1997 Annual Review for Sweden

This record reviews 1997's main developments in industrial relations in Sweden.


It was with confidence that the Social Democrat Government presented its report on the Swedish economy in 1997. When it took office in 1994, Sweden had one of the biggest public sector deficits in the European Union. In 1997, it was reduced to 0.4% of GDP, measured by EU accounting principles, and the consolidated debt ratio had fallen for three consecutive years. "This is a signal to other countries that Sweden's decision to stay outside the monetary union at the start is not because of a wish to pursue a less responsible policy than other EU member states," the Minister of Finance, Erik Åsbrink, commented.

Sweden's annual average inflation for 1997 measured by the EU Harmonised index for consumer prices was 1.9%, which was an increase compared with the extremely low figure for the year before (0.8 %) but still within the limits drawn up by Bank of Sweden (Riksbanken). Economic growth is estimated at 2.3% for the year, compared with 1.1% in 1996.

Unemployment continued to be a matter for concern. However, in the very last months of the year the situation began to improve, and according to statistics from Eurostat, the unemployment rate fell from 10.6% to 9.1% between December 1996 and the end of 1997. There was, however, no rise in employment corresponding to the fall in unemployment. Instead the latter was largely explained by the fact that the number of full-time students increased. As a part of a five-year government programme called the "knowledge lift" (Kunskapslyftet) the local authorities were given SEK 1.6 billion (ECU 185 million) extra as from 1 July 1997, in order to grant 104,000 adults an opportunity to study.

The Social Democratic Party (Socialdemokratiska Arbetarepartiet, SAP) is in government, and the next elections are due in September 1998.

Key trends in collective bargaining and industrial action

In most of the large sectors, collective agreements of two years' duration or more were in force during 1997, which meant that only a few sectors were engaged in bargaining. In these sectors the negotiations turned out to be difficult and notices of boycotts and strikes were more frequent than usual. There was, for example, a short strike and lockout in newspaper distribution (SE9704113N), and boycotts and a brief stoppage in cleaning (SE9705123N). The stumbling-block generally was not so much the matter of pay, as of working time. The trade unions' calls for reductions in working time were decisively rejected by the employers. In return, the latter gained no hearing for their claims for a more flexible organisation of working time (SE9705119F).

Agree pay increases stood at 2.5%-3%, which was less than expected (SE9706126F). This could be seen as one of the manifestations of a change in the industrial relations climate which occurred in 1997, seemingly as a result of the high unemployment figures and the Government's firmly demonstrated resolution to keep inflation down. Based on a report evaluating the outcome of the preceding bargaining round, a mutual understanding was reached between employers' organisations, trade union confederations and the Government that nominal wages should not increase as much as they had done in the past years, if unemployment were to be reduced. They also agreed that there might be a need to change the procedural rules for collective bargaining and mediation if wages were to be kept at a level where they would not increase inflation (SE9704111F).

In the middle of March, eight trade unions and 12 employers' organisations from the industrial sector (SE9703110N) presented their own solution - an agreement on industrial development and wage formation. Its object is to promote industrial development, profitability and competitiveness, whereby it will "provide the necessary conditions for reducing unemployment as well as the foundation for a healthy wage development". The agreement consists of two parts. In the first, the parties describe the conditions under which Swedish industry is working and what they see as vital interests for the industry. From these mutual starting-points, leading representatives of the parties will meet in a special "industry committee" at least twice a year and discuss matters of importance for the companies and their workers. Its first act was to appoint a council of four independent economists, which will give opinions and recommendations on economic matters when asked to do so.

The second part of the industry agreement lays down procedural rules for the actual wage negotiations which will take place at sectoral level as before, though supervised by the industry committee. The rules oblige the unions and employers' organisations to start negotiations earlier than previously, with the aim of reaching a new agreement before the old one runs out. Thereby they have indirectly committed themselves to avoid industrial action, since such action is illegal as long as an agreement is running. If they have not completed the negotiations one month before the old agreement runs out, an impartial chair intervenes to help them to do so in due time. The chair does not, however, have the powers to forbid industrial action - only to postpone it for 14 days - or to force the parties to accept a settlement. The rules are intended to work through the moral obligation to which the parties to the agreement have committed themselves.

The conclusion of this procedural agreement for industry, which regulates the bargaining procedure for around 800,000 workers, came as something of a surprise, since it expressed an understanding between employers and trade unions that had seemed unthinkable only a couple of months earlier.

Industrial relations, employment creation and new forms of work organisation

On several occasions in 1997 leading members of the cabinet urged the employers to meet the workers' demands for shorter working time. If they did not, the Government would, it was stated, be forced to legislate. In general, however, these demands are not motivated by a wish to reduce unemployment. The idea that a reduction of working time would lead to more jobs has not prevailed in Sweden. Hours cuts are seen primarily as a means of furthering workers' well-being and indirectly also a means of furthering equality between the sexes, as it makes it easier for both men and women to combine gainful employment and parenthood.

Instead, measures generally promoting the productivity, growth and competitiveness of companies are seen as the main instruments for employment creation. One example is the agreement on industrial development and wage formation referred to above. Shortly after it was concluded, the Government appointed an official committee with the task of proposing measures for "sound and stable" wage formation. Another example is the efforts of the Government and the social partner organisations to find ways of granting all employees continuing training throughout their working lives, to the benefit of both companies and their workers (SE9708132F).

Developments in representation and the role of the social partners

There were few novel departures in the area of representation in 1997.

Industrial relations and the impact of EMU

The unemployment problem was also taken into consideration when Parliament decided that Sweden should not join the EU Economic and Monetary Union from 1 January 1999. Of course opinions differ, but a majority regards the project as too hazardous and fears that it might lead to permanently high unemployment and to risks for export industry.

Conclusions and outlook

High unemployment figures and the Government's firmly demonstrated resolution to keep inflation down paved the way for a change in the Swedish industrial relations climate in 1997. The most obvious manifestation of this change was the conclusion of the agreement on industrial development and wage formation by eight trade unions and 12 employers' organisations in the industry sector (see above). It will be put to the test in the 1998 bargaining round, when a majority of the blue-collar unions affiliated to the Swedish Trade Union Confederation (Landsorganisationen, LO) will repeat their demand for a reduction of working time.

(Kerstin Ahlberg, Arbetslivsinstitutet)

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