In 2016 the Swedish wage setting model is being put to its biggest test for several decades. Agreements must be made for some three million employees, but the members of the Swedish Confederation of Trade Unions (LO) are split, and different demands from different unions and trades risk breaking a nearly 20 year old tradition where the industry has set the norm for wage increases.
“It is no exaggeration to say Swedish wage negotiations are facing a crisis, where the model that we know is at stake,” says labour market journalist Tommy Öberg.
He has been covering the labour market for four decades, at Svenska Dagbladet and elsewhere. This autumn he published a book together with another experienced labour market journalist, Anna Danielsson Öberg. In ‘Leading jersey or straightjacket – the faces of Sweden’s wage setting or the story about how we got there’, he describes how today’s wage setting model has developed, where the so-called industry agreement has dominated labour market agreements since 1998.
That agreement introduced a compromise where trade unions promised to respect the wages in the competitive industry and employers backed down from their attempts to wreck central agreements.
The industry agreement meant the consensus reached between the parties in the export industry became a standard for other wages. They introduced the so-called ‘cost mark’, which meant their agreement became the norm for the rest of the labour market’s wage demands.
“The basic idea behind the agreement, apart from protecting the industry’s competitiveness, was and remains to put a cap on wages in the rest of the labour market. But if the industry’s agreed wage increases are topped by those of a range of other unions or trades, the industry agreement ceases to exist,” says Tommy Öberg.
The model has been successful if you consider real-term wage increases and the absence of industrial action. But it coming under increased criticism. There is growing support for measures aimed at increasing lower wages, especially within female-dominated trade unions like Kommunal (the Swedish Municipal Workers’ Union) and Handels (the Commercial Employee’s Union).
And there is certainly agreement within LO that the pay gap between women and men should be halved by 2028. Yet when it came to real action, like when the 14 LO unions were supposed to agree on common low wage measures, the cooperation fell apart.
As a result, LO unions will be presenting separate wage demands during wage negotiations this spring. We already know that several unions will increase their demands to 3.3 percent, which is higher than the 2.8 percent demand from unions representing workers in the competitive industry.
Other unions are also increasingly irritated that industry unions and employers are the norm-setters. Susanne Gideonsson, President of Handels, told the daily Dagens Nyheter that “we are not in the industry’s or anyone else’s pocket. Handels’ role is to make a second ‘mark’ for the wage negotiations: the equality mark, for women and low earners.”
The way employers are increasingly demanding more control over working hours is also being criticised, as are the so-called numberless agreements, which means wages are set locally.
There is also a new and unexpected aspect to this spring’s wage negotiations. Last summer the government decided to award three billion kronor (ca €320m) to teachers. Their reasoning for entering the wage setting was that higher wages will improve teachers’ status and position in the severely criticised Swedish school system.
The government’s action contributes strongly to putting the wage setting model at risk, where the social partners negotiate independently and agree on wages, claims Tommy Öberg.
“This clumsy intervention with three extra billion for teachers represents a serious threat to wage stability mainly in the municipal sector, but it will also influence the entire labour market and hence society as a whole. We could see demands for compensation spreading across the board and conflicts could become commonplace,” he says.
As always the wider world plays a part in how the social partners present their demands. This time the refugees have become part of the wage negotiations. Employers are using them as an argument to lower or at least freeze starting wages, arguing this is the only way to get them into work.
“We recognise the pattern. Last time it was young people’s chances of finding work which fronted the same demands. The disagreements this time are therefore not based on formulations or the actual demands, but in the number of new arrivals to Sweden,” says Tommy Öberg.
The question is whether today’s agreement model will survive? It will no doubt be put to the test.
“It is hard to predict what will happen, at least with any degree of certainty. But there is a considerable chance we will end up with a messier and more conflict-prone labour market. A more optimistic or alternative view is that the industry remains strong enough so that no-one else can shift the cost mark for wage increases,” says Tommy Öberg.
The 2016 wage negotiations affect three million employees in Sweden – that’s more or less all of them. There are some 685 collective agreements in total in Sweden and in 2016 500 of them will be up for renegotiation. Beyond that, there are 300,000 people on open-ended contracts who can be made redundant in the course of 2016.
LO has broken out of the cooperation which saw unions present a joint offer, and where the competitive industry set the norm for wage increases.
Industrial trade unions have called for a 2.8 percent pay rise, while Kommunal (the Swedish Municipal Workers’ Union) has called for 3.3 precent and Handels (the Commercial Employee’s Union) 3.1 percent. A group of unions within LO known as 6F, comprising Byggnads (the Swedish Building Workers’ Union), Elektrikerna (the Swedish Electricians' Union), Målarna (the Swedish Painters’ Union), Fastighets (the Swedish Real Estate Agents Union) and Seko (The Swedish Union for Service and Communications Employees) calls for 3.2 percent. Other trade unions within TCO (The Swedish Confederation of Professional Employees) and Saco (the Swedish Confederation of Professional Associations) have so far not presented any demands.
“LO in Sweden is probably facing a greater challenge than in Norway. But you should be careful to predict the permanent demise of the coordinated wage setting model. This is not the first time the social partners have failed to coordinate their demands. After a few years they have usually come back,” says Jon Erik Dølvik, a researcher at Norway's Fafo research foundation.
On 15 February Fafo hosts a seminar on Swedish and Norwegian wage negotiations, based on a report written in cooperation with the Centre for Wage Formation: ‘The Frontfag Model yesterday, today and tomorrow’.
The ‘frontfag’ model is similar to Sweden’s wage setting model, which means the competitive industry decides how big wage increases can be before they become unsustainable.
“Nordic trade unions have always studied each other and have been inspired by each other. But they have different histories and are to a degree organised in different ways. In Norway you won’t find the same clear division between workers and officials, for instance. Norwegian LO organises both groups and even though trade union membership is lower, LO dominates completely when it comes to wage negotiations in the private sector.”
In the short term employers are probably more influence by each other. If employers in one country for instance demand more flexibility in wage negotiations, this could impact on employers in a different country.
Jon Erik Dølvik points out that the industry sector also influences the negotiation process. Norway, with its large oil sector, is very dependent on coordinating wage negotiations. If everyone followed the oil sector’s wage standards, other industries would not survive. In Sweden technology firms in the IT sector play a bigger part.