Overall, merchant tonnage tripled between 1920 and 1939. At the same time, the number of vessels was reduced by half, but this did not translate into greater efficiency aboard ship. The transition to steamships was achieved largely by purchasing obsolete vessels cheaply from abroad. In addition to trained maritime professionals, these ships required coal stokers. Simple manual labour remained common, even though hauling ropes and loading cargo increasingly belonged to the age of sail.
Vessels sailing under the Finnish flag retained their competitiveness until the Second World War largely through traditional means. The most important factor was low labour costs. Finland also imposed less demanding standards on accommodation aboard ship than those prevailing elsewhere in Western Europe, for example with regard to heating. These cost advantages ultimately resulted in approximately one-fifth of Finnish tonnage passing into foreign ownership before the war. To some extent, Finland effectively became a flag-of-convenience state. The state did not support the maritime sector, just as it had not previously supported social protection for seafarers. Because of political disputes within the trade union movement and employers’ general opposition to collective agreements, sufficient pressure for improving conditions failed to materialise.
Despite the technological transformation of merchant shipping, the interwar period witnessed what might be described as a typical “poor man’s revolution”. Compared with industrial workers, the living and working conditions of seafarers improved only through a new catering regime and a few additional days of annual leave in the late 1930s. The two-watch system—twelve hours on duty followed by twelve hours off duty—remained in force. Working hours therefore continued to be longer than in industry and most other sectors, where the eight-hour working day had been introduced as early as 1917. Wage payment practices also retained many old and imprecise features. Even in scheduled shipping services, discretionary advances were common, while the actual wage was often paid only when the seafarer left the vessel.
Working conditions for crews in the maritime sector improved significantly later than those of industrial workers and employees in many other occupations. Only during the 1940s and 1950s did seafarers succeed in negotiating wages, working hours and social benefits comparable to those enjoyed by workers ashore.
The National Pension Fails, Except as an Investment
The entry into force of the National Pension Scheme at the beginning of 1939 could hardly have come at a worse moment. Finland was almost immediately drawn into the turmoil of the Second World War. In principle, the new legislation provided comprehensive coverage. All persons between the ages of eighteen and sixty-five were included in the scheme. Ship’s boys and other very young seafarers were therefore unable even to begin accruing pension rights. At the same time, those who had already reached the age of fifty-five when the legislation entered into force were excluded from the system. The oldest seafarers typically belonged to the officer corps and may have retained benefits from the abolished Pension Institution or from shipping companies.
Nor did the universal pension promise any rapid improvement in pension security for those insured. The original National Pension Scheme was a savings-based insurance system into which employees and employers initially contributed a combined one per cent of income, rising to two per cent from 1944 onwards. The system involved a lengthy maturation period. The first disability pensions were not paid until 1942, while old-age pensions commenced ten years later, in 1949. In its original form, the scheme would not have reached full maturity until around the turn of the millennium. The pensions, modest from the outset, were further eroded by wartime and post-war inflation, while supplementary benefits provided little meaningful improvement.
Apart from the National Pension Scheme, no pension arrangement based on maritime employment existed between 1937 and 1956. As a low-yield savings insurance system, the national pension offered little comfort, particularly to unmarried seafarers without relatives to support them in old age or after the loss of working capacity.
For the maritime industry, however, the National Pension Scheme provided valuable capital during difficult years. Significant amounts of pension funds were invested in Merivienti Ltd., a company established by Finland’s state-owned forest industry in 1947. In a country suffering from a shortage of merchant tonnage, national pension assets were used to purchase ships and establish much-needed regular shipping connections with the United States. The shipping company owned by Enso-Gutzeit until 1982—better known as Finnlines—also launched what was perhaps the most visible aspect of post-war shipping development by commissioning the first passenger car ferries in the 1960s.
War and Its Sacrifices Reinforce the Case for Pensions
Pensions were hardly at the forefront of people's minds when Finland first had to survive three wars: the Winter War, the Continuation War and, finally, the Lapland War between 1939 and 1945. Likewise, reform of maritime legislation was pushed aside during the war years by far more pressing concerns.
The war years took a heavy toll on civilian shipping and on seafarers themselves. The number of lives lost is estimated at around 350. Compared with Finland's total wartime losses of approximately 90,000 dead, this may seem relatively modest. Even neutral Sweden, however, lost some 1,500 people at sea as a consequence of the war. These far greater losses were largely due to the fact that Sweden's considerably larger merchant fleet, benefiting from the country's neutrality, continued to operate on a much broader scale than Finland's.
For those who survived the war, dangerous conditions and rapidly changing political circumstances brought tragic consequences to many unfortunate seafarers, including women. Finnish seafarers interned throughout the British Commonwealth in 1941, and later that year in the United States, were generally treated properly. By contrast, after Finland's co-belligerence with Nazi Germany came to an end, the crews of Finnish ships in German-controlled territory were sent to concentration camps after unanimously refusing to cooperate. Finns were forced into labour, and some disappeared—most likely dying or being killed under inhumane conditions.
The sacrifices and losses of war extended far beyond those who lost their lives. More than twice as many Finns were permanently disabled as were killed. In addition, those who died left behind large numbers of widows and orphans. All of them required support, reinforcing and strengthening the idea of a shared social responsibility.
The war itself also fostered new ideas about building a better world once peace returned. The total mobilisation of nations to achieve victory in war—warfare—should, after victory, be transformed into a new era of welfare. The principal architect of this vision was the British economist and social reformer Lord Beveridge, whose plans were already being presented while the war was still in progress.
Although Britain was at war with Finland, Beveridge's ideas reached Finland through Sweden, with which the Seamen's Union maintained perhaps even closer contacts than usual during the war years. As the war continued, the Union repeatedly drew attention to the almost non-existent pension protection available to seafarers. After peace was restored, however, improving pension protection remained secondary to the more urgent goals of raising wages and improving working hours and working conditions in the maritime sector.
Once hostilities had ceased, examples could be drawn from every direction. In the other Nordic countries, comprehensive pension protection was already decades ahead of Finland's. In the maritime sector, Finland's western neighbours had already introduced statutory pension schemes.
Many also believed that inspiration could come from the East. The victorious Soviet Union actively promoted its own social security system through propaganda, and these ideas found an audience through the strong left-wing movement of the period. Niilo Wälläri, who had served as President of the Seamen's Union since 1938, also joined the Finnish People's Democratic League (SKDL), hoping to win a seat in Parliament in the 1945 elections. Soon afterwards, however, he returned his full attention to trade union affairs.
Fairer Winds for Seafarers
Guidelines for Seafarers' Pension Protection from Seattle 1946
Shipping was already a global industry eighty years ago. As the world's merchant fleets were rebuilt after the devastation of the Second World War, the international political climate favoured efforts to improve the welfare of maritime workers. At the International Labour Organization (ILO) Conference held in Seattle in 1946, after the organization had become a specialised agency of the United Nations, delegates agreed on common labour standards for the maritime sector.
Finland was represented on maritime matters by Niilo Wälläri, who had spent his youth in the United States as an emigrant. The Finnish Shipowners’ Association was represented by Hilding Hallberg, Master of Laws. The remaining Finnish delegates were members of the diplomatic mission, making Wälläri and Hallberg the key Finnish representatives in matters concerning shipping.
The work in Seattle was carried out in committees. Wälläri and Hallberg served on the committee responsible for wages, working hours and ship manning, regarded as the most important for the maritime sector. Finland’s small delegation was, however, unable to appoint its own representative to the committee dealing with pensions. In June 1946, the Seafarers’ Pensions Convention was adopted. Finnish shipowners opposed the Convention because they still supported the Officers’ Association’s proposal for a separate pension scheme for ships’ officers. The proposal, however, never progressed beyond the discussion stage.
The Seattle Convention required countries that ratified it to establish and guarantee pension protection for all civilian seafarers principally employed aboard merchant vessels. The Convention contained a number of detailed qualifications, but the essential criterion was that the person should be engaged primarily in maritime employment rather than, for example, fishing. Public officials were likewise excluded so that individuals would not accrue multiple pensions simultaneously.
The Convention laid down detailed pension provisions that, in their main features, were implemented in Finland ten years later through the Seafarers’ Pensions Act (MEL). It recommended a pension age of either fifty-five or sixty years. The Convention also incorporated the now familiar accrual principle of 1.5 per cent of pensionable earnings for each year of service where the pension age was fifty-five (2 per cent where the pension age was sixty). The pension was calculated by multiplying the relevant percentage by the years of service and the pensionable final salary. The Convention considered a total contribution of 10 per cent of the seafarer’s total earnings sufficient to finance the pension. The seafarer’s own contribution was to be limited to no more than half of that total.
The Convention recommended—but did not require—the principle that accrued pension rights should be preserved. As an alternative, it proposed reimbursement of pension contributions to those “who cease to be subject to the Convention”, a solution that was likewise incorporated into the original Seafarers’ Pensions Act (MEL).
The Convention also recommended that the administration of the pension scheme, including its appeals procedure, should be jointly managed by shipowners and seafarers. Fraudulent conduct, however, could justify reducing or suspending pension benefits. Wälläri, who persistently defended his members’ interests through the threat of industrial action and strikes, likely supported these principles aimed at preventing abuse. He was, after all, known as a committed teetotaller who demanded honesty and integrity from his own members as well.
Another innovation was that, for the first time in the history of the ILO, it was considered possible to implement the decisions of an International Labour Conference through collective agreements. This further strengthened the position of the maritime sector—and especially the Seamen’s Union—in post-war Finland. Shortly after returning from Seattle, Wälläri told the Union’s representative assembly in the autumn of 1946 that if “conditions cannot be improved through legislation, they must be improved through agreements.” In other sectors as well, employment-based pension protection initially advanced through collective agreements. Although the Convention was ratified, the decisions taken in Seattle influenced developments primarily as guiding principles and a moral framework rather than as directly binding obligations to establish pension protection.
Shipping Recovers and the Position of Seafarers Improves
The losses of merchant tonnage caused by the war and its aftermath eventually amounted to 60 per cent of Finland’s 1939 merchant fleet. This figure included vessels handed over to the Soviet Union as war reparations, most of which were among the fleet’s newest and most modern ships. In addition, Finnish shipyards built further vessels as war reparations that otherwise could have been delivered to domestic shipowners.
Although the merchant fleet continued to suffer from a shortage of vessels for many years after the war, there was no shortage of demand for sea transport. After more than five years of coffee rationing, the Finnish public followed the return voyage of the coffee ship Herkles, operated by the Finland–South America Line, with great anticipation through newspapers and radio broadcasts during the late winter of 1946. For the first time since the 1870s, shipping attracted substantial investment from other sectors of the economy, including private companies and public funds, as described earlier in connection with the National Pension Scheme. Shipping was an attractive investment because post-war shortages affected both Finland and many other countries recovering from the war. At the same time, exports expanded as the Korean War and other international crises increased global demand for Finnish forest products and other exports.
Winter navigation also improved after Finland had fulfilled its war reparations obligations in 1952 and was once again able to build icebreakers for its own use. Finnish-flagged vessels played a particularly important role in winter shipping. Following the Second World War, Finland’s merchant fleet rapidly developed from the level of a developing maritime nation to a good European standard. Unlike in earlier decades, the state began supporting shipping from 1944 onwards through additional tax concessions. Repeated devaluations also kept the price level of Finnish shipyards competitive for domestic shipowners. Nevertheless, the modernisation of the fleet did not begin to have a significant impact until the late 1950s.
Wage Increases Were Traded for Pension Security
The organisations representing the maritime sector, and especially the Seamen’s Union, played a prominent and influential role in post-war Finland. Of all the trade unions, only the Seamen’s Union succeeded in securing a closed shop for its members. Employees of Finnish shipping companies were required to belong to their trade union. In return, the Union guaranteed the honour and professional integrity of its members. To this end, it even maintained its own disciplinary system. The authority formerly exercised by shipmasters, which had often led to arbitrary treatment, was replaced by the discipline of solidarity among fellow seafarers.
Through its influence, the Union first succeeded in bringing the seafarers’ centuries-old low wages into line with modern standards and then in improving working conditions aboard ship, including working hours (1945) and accommodation (1948). These reforms were further reinforced by international conventions. During the years following the Second World War, work and life aboard ship changed more profoundly than they had during the previous two centuries. Even so, post-war inflation and widespread shortages remained persistent problems. Inflation proved difficult to control despite the so-called “industrial peace”, enforced through wage and price controls.
Pension security was not forgotten amid these immediate improvements in the maritime sector. The need for a pension scheme was recognised as an urgent issue by the Maritime Labour Committee of 1948. Acting on its recommendation, the Government appointed a special committee in the spring of 1952 to examine the matter. Before this, efforts had been made to advance the issue through parliamentary motions. The establishment of a tripartite committee on seafarers’ pension security became possible because the parties had already cooperated successfully in preparing the Seamen’s Act, which was adopted in 1952.
Teivo Pentikäinen, Head of the Insurance Department at the Ministry of Social Affairs, was appointed chair of the committee. Niilo Wälläri was the sole representative of all seafarers, while the shipowners were represented by Mikko Mannio, Master of Laws. The committee secretary was Erkki Mäkelä, also a Master of Laws from the Ministry of Social Affairs, who drafted the legislation. The committee—and Wälläri in particular—were optimistic that the question of seafarers’ pensions had effectively been settled when, after nearly two hundred meetings, the committee submitted its report for consultation in 1954. Confidence grew further in January 1955, when all employee organisations in the maritime sector and the shipowners’ employers' organisation agreed to translate the committee’s proposals into legislation. The parties undertook to conclude collective agreements with identical provisions, under which part of future wage increases would be exchanged for pension security. The essential condition for the progress of the legislation was that every party accepted and remained committed to the agreement in its entirety. The consultation process produced no significant proposals for amendment.
Perhaps the greatest challenge was ultimately persuading the Seamen’s Union’s own members. Many crew members would have preferred immediate wage increases, and the value of pension security was not fully understood by everyone. Wälläri defended the proposal in his characteristically colourful style, arguing that “if you can obtain a twelve per cent benefit by paying four per cent” – the seafarers’ one-third contribution – “that is worth more than a wage increase.” In addition, Wälläri faced opposition from certain unions and individual officials for personal reasons rather than because of any fundamental disagreement with the pension proposal itself.
Accepting pension security was not a bad bargain for the shipowners either, as it helped to ensure a stable workforce on Finnish vessels. At the same time, older seafarers could retire with dignity from increasingly technical and modern ships instead of long-serving and loyal seafarers being dismissed after decades of service. As employers, the shipowners would contribute the same four per cent to the Fund as the employees. The State would finance only one-third of the initially modest pension expenditure of the future Fund. Securing industrial peace among a workforce that was indispensable to the national economy but prone to industrial action would therefore impose only a limited burden on public finances for many years to come.
Despite the completed proposal, the legislation nearly stalled in the Government because the Seamen’s Union had simultaneously been engaged in industrial action during the winter of 1955. The Government threatened to have the icebreaker Voima crewed by naval personnel. Wälläri ultimately prevailed in that dispute, but at the same time he reinforced the hostility that many already felt towards both the seafarers and their Union. Prime Minister Urho Kekkonen criticised the proposed state contribution, fearing that it would eventually lead to demands for similar state financing in other sectors. The matter was skilfully resolved by the Minister of Social Affairs, Tyyne Leivo-Larsson, who stated that she would be prepared to propose the same arrangement for other groups, provided that they were willing to assume the same obligations as the seafarers. Leivo-Larsson subsequently served for several years as Chair of the Delegation of the Seafarers’ Pension Fund before being appointed Finland’s Ambassador to Oslo.
With the exception of a few minor details, the Seafarers’ Pensions Act received a largely favourable reception during its parliamentary consideration. Parliament adopted the Act in December 1955, and President J. K. Paasikivi confirmed it on 26 January 1956. It entered into force on 1 June of the same year.
The Seafarers’ Pensions Act was based on the principle of earnings-related pension accrual. Pension rights accumulated according to the number of insurance periods, and a full pension amounting to 50 per cent of pensionable earnings required twenty-five years of service at sea. To qualify for coverage under the Act, a person had to have worked at sea during at least three of the years preceding its entry into force. The retirement age was designed as both flexible and partly occupation-specific. For crew members, the normal retirement age was sixty, but those who had completed twenty-five years of sea service could retire on an old-age pension at the age of fifty-five. An absence of more than three years from employment in the merchant fleet interrupted the accrual of pension rights.
Because Finland did not yet have a unified earnings-related pension system in 1956, a person leaving the insurance scheme administered by the Seafarers’ Pension Fund was entitled to a refund of the contributions paid upon leaving maritime employment. At that time, the principle that accrued pension rights should be preserved had not yet been adopted even in public-sector pension schemes. Owing to the lighter working conditions of ships’ officers, their retirement age was sixty-five, although it could be reduced to sixty once the required years of service had been completed.
Pensionable earnings were calculated as the average earnings during the final fifty months of service. The financing of the scheme was shared equally between the insured employee and the shipowner as employer, while the State financed one-third of pension expenditure. The Act covered service aboard vessels engaged in foreign trade. Fishermen were excluded unless their fishing voyages extended beyond the Baltic Sea. Crews serving aboard icebreakers, but not their officers employed by the State, were insured by the Seafarers’ Pension Fund. Inland waterway transport did not fall within the scope of the Seafarers’ Pensions Act (MEL). Pension protection for those workers was postponed until 1962, when the Employees Pensions Act for Short-Term Employment Relationships (LEL) entered into force.
The Act also introduced disability pensions. Eligibility was based on a reduction in earning capacity resulting from impaired ability to work in relation to previous earnings from maritime employment. The amount of the pension was determined on the basis of the period during which the disabled person would have been able to continue working had they remained healthy—the so-called projected service, or “future service”, in pension terminology. Likewise, earlier periods of service were credited towards the old-age pension, although at a lower accrual rate, even though no pension contributions had been paid for those years. Absence from maritime employment during the war years 1939–1945 likewise did not reduce entitlement to a MEL pension.
The position of pension recipients was safeguarded by granting the Fund the authority to adjust pensions in line with wage developments in the maritime sector, provided that its financial resources allowed such increases.
Survivors’ pensions were not included in the original Seafarers’ Pensions Act because of uncertainty surrounding the financial calculations. The Act nevertheless contained an enabling provision, and survivors’ pensions were introduced five years later, at the beginning of 1961.
A Separate Pension Scheme for Seafarers
Why was the maritime sector the first to receive a statutory earnings-related pension scheme? One reason was probably that, despite internal divisions, those working at sea constituted a group of central importance to the economy as a whole. In post-war Finland, shipping had assumed a prominent position in foreign trade, a position that the Seamen's Union in particular knew how to use to its advantage in many ways. The explanatory memorandum to the Act summarised the matter succinctly: “the establishment of pension protection for seafarers is in the public interest.”
The Seafarers' Pensions Act was not enacted solely as a result of political pressure, however, although this has sometimes been oversimplified in later interpretations. An equally important reason was the lack of a unified pension system. The opportunity to accrue a pension through maritime employment had been lost in 1936. The experience of the National Pension Scheme that followed proved disappointing. The pension available under the Poor Relief Act for employees who had served the same employer for at least twenty years was not suited to maritime employment, where fixed-term service and frequent changes of employer were the norm.
The MEL scheme also suited employers. “A clearly defined group of employees had been provided with compulsory insurance, the costs of which the employees themselves shared on the same basis as the employers. In addition, the State paid part of the costs without gaining a strong foothold in the practical administration of pension protection, since the scheme was administered through a private-law pension fund.” The Foundations for Employee Pensions Act, which entered into force in 1955 shortly before the Seafarers' Pensions Act, offered employers another means of arranging pension provision through pension foundations administered by themselves and for their own benefit. Pension foundations, however, would not have been suitable for the maritime sector.
International conventions naturally formed part of the background, as did the opportunity for seafarers engaged in foreign trade to compare their working conditions with those in other countries. At the same time, employment-based pensions once again became an objective of Finnish pension policy during the early 1950s, partly because reform of the National Pension Scheme progressed slowly. The public interest and the importance of shipping to the national economy contributed to the enactment of a unified pension scheme specifically for seafarers. The explanatory memorandum stated, in almost the same words as those used more than two centuries earlier when the Seamen's Houses were first proposed, that “if skilled and conscientious seafarers are to remain in their profession, it is essential that they be guaranteed adequate pension protection”, and that “the Finnish merchant fleet can function only if it is served by a skilled body of seafarers who also feel secure against old age and disability.” Earlier experience and the history of pension protection in the maritime sector also played a part in the establishment of the pension scheme.
[1]: Kaukiainen (2008) pp. 363–408; Kaukiainen (1994) pp. 76–77.
[2]: Häggman (1997) pp. 23–25, 46, 75–76.
[3]: Kaukiainen (2012) pp. 410–412; Kinnari (1994) pp. 197–202; Soukola (2003) pp. 201–206.
[4]: Soukola (2003) pp. 203, 250–256; Brunila (1978) p. 15; Häggman (1997) p. 95.
[5]: Soukola (2007) pp. 80–84.
[6]: Brunila (1978) pp. 17–24.
[7]: Background material for the legislative drafting. MEK archive; also Brunila (1978) p. 19.
[8]: Soukola (2003) p. 232.
[9]: Kontio & Yrjänä (2014).
[10]: Kaukiainen (2008) pp. 420–471; Pietikäinen (1994) p. 215.
[11]: Soukola (2003) pp. 221–222; Kaukiainen (2008) pp. 468–470.
[12]: Brunila (1978) passim; Pentikäinen (1997) pp. 19–21; Soukola (2007) pp. 184–190.
[13]: Jaatinen (1997) pp. 187–188; Vauhkonen (2012) pp. 73–74. Seafarers' Pensions Act 1956.
[14]: Background material for the legislative drafting. MEK archive; Vauhkonen (2016) pp. 116–119, from which the quotation; also Hellsten (1993) pp. 318–320.
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