Gap between blue-collar and white-collar pay increases

According to a report published by the Swedish Confederation of Trade Unions (LO) in September 2005, blue-collar workers were on average paid 43% less than white-collar workers in 2004. This wage gap is increasing, having stood at 34% in 2004. LO believes that changes need to be made to Sweden's current wage-formation system in order to narrow the gap.

Wage differentials in Sweden are increasing, the blue-collar Swedish Confederation of Trade Unions (Landsorganisationen, LO) states in its 2005 wage report (Lönerapport år 2005), which examines pay developments from 1994 to 2004. The wage statistics in the report, which was published in September 2005, are based on data from Statistics Sweden (Statistiska Centralbyrån), processed by LO.

Wage differentials 1994-2004

From 1994 to 2004, the average wages increased by 44% for blue-collar workers and by 52% for white-collar workers, the report finds. In 1994, the average wages of white-collar workers were 34% higher than those of blue-collar workers, and in 2004 the differential had increased to 43%. The average monthly wage for all employees was SEK 23,000 in 2004. That for blue-collar workers was SEK 18,700 and that for white-collar workers SEK 26,600, a difference of SEK 8,100. Wages in the private sector were higher by about 15% than in the public sector for both blue- and white-collar workers.

Overall, wages in Sweden increased by an average of 3.4% in 2004 compared with 2003 - 3.2% for blue-collar workers and 3.6% for white-collar workers. For the latter group, the average increase differed considerably between the private (4.0%) and public (2.7%) sectors. The average monthly wage increase for all employees was SEK 770 - SEK 580 for blue-collar workers and SEK 920 for white-collar workers .

The average monthly wage in 2004 was SEK 20,700 for all female employees and SEK 25,200 for all male employees. In 2004, wages increased more for men (3.6%) than for women (3.4%). On average, women's pay was 82% of men's. Taking into account occupational factors through statistical 'standard weighting' (standardvägning) ( SE0402103F) women’s average wages were 93% of men’s - ie the wage differential is less for women and men within the same occupation, working in the same sector.

The table below sets out the overall average wage increases for blue- and white-collar workers by sector from 1994 to 2004.

Average wage increase by sector, blue-collar (b) and white-collar workers (w), 1994-2004

Manufacturing industry/private sector (w) 58%
Private services production (w) 53%
City councils (w) 53%
Government (w) 48%
Private service production (b) 47%
Municipalities (w) 46%
City councils (b) 44%
Manufacturing industry (b) 44%
Government (b) 43%
Building industry (b) 42%
Building industry (w) 42%
Municipalities (b) 40%

Source: EIRO.

Blue-collar workers can be divided into three groups, those earning more than SEK 20,000 per month (in 2004), those earning SEK 18,000-20,000 and those earning less than SEK 18,000. In the first group are only blue-collar workers in the building industry, whose average wage is SEK 22,500 per month. In the second group are mainly workers in manufacturing industry, the private service sector and the government sector. The third group involves low-wage workers in the public and private sectors, mainly in healthcare and care of the elderly, schools, retail, and hotels and restaurants.

By comparison, a similar grouping for white-collar workers produces a highest wage group earning SEK 30,000 and over per month. The best-paid category is white-collar workers in finance and insurance companies, with average monthly pay of SEK 32,800 - pay for this group increased especially in the late 1990s. In recent years, the gap between white-collar workers in finance and insurance and those in the manufacturing industry has decreased, with the average monthly wage for the latter currently standing at around SEK 30,000. The second group contains white-collar workers earning between SEK 23,000 and 29,900. In the third, lowest-paid group are only white-collar workers in municipal childcare. Their average monthly wage is SEK 19,700, which is even lower than that of blue-collar workers in certain sectors.

Future developments

Given a continuation of current developments, the LO report makes predictions on the wage situation in 20 years' time. If wages increase at the same rate as in the last 10 years, the gap between blue-collar workers and white-collar workers will be much wider, standing at about 60% to the latter group's advantage. Therefore, LO argues, the present trend of wage development must be broken and the wages of blue-collar workers must increase more rapidly that those of white-collar workers for a certain period. If blue-collar workers' wages increase by a little over 0.5% more each year than white-collar workers' wages, the gap would narrow to 27% in 20 years. On the other hand, if the gap is to disappear completely, blue-collar wages must increase by 2% more than white-collar wages every year, according to LO.

Commentary

LO states in its 2005 wage report that pay developments over the past 10 years are largely explained by Sweden's economic problems in the 1990s, when there was practically no real growth in pay. Unemployment grew considerably, the tax base for funding the public sector decreased and public expenditure and debt increased. The government cut back social insurance and welfare systems in order to adapt Sweden to new conditions such as low inflation and a more stable exchange rate. LO and its member trade unions chose to establish a strategy whereby wage demands were held down. Collective agreements providing for wage increases at the same level as in neighbouring countries were seen as necessary. However, there was also a worry that this restrictive wage policy would involve losses for workers. Nevertheless, this was a necessary strategy, LO states. The employers demanded agreements on reasonable wage increases, and both blue-collar and white-collar trade unions largely acceded. However, white-collar workers have achieved higher increases, for example through local negotiations, and the average gap between the two groups has been allowed to widen.

LO stated in a debate article in the liberal Dagens Nyheter newspaper on 14 September 2005 that a fairer and more stable process of wage formation is necessary. LO argues, firstly, that wage rises must be in line with those in neighbouring countries, in order to secure Swedish industry’s competitiveness. Secondly, the rate of wage increase must be allocated between groups in a way that all employees find acceptable, which is not the case currently. If LO is not to change its strategy and seek higher pay increases, then new measures need to be taken. LO is willing to discuss with the Swedish Confederation of Enterprise (Svenskt Näringsliv) and its affiliates on these terms.

The Swedish Confederation of Enterprise replied on the same day, though without more than touching on the main issue, that there must be a true balance between the parties, and expressed a wish for forms of cooperation in other sectors like that which applies in manufacturing industry (SE9703110N). The employers also want changes in a number of areas, such as the introduction of a 'proportionality rule' in industrial conflict actions and a ban on sympathy rules, an issue the confederation has raised before (SE0507101N).

In an interview in the conservative Svenska Dagbladet newspaper on 16 September 2005, the Swedish Confederation of Enterprise stated that it could not accept LO's statistical calculations and the conclusions that LO draws from them. It also rejected LO's offer to start discussions about wage formation. It is not up to the central parties to intervene in this area, as this is the role of the sector-level parties, the employers argue. Furthermore, the white-collar Swedish Confederation of Salaried Employees (Tjänstemännens Centralorganisation, TCO) objects to the report from LO, claiming that the statistics are not interpreted properly.

Following the major sectoral collective bargaining round in 2004 (SE0503102F), the two main central social partner organisations in the private sector - which are not bargaining parties themselves - have now started to lay down markers in the period up until 2007, when the current three-year agreements expire. The issues they have raised of higher pay rises for blue-collar workers than for white-collar workers and restrictions on means of industrial conflict will not be easy to handle. (Annika Berg, Arbetslivsinstitutet)

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