LO concerned about measures promoting self-employment

The number of self-employed people is increasing in Sweden. Legally, they are treated as if they were enterprises and trade unions tend to place them on the same footing as employers. However, in a report issued in May 1998, the LO union confederation considers the possibility of accepting self-employed people as union members. LO is worried that ill-thought out measures promoting self-employment could lead to a large group of modern casual labourers without any form of employment protection.

Contractor, free agent, self-employed, freelancer - there are many names for people selling their competence, skills, services and labour without having an employment contract. Even if Sweden, together with Denmark, has the lowest figures in the EU (8% of the total occupied labour force compared with 46% in Greece, and 33% in Italy), self-employment is an increasing form of employment, not only among white-collar workers but also in traditional blue-collar sectors. In a report entitled Self-employed: the heroes of our time - or the new day-labourers?, presented in May 1998, the Swedish Trade Union Confederation (Landsorganisationen, LO) outlines the problems raised by this development. The report is part of a project aimed at discussing ideas and solutions to reduce unemployment.

Why self-employment?

There is a widespread consensus that new jobs will occur in small and medium-sized enterprises (SME s), and the central question of the LO report is: Will a policy directed especially towards these enterprises improve productivity, stimulate economic growth and provide more jobs?

According to LO, there are three main reasons why people become self-employed. The first two are voluntary, whereby people prefer a particular independent life-style or want to bring a business idea to fruition. The third is where people become self-employed against their will for fear of becoming unemployed. Unions affiliated to LO believe that many people become self-employed involuntarily. A study by Statistics Sweden (Statistiska Centralbyrån, SCB) shows that 36% of building workers who became self-employed did so either because they were unemployed or because they risked becoming unemployed. The same was true for 30% of industrial workers and 21% of service workers. In many cases their main customer was their former employer. LO concludes that those who opt to start a business should do so by individual choice rather than be forced into self-employment because of the fear of unemployment.

Increased productivity called into question

LO questions the view that productivity and growth is furthered by measures which promote SMEs. According to the report, most enterprises remain small and only 10%-15% increase their number of employees. LO also argues that the relationship between self-employment and productivity is unclear. The self-employed work more - often around 50 hours per week - and earn less than those with an employment contract in the same sector. Furthermore, women only earn half as much as men do. LO stresses the risk of increasing numbers of self-employed people with worse working conditions than those with an employment contract. In the long run there is a danger that this could result in a form of "social dumping".

Government labour market policy provides for unemployed people to receive a "start-up grant" that basically gives them an opportunity to start their own businesses. In 1995, one-third of new enterprises were set up with a start-up grant. According to the Swedish Labour Market Board (Arbetsmarknadsstyrelsen, AMS), 75% of those enterprises survive. LO takes a generally positive view of start-up grants but has certain reservations about them. Firstly, the unions question whether such grants should be given for starting businesses in declining sectors. Secondly, the procedures for evaluation and follow-up of start-up grants are see nas inadequate. Thirdly, the start-up grant could lead to distorted competition and not necessarily result in improved productivity.

Redefining the concept of an employee

Traditionally, most trade unions have looked upon the self-employed in the same way as any other enterprise, placing them on an equal footing with employers. Thus, workers becoming self-employed usually have had to resign from their unions. Legally, they are also treated as enterprises. However, due to the risk of an increased number of self-employed people undermining collective agreements and the opportunity this gives to employers to evade the application of labour law and collective agreements, LO advocates an extension of the legal definition of an "employee" which would make it very difficult to escape the application of labour law and collective agreements.

The Swedish Employers' Confederation, (Svenska Arbetsgivareföreningen, SAF) has a different opinion. It wants the definition of employee to be more precise than at present. In this way, the intentions of the parties to a contract could be expressed in the written contract, and that would then be binding. SAF is also considering the creation of a new concept of self-employment that would be covered by specific legal rules.

The LO has requested its affiliated unions to discuss the phenomenon of self-employment from a trade union perspective. The issue of union membership and unions' unemployment benefit funds ought to be given serious consideration.

Commentary

It is understandable that LO has reservations about discussing the issue of self-employment - such a debate might question the legal definition of an "employee", which might in the long run question the traditional role of trade unions. The unions still see the phenomenon of self-employment from an "employer-employee" perspective. However, the fact that LO has raised the matter may widen the horizon of the debate. This might enable a serious examination of questions such as whether the problems of alleged exploitation associated with self-employment are due to difficult labour market conditions, particularly in certain sectors, or to the weak legal position of those involved. There is every sign that self-employment will continue to increase. (Lena Järpsten, Arbetslivsinstitutet)

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