Trend toward collective agreements with no fixed pay increase

During Sweden’s 2013 collective bargaining round, there was a trend towards agreements that set no fixed pay increase. The yearly report from Sweden’s National Mediation Office shows that although this trend had already been seen in previous bargaining rounds, it increased significantly in the 2013 agreements and will affect an estimated 800,000 workers by 2015. The social partners’ reactions to this vary. Employers have welcomed it, and trade unions’ views are mixed.

Background

The National Mediation Office (MI) in Sweden recently released its yearly report, revealing a trend towards collective agreements that set no fixed pay increase during the bargaining round of 2013. Although this trend has been seen in previous years, the increase in 2013 was significant.

Collective bargaining between social partners is a strong tradition in the Swedish labour market. Trade unions and employer organisations have high membership levels, which contributes to their strong bargaining positions. Wage bargaining in Sweden is carried out at both central and local, level.

A minimum wage increase is normally set during centralised bargaining, while actual wage increases are negotiated locally between employers and trade union representatives. Centralised bargaining between social partners is usually done every three years, and local-level bargaining is conducted annually. In the central bargaining round covering 2013–2016, an increasing number of employees were covered by collective agreements that set no minimum fixed pay increase.

Collective bargaining in 2013

The bargaining round of 2013 was extensive because 500 expired agreements had to be re-negotiated, affecting 2.7 million workers. When the collective agreement negotiations were completed, the MI concluded in its yearly report, Wage negotiations and wage formation (in Swedish, 2.4 MB PDF), that almost 20% of the re-negotiated agreements set no minimum fixed pay increase. It is estimated that 800,000 workers, mostly in the public sector, will be affected by this type of agreement by the end of 2015.

In 2012, 11% of employees were covered by collective agreements that set no minimum pay increase. By 2015, MI estimates that this figure will be 30%. For these workers, any wage increase will entirely decided at local level between the employer and the employee.

Social partners in disagreement

The social partners’ reactions to the trend have varied.

The largest employer organisation, the Confederation of Swedish Enterprise (Svenskt Näringsliv) welcomes the change, saying that it gives employers the opportunity to ensure that there is a closer relationship between employees’ performance and wages than is possible with a centralised wage framework.

The Union of Metalworkers (IF Metall) is one of the most vocal critics of the trend. The Chair of IF Metall, Anders Ferbe, has claimed that collective agreements without a minimum pay increase erode the so-called Swedish model of centralised wage bargaining. He says that it will favour those who already have advantages in the labour market, leaving behind the less privileged, and over time this will lead to a more unequal labour market.

The largest trade union in the private sector covering mostly white-collar workers, Unionen, agrees with the IF Metall position. An opinion editorial, Numerical solving agreements are the wrong way to go (in Swedish), written by the Chair of Unionen, Cecilia Fahlberg, said that Unionen will never accept collective agreements without a fixed pay increase. It argues that in the long run such agreements will create a less competitive Swedish labour market.

The Swedish Confederation of Professional Associations (Saco) is one of the unions that has negotiated collective agreements without a fixed pay increase. The Chair of Saco, Edel Karlsson Håål, argued in a news article (in Swedish) that these agreements would open the way for cooperation between actors in the workplace and increase employees’ motivation. She argues that the role of unions is changing as they increasingly act more as an employee advisory service than as employees’ representatives.

Commentary

Collective agreements without a minimum pay increase are not a new phenomenon in the Swedish labour market, but their extent since the bargaining round of 2013 is new. This trend is therefore likely to be widely debated among social partners until its effects can be evaluated.

Mats Kullander and Linda Talme, Oxford Research

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