Tough negotiations for a norm-setting agreement

Unions and employer organisations in Sweden have until 31 March 2013 to conclude a new norm-setting industry agreement governing wage levels. The social partners are at odds over the effect of a surge of redundancies in Sweden, particularly in the manufacturing sector. Trade unions affiliated to the Swedish Trade Union Confederation have demanded wage increases of 2.8%. Employer groups dismissed the demands as too high before the negotiations had even started.

Background

Industry agreements have served as a framework for wage-setting in Swedish industry since 1997, with the manufacturing sector given the norm-setting role. The system was brought in after the Swedish recession in the 1990s when the country experienced high unemployment and rising inflation. Collective bargaining had brought industrial conflict and large pay increases, and threatened the country’s economic stability.

The norm-setting agreements (SE1105019I) have generally brought stability to negotiations in the labour market as a whole. The manufacturing sector was given the norm-setting role because of its exposure to international competition, and the belief that this influence would keep wage negotiations at a reasonable level.

The last update of the industrial agreement was concluded in 2011, and new negotiations between trade unions and employers need to be concluded by 31 March 2013.

Updates are made on the basis of assessments of the current developments in Swedish industry. The social partners have established the bipartite Industrial Council in order to promote application of the agreement and to create favourable preconditions for the sector and its employees.

However, there has been some discontent. In 2010, the Association of Swedish Engineering Industries (Teknikföretagen) chose to leave the agreement, while the Swedish Paper Workers’ Union (Pappers) refused to follow the norm-setting agreement signed by the Union of Metalworkers (IF Metall) and the employers (SE1004019I, SE1005019I).

Trade union demands

In November 2012, trade unions affiliated to the Swedish Trade Union Confederation (LO) jointly presented their demands for the 2013 collective bargaining round (in Swedish). They called for 2.8% increases for all employees with a monthly wage level above SEK 25,000 (€2,878 as at 23 January 2013) – that is for all employees earning at least the industry average. For all employees earning below that, unions called for a flat-rate monthly rise of SEK 700 (€80.5). The demands were higher than in the last bargaining round. The unions also called for an insurance package consisting of an additional contribution to all employees on parental leave.

Responses in the light of the Swedish economy

The economic situation has made this round of negotiations particularly complicated. A report (in Swedish, 3.2Kb PDF) by the National Institute of Economic Research (KI) pointed to an expected worsening of the economic situation in the spring of 2013. And both trade unions and employer representatives highlighted a surge of redundancies in Swedish companies, particularly in the manufacturing sector, during the last six months of 2012.

LO President Karl-Petter Thorwaldsson urged the government to take action to create jobs in manufacturing and prevent the autumn’s redundancies from spreading to other sectors.

In a statement (in Swedish) in late December 2012, Teknikföretagen’s President Åke Svensson argued that trade unions ought to take the economic situation into consideration. He said unions were wrong to demand higher wage increases when the economic situation was worse than in the last bargaining round. Mr Svensson said he wanted long-term agreements characterised by low wage increases which would give each company the chance to strengthen its competitiveness.

Teknikföretagen also responded to trade union calls in a press article (in Swedish) in which it emphasised the necessity of company-specific agreements. It called for decentralisation of negotiations and local settlements to run alongside the central agreement.

Other industrial leaders have proposed a wage freeze to help secure employment for subcontractors with companies such as steel firm SSAB and engineering group Sandvik.

Commentary

Calls from employer organisations to decentralise negotiations and to increase the number of dispositive agreements have increased since the beginning of the financial crisis in 2008. The current gap between trade unions and employer organisations risks obstructing negotiation of a new industrial agreement.

The surge of redundancies in the autumn of 2012 and the expected development of the Swedish economy will surely influence both negotiation of a new industry agreement and the collective bargaining round as a whole.

However, it is too soon to tell whether negotiations will be characterised by a mutual determination to adapt to the economic situation or whether the social partners will be driven further apart.

Emilia Johansson, Oxford Research