Heated debate among social partners on reform of labour market model

The employer organisation Almega finds it a necessity to adjust the Swedish labour market model to the conditions and reality of today’s industry and private services sectors. The trade unions have responded with strong criticism and reject the need to reform the Swedish collective bargaining system. They defend the existing model and believe that the challenges the labour market currently faces can well be handled within the existing structures and negotiation model.

Background

The current debate about reforming the Swedish labour market model should be considered within the context of recent debates and developments, such as the Laval case (SE0905029I, SE0706029I, SE0801019I, SE0804029I, SE0811029I, SE0901029I) and the breakdown in negotiations between the peak national social partner organisations to reach a new central agreement earlier this year (SE0903029I, SE0908029I).

Since the European Court of Justice (ECJ) delivered its verdict in the Laval case (117Kb PDF), there has been widespread debate among the social partners on the Swedish labour market model. The Swedish government has recently proposed a change in labour law regulating central parts of the Swedish model; the proposed changes are based on a public inquiry that has also been under consideration by the social partners earlier this year.

At the beginning of 2010, more than 90% of the existing collective agreements will be renegotiated. The social partners are already positioning themselves for the upcoming negotiations (SE0910029I). In light of the ongoing recession, the restructuring of Swedish industries, particularly in the metalworking sector, along with the breakdown in negotiations for a new central agreement render the coming bargaining round more challenging than ever. Tension between the social partners is rising, and an opinion published in a daily Swedish newspaper from the President of the Swedish Service Employers’ Association (Almega), Jonas Milton, has caused strong reactions.

Almega argues for modernised collective bargaining model

On 10 September 2009, Almega’s President, Mr Milton, has issued an opinion in the daily newspaper, Svenska Dagbladet (SvD), arguing for the necessity to modernise the collective bargaining system such that it complies with the industries’ needs and prerequisites in a modern Swedish economy. Representing the employer association’s viewpoint, Mr Milton stated that the Swedish labour market model is about to become so old-fashioned that it counteracts its purpose and limits the growth prospects of companies, as well as their capacity for adjusting to the global market and the recession. Almega wishes to end the system of collective agreements at national and sectoral levels and, instead, proposes to only conclude collective agreements at local and company levels, in order to increase flexibility and adjust bargaining to companies’ needs and their different economic situations. Almega also wishes to decentralise wage negotiations, transferring wage bargaining to the company level. Mr Milton’s opinion has caused strong reactions among the trade unions as it outlines the main challenges lying ahead of the next bargaining round in 2010, when 500 out of 600 collective agreements are to be renegotiated.

Role of industry agreement questioned with growing services sector

Almega is questioning the role of the Swedish Industry Agreement (Industriavtalet), which plays a normative role in the Swedish collective bargaining model for the whole economy. In doing so, the employer association addresses the increasing importance of the private services sector for creating new jobs and generating growth. Almega has outlined five reasons for reform, emphasising the following aspects.

  • In the Swedish economy, heterogeneity is the norm rather than homogeneity. Significant differences exist between economic sectors but also between the companies in the different sectors of activity. Therefore, wage bargaining should be decentralised and transferred to the company level in order to ensure the survival of companies and jobs.
  • Wage formation should be an active instrument for companies to reward good performances, as well as to create incentives for growth at both the company and individual level in line with clear performance objectives.
  • Wage negotiations should only take place at an individual level in the company – that is, between the individual worker and the employer – such that workers have greater influence on their pay.
  • Certain labour law regulations should be amended to facilitate employing workers and implementing flexible working hours in line with production levels, as well as reforming the selection order in case of redundancies. In Sweden, legislation obliges employers to make people redundant in a specific order: those who were hired last should be the first people to be made redundant. This rule has been a thorn in the side of the employers for a long time, who demand greater independence regarding the decision on who to make redundant. Collective agreements on working time and types of employment should also be decentralised and transferred to the company level to increase flexibility.

1. Everybody has the right to get paid for work, but not to systematically receive pay increases. Pay levels should correlate with individual performances; therefore, different pay levels for the same type of job must be accepted by the trade unions and workers.

Trade union reactions

According to the Collective Bargaining Chief of the Union of Metalworkers (IF Metall), Veli-Pekka Säikkälä, Almega’s demands are unrealistic, based on the assumption that workers and employers would share equal powers, which is far from the reality. Mr Säikkälä added that in this utopia there would be no need for trade unions and emphasised that this is not the case. He disagreed with Almega’s statement that the central agreements are settled far beyond the heads of the workers and that the agreements disadvantage the Swedish economy (Press release on 10 September 2009 (in Swedish))

On behalf of the Swedish Unions within Industry (Facken inom Industrin), the President of the trade union for professionals in the private sector Unionen, Cecilia Fahlberg, highlighted in a statement to the press that it is necessary to have a norm-setting collective agreement at central level and that the metalworking industry should keep this role.

The Swedish Trade Union Confederation (Landsorganisationen i Sverige, LO) put forward that the Swedish Trade Federation (Svensk Handel) should have the norm-setting role in the next bargaining round due to the crisis in the automotive sector and the restructuring that is taking place in the manufacturing industry (SE0910029I, SE0908029I).

The Swedish Confederation of Professional Employees (Tjänstemännens Centralorganisation, TCO) and its members defend the existing bargaining system and believe that central collective agreements are a good tool for adjusting pay levels and restructuring in line with global demands and developments. TCO stated that the required adjustments to the global market and the economic recession are possible within the existing model, and that it is unacceptable to reject or reform the current model. TCO also argued that a decentralisation of collective bargaining can imply great risks for the Swedish economy (Press release on 14 October 2009 (in Swedish)).

The Union of Service and Communication Employees (Facket för Service och Kommunikation, SEKO), as well as TCO, wishes to enforce the central level of collective agreements, thereby ensuring increases in real wages. SEKO also indicated that strikes are likely to take place as a result of the large gap between the social partner positions.

The Union of Civil Servants (Statstjänstemannaförbundet, ST) strongly opposes that the public employer organisations are positioning themselves in line with Almega and the Confederation of Swedish Enterprise (Svenskt Näringsliv). ST considers that Almega and the Confederation of Swedish Enterprise are not acting responsibly (Press release on 30 September 2009 (in Swedish)).

Karolin Lovén, Oxford Research

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