Widescale redundancies in labour market in recent months

Over 8,000 people in Sweden received redundancy notices in September 2008, exacerbating the country’s rising unemployment rates. While the government has already finalised the Budget Bill for 2009, the trade union confederations point to the need for additional efforts by the government and the Public Employment Service. However, the Minister for Employment has assured them that the government will try to aid those who have been made reundant.

The significant rise in redundancies in Sweden is attributed to the current turbulent and insecure financial market. In September 2008 alone, some 8,000 people received redundancy notices. Manufacturing industries such as car manufacturers and paper and pulp companies have been among the worst affected by Sweden’s declining economy. Moreover, because of the increased number of redundancies, young people will find it more difficult to enter the labour market due to the rising unemployment figures which are set to follow the redundancies, claims the Swedish Public Employment Service (Arbetsförmedlingen).

Car industry worst affected

The biggest number of redundancies occurred in the car industry. Volvo – the largest employer in Sweden’s car manufacturing industry – issued redundancy notices to some 6,000 people, most of whom were based in Sweden. When large enterprises such as Volvo decide to reduce their production turnover, this has a direct impact on their subcontractors. These subcontractors are often small and medium-sized enterprises (SMEs) in the private sector with only a few large clients on which their production depends. Therefore, if some of their major clients scale down operations, the SMEs also have to downsize their production and make hundreds of people redundant.

In addition, the redundancies in the Swedish labour market have been concentrated in certain regions, such as the western part of the country with the city of Gothenburg at its centre. This is due to the fact that both Volvo and many of its subcontractors operate from this region.

Trade unions demand action

The Swedish Trade Union Confederation (Landsorganisationen i Sverige, LO) has criticised the government for failing to take adequate measures to deal with the turbulent labour market. According to LO, the labour market policies implemented after the 2006 elections did not prove to be efficient; instead, it attributes the drop in unemployment in 2006 and 2007 to pre-existing factors, such as the solid economy at that time. Given the current economic downturn, the government needs to introduce new measures – such as raising children’s allowance and study grants to satisfy the demands of the public – claims the President of LO, Wanja Lundby-Wedin, in a press statement (in Swedish).

The Swedish Confederation of Professional Employees (Tjänstemännens Centralorganisation, TCO) is also demanding stronger measures from the government. In a statement on the issue (in Swedish), the Chair of TCO, Sture Nordh, referred to a study which the confederation conducted on employers’ recruitment policies, which reportedly discriminate against certain categories of prospective employees (SE0809039I). Mr Nordh claims that the massive number of redundancies announced in recent times will make it even harder for unemployed people to enter the labour market, unless the government acts quickly to improve the situation. In particular, he recommends investing more resources into vocational education and offering training for employees who wish to improve their competencies.

Meanwhile, the Swedish Confederation of Professional Associations (Sveriges Akademikers Centralorganisation, SACO) recommends that the Public Employment Service guarantees more comprehensive support for unemployed academics by restoring their skills within their particular area of expertise. Furthermore, SACO recommends that the government maintains stability in public services in relation to healthcare, childcare and education, so that it does not repeat the same mistake it made in the last financial crisis during the 1990s, when it drastically cut public welfare services, resulting in further turbulence as a consequence.

Unemployment conducive to change

The Confederation of Swedish Enterprise (Svenskt Näringsliv) claims that involuntary unemployment could, in fact, have positive effects, especially for women. The federation points to a study by Statistics Sweden (Statistiska centralbyrån, SCB), which found that 50% of the women who were made redundant and subsequently found another job managed to raise their income level, particularly white-collar workers in the private sector. The Confederation of Swedish Enterprise also refers to several studies which show that many employees are not satisfied with their current employment but are too afraid to leave and find another job. Therefore, according to the confederation, involuntary unemployment could encourage people to seek out a more satisfying work situation.

Government response

The government is refusing to appoint a special crisis group for handling the current labour market situation, as the trade union Unionen suggested in an article in the Swedish newspaper Svenska Dagbladet on 9 October 2008. However, in Gothenburg, a special mediation agency for those who have received redundancy notices from Volvo Cars and Volvo Trucks will be established. Moreover, as the Minister for Employment, Sven Otto Littorin, pointed out in the aforementioned article, the Public Employment Service is set to spend SEK 1.5 billion (almost €148 million as at 12 November 2008) in total to take the measures needed in the current economic climate.

Thomas Brunk, Oxford Research