Sweden should not copy foreign models for mediation, mediators conclude

A report by the two top mediators in Sweden concludes that the country should not try to copy the Danish or the Norwegian models for pay determination and mediation; these models have been shown to have specific flaws again in 1998. The report's conclusions are directed against proposals which an official committee is expected to present at the end of November 1998.

In 1998 the industry sector's "agreement on industrial development and pay determination" (Industrins samarbetsavtal) and the procedural agreement attached to it were put to the test for the first time. The agreement was signed in 1997 by eight trade unions and 12 employers' organisations in industry, and its purpose was to create the prerequisites necessary for the parties "to engage in constructive negotiations over agreements with a balanced outcome" (SE9704111F). Thus, the deal not only regulates the bargaining procedure, but also establishes an institution, the Industry Committee, where representatives of the contracting parties can meet and confer between bargaining rounds. The partners also agreed to create a council consisting of four economists who are employed neither by an employers' organisation nor by a trade union - the Economic Council for Industry. The task of this council is to express opinions and make recommendations on economic issues, if so requested.

When it comes to collective bargaining, the idea is that the parties should be forced to keep to a negotiating timetable so that a new agreement is concluded before the old one expires. Here, a group of impartial chairs, at present comprising four persons, play an important role. One month before the old agreement expires, an impartial chair intervenes and does what he or she deems necessary to help the parties complete the negotiations in time.

In September 1998, two of the impartial chairs submitted a report to the Industry Committee, in which they analysed the outcome of the first bargaining round where the new model had been applied. The two - Lars-Gunnar Albåge, former director of the Swedish Employers' Confederation (Svenska Arbetsgivareföreningen, SAF), and Rune Larson, former general secretary of the Union of Civil Servants (Statstjänstemannaförbundet, ST) - acted as impartial chairs in the negotiations over 23 of the 25 collective agreements concluded according to the new procedure between 28 November 1997 and 17 June 1998 (SE9806190F).

Mr Albåge and Mr Larson point out that the role of an impartial chair differs from that of a traditional mediator. The main task of a mediator is to find a solution between the differing views of the parties, irrespective of what effects this solution may have. However, under the industry sector agreement, the task of the impartial chairs is to help the parties to reach not just any agreement, but an agreement where due consideration is given to its effects on the national economy and employment, and which serves to maintain or improve industry's competitiveness and to increase workers' real pay.

Pessimistic forecasts came to nought

The report's conclusion is that the model introduced by the industry sector agreement is a success, and that the pessimistic forecasts of 1997 have come to nought. The study finds that:

• according to estimates made by economists in autumn 1997, labour costs would increase by 4%-5% during one year. Now that the bargaining round is complete, the increase is calculated to be around 8.5% over three years, including account wage drift;

• forecasts made by the National Institute of Economic Research (Konjunkturinstitutet, KI) in autumn 1997 pointed to increases in pay which would lead to an increase in inflation and unemployment. The rate of inflation was predicted to be 2% for 1998 and 2.5% for 1999. In March 1998, KI modified its forecast to 1.1% for 1998 and 1.5% for 1999. In June 1998, Statistics Sweden (Statistiska Centralbyrån, SCB) stated that the yearly rate of inflation was 0.6%;

• during autumn 1997, interest rates were turbulent and in December the Bank of Sweden (Riksbanken) raised the "repo" rate (repurchase rate) in anticipation of the approaching bargaining round. After the conclusion of the first collective agreement, long-term interest rates declined. During spring 1998 the market stabilised and the Bank of Sweden lowered the "repo" rate; and

• in autumn 1997, several commentators claimed that the process of pay determination in other countries, especially Denmark and Norway, worked much better than in Sweden. However, if anything, wage costs have increased more in the rest of the world (except Asia) than in Sweden in 1998. Today, Denmark and Norway have experienced serious problems due to a malfunctioning - from a national economic point of view - of the pay determination process.

No state intervention

The last statement is addressed to the official committee, chaired by the director-general of the National Institute of Economic Research, which has been charged with proposing measures, including strengthening the powers of the public mediators, to lead to a "better functioning" system of pay determination (SE9806190F). The committee was due to present its report on 30 November 1998. According to the report from the two impartial chairs, the terms of reference of the committee are very much inspired by the Danish and Norwegian systems.

However, Messrs Albåge and Larson argue that more than 4 million days were lost due to industrial action in Denmark in the 1998 bargaining round and the state had to intervene as a last resort (DK9805168F). This was also the case in Norway (NO9810191F). In addition, the increase in labour costs will probably lead to serious problems for both countries. Thus neither the Danish nor the Norwegian models provide a realistic alternative to follow, as both developed under quite different conditions than in Sweden and were shown to have specific flaws in 1998. The report concludes that direct state intervention in negotiations, which has been a practice accepted by the social partners in Denmark and Norway for some time, is something totally unfamiliar to Swedish practice.

Commentary

The industry sector agreement is probably not the only factor contributing to the peaceful course and the balanced result of 1998's bargaining round. Other factors are Messrs Albåge and Larson's substantial experience as mediators, the high rate of unemployment and the imminent "threat" of stricter legislation. The main lesson to be learnt from the Swedish, as well as from the Danish and Norwegian examples, is that statutory rules are not the only decisive factor. (Kerstin Ahlberg, Arbetslivsinstitutet).