we argue that certain ideas – which we call the ‘economic outlook’ – prescribed and legitimized exhausting institutional resources in wage regulation and enabled temporary consensus among divergent interests regarding wage policy. The economic outlook linked and enabled compromises between wage policy and wage regulation interests and effectively solidified a commitment to an uncertain policy process. The case study suggests that an ideational analysis of policy processes can offer explanations for shifts in wage policy and regulation that deviate from macro-level regime shifts. While all Nordic countries have faced similar economic and institutional reform pressures, Finland’s readoption of centralized bargaining shows that national policy ideas can drive distinct industrial relations patterns within the Nordic context.