Amid rapid growth and with seemingly benign outlook, generous wage increases were agreed upon, and the contracts mostly extended for about two years. Then the financial crisis struck, leading to slowdown in wages in many countries while Finnish wages diverged. Why was no correction made after the contracts had expired?
The reason probably has a lot to do with the relatively muted increase in unemployment in Finland. Employment has been supported by growth in domestic demand, especially household consumption. Domestic demand has also been supported by loose fiscal policies and low ECB interest rates.