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On February 18th, I blogged about employment and people’s expectations of it. In the post I also touched on the issue of labor unions and how they affect people’s lives these days, unfortunately too often in a negative way. To my readers outside Finland, we’re just into the second large nationwide strike this week from the same union – AKT (Transport Worker’s Union). First they were on strike with the bus drivers and now they pulled their big guns out as they’re on strike with the dock workers.

Dock workers are a crucial logistic bottle neck in many economies that rely on sea based transportation to export and import goods. If they stop working, nothing moves through our borders – in an industrial context. Therefore, they are the key to a nation’s wellbeing – in a sense. The situation now is that Finland’s dock workers are on strike, putting our whole country to a stand still.

To some, very little degree I understand the concept of being on strike. In my previous post I argued that it has been a major part of the wellbeing of our society as workers have been able to stand up and defend their rights to make working conditions civil. However, in today’s society I have very little understanding for being on strike – very little.

The current strike we’re experiencing isn’t only stirring up disgust in the society, but it’s damaging our slow economic recovery in a very harmful way. Helsingin Sanomat, in their online version, had a poll whether the right to be on strike should be limited – 50% of people supported this move and another 50% were against it. This clearly divides our society. In another poll by Ilta-Sanomat, 73% of the readers did not justify being on strike during recession and times of economic diffuculty. By no means are these polls academic or show any scientific relevance on any level, but I do believe they cast the voices of the public to some degree.

Many people relate the AKT strike to the Paper Union strike a few years back when they put the paper industry to a halt, causing millions of euros of lost revenues each day. The situation these days is that the paper union has lost thousands of jobs in Finland, partly or should I say mostly, due to those strikes. A two week strike easily wiped out the possibility to keep the year profitable which would have meant more investments and possibilities to survive in the future.

I’m guessing AKT is signing its contract to follow in the foot steps of the Paper Union. They will inevitably face the more extreme actions of the employers in keeping the industry profitable and somewhat running. This in essence will mean that the employer’s side of the table will begin to take every possible step to renew the labor force with more motivated workers. I’m not even going to go through the demands the union is on strike for, there simply cannot be any understanding for their actions – whatsoever.

Another interesting reaction to this strike has been the temporary shut down of the UPM Kymmene Rauma paper factory. They’re running very lean processes there and the factory lacks storage for its products, meaning everything they manufacture is immediately taken to the docks. Now that the docks are at stand still, the paper factory has been forced to shut down for the duration of the strike. UPM Kymmene has also stated that they have the right to stop paying wages to the workers after 7 days due to an external strike that has caused their business to halt. This, in the end will make those paper union workers dig into their union savings. A nasty outcome, that I somehow secretly enjoy watching.

My only recommendation is that someone in our government step up and start discussions on the right to strike. When a 3000 strong group is able to bring the country to a stand still and harm the economic wellbeing of hundreds of thousands of people – no one can understand a cause that would justify this. We need to begin to renew the way these negotiations are handled, our wellbeing cannot be harmed by any selfish group of people only looking to improve their own work conditions above others’ for a short period (because the markets will always right them in long term).

I have no understanding of whatsoever for the current AKT strike. Actually their strike disgusts me in how they show no respect for the wellbeing of our society.

Update @ 11.17pm on March 4th, 2010: Reminded by a friend, Finland is actually nearing the top position of lost workdays due to strikes in the EU. Two countries remain to be overtaken by the unions, they are Spain and Italy. There’s a well written post about strikes in Finland by Harri Nummila on the Statistics Finland website.

Furthermore, these statistics compare the amount of lost work days we endure in relation to other European countries.

I thought of writing about this to ArcticStartup since it relates to the startup ecosystem so closely, but decided to post it on my personal blog as it is such a strong personal opinion.

Taxes in society work to distribute wealth, run governmental organisations to generate services for everyone, enable running of cultural services that wouldn’t be possible under market conditions, make education free in our country and for a ton of other reasons. In the end, they are in place to make our society a better place for everyone to live in.

Finland, like most civilised countries aim to treat all its citizens and organisations in an equal manner. This guarantees equal opportunities and rights for everyone involved. However, in some cases it is not favorable for the society as a whole to apply the same set of rules to everyone. Examples of this can be seen in our progressive taxation, the more wealthier you are the more you pay taxes in relation to your income. Everyone understands that while those being taxed more understandably do not prefer to be taxed more, but it works extremely effectively to generate more wellbeing for everyone else – thus justifying the unequal treatment of tax payers.

Like progressive tax, I strongly believe there is a case for a similar kind of unequal treatment in taxes for entrepreneurs. I’m talking about entrepreneurs here in general and not distinguishing between growth entrepreneurs and other kind. Unfortunately very few people in our society have realised the importance of this group to our social well being.

While two thirds of the Finnish population work at large companies, it may not be obvious to them that 95% of all companies registered in Finland are SMEs. Not only does one third of the population directly depend on entrepreneurship as their prime source of income, it is a key component of our economy in the way of generating employment, goods and services that larger companies will never engulf on. To generalise, we can say that entrepreneurs are a key component of welfare in our society.

In the recent years Finland has taken many steps toward making entrepreneurship more appealing, having finally realised its importance as large companies aren’t always employing as planned. However, there is a very simple yet extremely effective mechanism left unused that I strongly believe would only bring value to our society in the long term.

The mechanism I’m talking about, after the long prelude, is income tax for young companies. I have no understanding what so ever, when our government believes it is building a better society in the long term by taxing growing companies in the short term.

We have worked extremely hard for the past 2,5 years to build ArcticStartup the phenomenon it is today. We’ve put in tons of sweat and countless amounts of midnight oil to build it into a successful company. In 2009 we worked close to 10 months, alongside our day time jobs to make the machine turn – effectively keeping its costs down to a minimum. We also managed to sell quite a bit of advertising and visibility to our partners who have received very valuable coverage in a tough niche. All this hard work has resulted in us creating a profit for 2009, which does not carry over too well through 2010 as we’re putting in a lot resources to developing our business further.

All our hard work, countless hours and determination give us the opportunity to enjoy a very limited profit for 2009 which is then taxed on by the government. While I understand that taxing is in place to build more value, I believe in this case it does dramatically more harm than originally thought.

While the amount of taxes we accrued is very reasonable, I think there are justified reasons why young companies should not be taxed on their income during their first years of infancy. The very essence of effectiveness; startups have a chance at success because they create things thousand times more effectively than large organisations could ever do. This applies to the government as well, entrepreneurs make a lot more good with the money than our governments could ever do – at least on this scale.

It’s not recommended to whine in length about something if you don’t offer a solution. Here are my 2 cents. Any form of legal corporate entity that is under three years of age or has accrued less than 500 000 euros of profit and keeps that money in the company (as opposed to paying out dividends) – should not be taxed on their possible profit. While this might lower the amount of income tax the government collects from young companies, it supercharges them for success in the long term.

This single change in tax law, would make the Government of Finland our economy’s largest venture investor. This would create incredible implications in the long term through more possibilities for entrepreneurs to succeed, which in turn would make entrepreneurship more appealing and in the end – it would make our society a much better place to live in.

Google Street View has finally arrived to Finland and of course I had to drive around to my old place to see if my bike was there. :)

Back in January I helped a man called Saul Singer on some facts regarding Finnish entrepreneurship and the ecosystem we have. He told me he was writing a book about Israel and its startup ecosystem, thus I was glad to help the man in his project. Today I saw a tweet from Saul Singer that his book was #11 on New York Times Political Bestsellers list! Not only is the book doing well on NYT, but it’s also enjoying its third week on the Wall Street Journal business book list as well as on the Washington Post non-fiction/hardcover list. Well done!

Israel has been an inspiration to the Finnish startup ecosystem in a way that not many know. The current Vigo accelerators we have in this country are partly a result of the learnings from Israel and their ecosystem. The efforts being put across by our government are also a result of certain individuals hard work towards marketing growth entrepreneurship in Finland. So in summary, Israel has been somewhat of a benchmark for us Finns.

I managed to query the book with Amazon and in the end he did include a comment from me comparing Israeli and Finnish startup ecosystems. Mr Singer was kind enough to send me a copy of the book so I’m thrilled to read more about the reasons why Israel is doing so well compared to other parts of the world.

If you want your copy of the book, Amazon has Start-up Nation on sale for a mere $15.78 USD.

I’ll be heading to Tampere (too!) early tomorrow morning. Why? One of the best Finnish conferences is being held there, Mindtrek. It’s a 2-day conference and will see some 800 people all together over the course of the two days. Needless to say I’m glad the conference has taken a big role towards promoting startups and emerging companies.

ArcticStartup is partnering with Mindtrek to host the Startup Launchpad at the event. We’ll kickstart the stream at 1pm and finish around 3.30pm. I’ll be hosting the stream, so don’t hesitate to come and say hello once were finished.