1998 Annual Review for Sweden

This record reviews 1998's main developments in industrial relations in Sweden

Introduction

According to calculations made in December 1998, the economic growth rate was 2.8% and average annual inflation measured by the EU Harmonised Indices of Consumer Prices was 1.1%. Unemployment figures continued to decrease, and the EU harmonised unemployment rate for Sweden fell from 9.1% in December 1997 to 7.5% in December 1998. Unlike 1997, when the fall in unemployment was largely explained not by a corresponding rise in employment but by the fact that the number of full-time students increased, employment started to rise rapidly in the second half of 1998, primarily in the private sector. In some occupations there was even a shortage of qualified labour.

Even though Sweden has decided not to participate in EMU from its inception, the government is firmly resolved to pursue an economic policy that keeps the door open for entry later on. Thus, in 1998 the public budget showed a surplus of 1.5% of GDP measured by EU accounting principles. This meant that the state could start to amortise the public debt, and that the consolidated debt ratio was decreased from 76.6% of GDP in 1997 to 74.2% by the end of 1998.

Parliamentary elections were held in September 1998 (SE9810116N). The result revealed a polarisation in the electorate, as the best performing parties compared with the 1994 election were the Christian Democrats (Kristdemokraterna) and the formerly communist Left Party (Vänsterpartiet). The governing Social Democratic Party (Socialdemokratiska Arbetarepartiet, SAP) won 36.6% of the votes, which was 8.7 points less than in the previous election. Despite the reduction in votes, the SAP remained the largest single party, but had to seek support from other parties to stay in power. The result was a cooperation, though not a coalition, with the Left Party and the Green Party (Miljöpartiet de Gröna), both of which are anti-EU.

In its policy statement, the new government declared its ambition to give cooperation between the social partners increased significance, in the belief that voluntary agreements provide long-term and stable solutions. Thus labour legislation, working time rules, wage formation methods and other matters concerning the relationship between workers and employers should be formulated in cooperation between trade unions and employers' associations.

Key trends in collective bargaining and industrial action

The 1998 central bargaining round at sector level was notable for several reasons (SE9806190F). Bargaining concerned both the public and private sectors, and in almost all sectors agreements of three years' duration or more were concluded, which is comparatively long by Swedish standards (SE9801161F).

Negotiations took a rather different course than previously. Very few notices of industrial action were issued and even fewer were actually realised, though exceptions included painters employed by property companies (SE9806195N) and (informally) air traffic controllers (SE9808105N), while a strike was only narrowly averted among ships' officers (SE9802169N). Most agreements were reached before, or only shortly after, the previous agreements expired. This can largely be attributed to the effect of the procedural agreement for the entire industry sector concluded in 1997 (SE9703110N) and put to the test for the first time in 1998. Also, for the first time in many years, employers and trade unions in the export industries were the first to conclude agreements. This was seen as vital for the whole economy, as the first agreement usually sets the standard for the rest of the bargaining round.

The agreed average increase in wages was 2.6% per year. However, unlike earlier agreements, the 1998 sectoral deals also took account of expected wage drift of 0.5% at local level, based on previous experience. This means that, in fact, wages could be expected to increase by 3.1% in total per year. The assessment of likely wage drift is, of course, uncertain. Partly it is meant as a message to the parties at workplace level, indicating the maximum that the Swedish economy might bear.

The bargaining round also saw a significant breakthrough in the area of working time - see below.

Another issue mentioned in many of the 1998 agreements was skills development. These provisions were usually limited to general declarations stating that all workers are entitled to recurrent training, and that employers should map out the training needs for each employee. The financing of such skills development programmes was, however, unclear. At the time the agreements were negotiated it was generally assumed that a tripartite working group convened by the government would propose that the state should subsidise such programmes - for example, by allowing employers a tax reduction calculated on the wages of employees taking part in training activities (SE9810115F). To the disappointment of employers and unions, it later turned out that the government was not yet ready to fulfil the expectations that it had held out when inviting them to talks. It did, however, promise to present a proposal in 1999.

Industrial relations, employment creation and work organisation

In spite of the encouraging trend in the unemployment statistics, the unemployment situation was still troublesome and employment creation continued to be of major concern to the government as well as to the labour market organisations. In its National Action Plan (NAP) on employment that translates the EU Employment Guidelines into practice, the government set the objective of reducing unemployment to 4% by the year 2000 (SE9805185F). This should be done partly by traditional labour market measures - ie training and education to increase the employability of people who are, or are at risk of becoming, unemployed. After years of cutbacks, the government will also provide extra money to local authorities to enable them to create new jobs in schools, healthcare and social services.

In order to further growth and employment in the long run, it is also necessary to improve the wage formation process, the NAP stated. This issue, which had already been on the agenda for several years, implies modifying the procedural rules for collective bargaining to prevent the conclusion of wage agreements which do not take account of the national economy as a whole and which force up inflation. On several occasions, the government stressed that this should preferably be achieved by means of procedural agreements between trade unions and employers' associations. Simultaneously, however, an official committee has been working on a proposal for legislation (SE9811121F and SE9812129F).

In October, it emerged that the central social partner organisations - the Swedish Employers' Confederation (Svenska Arbetsgivareföreningen, SAF), the Swedish Trade Union Confederation (Landsorganisationen, LO), the Swedish Confederation of Professional Employees (Tjänstemännens Centralorganisation, TCO) and the Swedish Confederation of Professional Associations (Sveriges Akademikers Centralorganisation, SACO) - had been holding "exploratory talks" on a "pact for growth" for some time (SE9811122N). Their intention was both to agree undertakings to be carried out by themselves and to issue joint recommendations to their affiliates and joint requests to the Government. The wage formation process was one of the main topics. Other areas covered were the confederations' attitude to the EU social dialogue, Sweden's relationship to EMU, fiscal policy, labour legislation and competence issues. Both employers and unions seemed ready to review some of their long-standing principles. Furthermore, both were anxious to avoid state intervention in wage negotiations. Thus it appeared quite likely that they would reach an agreement. However, shortly before Christmas the talks broke down, primarily because of disagreement between SAF and the blue-collar union confederation, LO (SE9901135N).

There was a significant breakthrough on the issue of working time in the 1998 bargaining round (SE9806190F). In the previous round, most trade unions had already called for a reduction of working time. Until 1998, the employers, which had long wanted more flexible rules on the organisation of working time, were opposed to even discussing a reduction. However, most of the 1998 agreements, except those for state employees, contained new provisions on both the length and the organisation of working time.

Some of the agreements provide for a reduction by 27 hours in a year, but leave it to the parties at company level, or even to the individual employers and employees, to decide how it is to be utilised. There are many options available, such as reducing the working week, providing for longer holidays, or saving the reduction from year to year in a working time bank, enabling the worker to retire earlier. Most of the new agreements leave it entirely to the parties at local level to choose between a reduction of 27 hours in annual working time, or a corresponding raise in pay, the size of which is laid down in the sectoral agreement. Thus, the provisions on working time reduction themselves are flexible and adaptable to the needs and wants of individual companies. In addition, most agreements gave the employers a little more room than before to decide unilaterally, or to make agreements with individual workers, on when they are to work.

With these agreements, the social partner organisations hoped that they had averted the calls for a statutory, general reduction of working time. However, both the Left Party and the Green Party have such a general reduction of working time in their political platform, and the government had to agree to appoint a working group with the task of analysing the issue further (SE9810116N).

Developments in representation and role of the social partners

Ever since SAF withdrew from centrally coordinated negotiations in the early 1980s, the role of the affiliates of the central social partner confederations has increased at the expense of the confederations. In 1998, both the tripartite talks on skills development and the talks on a "pact for growth" indicated that this trend might be changing. Not that SAF will actually bargain on wages with the trade union confederations again, but the two sides may be restoring their roles as partners in the dialogue on the labour market.

The year saw few significant developments in the structure of social partner organisations or in rules on employee representation and participation. European Works Councils are not thought to have had a great impact at national level, as they fit relatively comfortably with the Swedish system of representation, while the EU rules are not as far-reaching as existing national provisions (TN9807201S). The social partners took varying positions on the details of the draft European Company Statute, but there is a general acceptance of employee representation on the boards of such companies (TN9809201S).

Industrial relations and the impact of EMU

SAF hoped that the talks on a "pact for growth" would result in a common position regarding Sweden's accession to EMU. However, opinions within the trade union movement are divided and none of the confederations seem to have a mandate to take a particular stand on the issue. TCO has nevertheless advocated that employers and trade unions should investigate the possibility of following the Finnish example and establishing "EMU buffer funds" (FI9711138F), to help protect employees against economic fluctuations within EMU, as Sweden will most likely join sooner or later.

Conclusions and outlook

The overriding question for 1999 is whether employers and trade unions will repeat their achievement of the 1930s, when they concluded the historic Saltsjöbaden agreement laying down procedural rules for negotiations and voluntary restrictions on the right to take industrial action, or if the government will find itself compelled to propose legislation. At the beginning of 1999, the government placed two mediators at the social partners' disposal to encourage them to reopen the talks on a pact for growth.

According to a November forecast from the National Institute for Economic Research (Konjunkturinstitutet, KI), the increase in employment and the decrease in unemployment will continue during 1999. KI, however, doubts that the government's aim of an unemployment rate of 4% by the year 2000 will be fulfilled. ( (Kerstin Ahlberg, Arbetslivsinstitutet)