Proposed job pact to tackle youth unemployment

During Sweden’s annual political summit in Almedalen, Visby, in July, Prime Minister Fredrik Reinfeldt presented proposals for a job pact with trade unions and employers. Its aim is to help Sweden’s young unemployed enter the labour market and to create 30,000 new jobs. The details of the proposed pact, which encourages firms to combine on-the-job training with education, are still sketchy, but the initiative has been largely welcomed by the country’s social partners.

Background

Against a background of high unemployment rates among young people, Prime Minister Fredrik Reinfeldt used his traditional summer speech at Sweden’s annual political summit to put forward a proposal for a job pact with unions and employers. The Government hopes the pact will create 30,000 new jobs for the country’s young unemployed.

The job pact is based on the idea that the Government, employers and unions must work together to cut youth unemployment. The Government believes young people without experience can be helped to enter the labour market if companies agree to combine on-the-job training with education.

A similar tripartite job pact aimed at reducing youth unemployment was signed in Bulgaria on 6 June 2012 (BG1206011I).

Three-part scheme

The detail of the pact is still unclear, but so far three aspects of it have been outlined. These are:

• agreements on vocational training;

• adjustment agreements concerning the termination of contracts due to redundancy;

• agreements on short-time work.

Prime Minister Reinfeldt said the government was prepared to provide financial support for companies or payroll tax relief to ensure the success of the scheme.

In his speech, he said the proposal was inspired by the Norwegian model (NO0512104T) which connects education and labour market programmes in order to help young people get on the first rung of the jobs ladder. Social partner organisations in Norway also play an important role in the development of vocational education and apprenticeship schemes.

Another inspiration, he said, is the youth agreement which forms part of the agreement between Swedish industrial workers’ trade union IF Metall and the Association of Swedish Engineering Industries on vocational introduction (SE1011019I). The deal was concluded in November 2010 by the former President of IF Metall, Stefan Löfven, who took over as party leader of the Social Democrats in early 2012.

Under the youth agreement, a vocational introduction provides people under the age of 25 with a fixed contract of one year with the possibility of extension for a further year. The salary is 75% of the minimum wage agreed between the social partners. The contract terms are flexible and the framework for individual contracts is set at the workplace. If the employer does not wish to take on the trainee permanently, the trainee must be notified no less than one month before the end of the agreement.

The youth agreement also stipulates that work must be combined with education or training under supervision, and an individual VAT plan must be created.

The contract includes a penalty clause for the employer. It aims to ensure that the education conditions are fulfilled by the employer and that the employer does not abuse the agreement. The penalty clause appears not to have been used to a great extent.

Pact proposal welcomed by social partners

There appears to be a consensus on the need for a job pact and the initiative was welcomed by social partners, including the Swedish Trade Union Confederation (LO), the Swedish Confederation of Professional Associations (SACO), the Swedish Confederation for Professional Employees (TCO) and the employers’ organisation the Confederation of Swedish Enterprise (Svenskt Näringsliv), and by the opposition Social Democrat party.

TCO’s Chair Eva Nordmark commented_:_

The important thing here is that the government has opened up for work with the social parties and we are very optimistic about the signals from the government today. It is very important to achieve a job pact.

The Chair of Sweden’s blue-collar trade unions’ umbrella organisation LO, Karl-Petter Thorwaldsson, and the General Director of the Confederation of Swedish Enterprise, Urban Bäckström, have both reacted positively to the proposal. At the LO headline seminar held in Almedalen, the two leaders shook hands, promising to cooperate to achieve a new central collective bargaining agreement for the Swedish labour market. In August, the parties were due to meet with the government for further discussions but Thorwaldsson anticipated that it could take all autumn to finalise the job pact.

While welcoming the initiative, Cecilia Fahlberg, President of the white collar workers’ union Unionen, said similar agreements were already in place but had been largely ignored. Interest from industry, she said, had been weak because many companies were reluctant to hire inexperienced workers. She added that to promote the model her union would encourage local branches to address the issue during the autumn.

Lars Calmfors, Professor of International Economics at the Institute for International Economic Studies, Stockholm University, and former Chair of the Swedish Fiscal Policy Council, also highlighted the conflict between society’s interest in getting young people into jobs and the fact that the costs had to be borne by the individual companies. This, he argued, would probably mean that large government subsidies were going to be necessary for the pact to be realised.

Commentary

If the job pact goes ahead it will be the first time a Conservative government has signed such an agreement with social partners. Judging from the responses of the social partners, the government’s initiative seems timely. The people of Sweden are keen that a solution is found to the problem of youth unemployment.

Mats Kullander and Johanna Linderoth, Oxford Research