Swedish labour market model under threat

The Swedish labour market model is based on social partner dialogue and negotiation on collective agreements, rather than state regulation. However, globalisation, EU membership and a decline in trade union membership have affected the unions’ role in the labour market in particular. A report from the Ratio Institute now questions the legitimacy of the social partners and calls for a change of the Swedish labour market model.


The social partners concluded a central agreement, known as the Saltsjöbadsavtalet, in 1938. Its aim was to give the labour market parties the right to regulate the rules, rather than relying on state regulations. The central agreement and collective agreements are a fundamental part of the Swedish labour market model. Although the Saltsjöbadsavtalet is still valid, it has been amended several times, most recently in 1976. Since then, factors such as EU membership, globalisation and the decline in trade union membership (SE0806029I) have affected labour market conditions.

For example, the verdict (117Kb PDF) of the European Court of Justice (ECJ) in the Laval case has attracted considerable attention (SE0706029I, SE0801019I, EU0801019I). The ruling states that the Latvian company Laval, which posted workers to Sweden, is not required to adhere to the collective agreement within the Swedish construction industry. Those involved in industrial relations are concerned about how this verdict will affect the Swedish labour market; the government is currently examining what the consequences will be and how it will affect Swedish legislation. The outcome of this investigation was due to be presented in December 2008 (SE0804029I).

Report questions labour market model

The Ratio Institute has recently published a report on the Swedish labour market model, entitled En ny svensk modell – vägval på arbetsmarknaden [A new Swedish model – choice of path for the Swedish model]. This non-profit association is an independent research institute in the area of entrepreneurship, the market economy and corporate governance. Its membership base comprises companies, organisations and individuals. The institute is financed through membership fees, book sales and the support of various foundations, including the Swedish Free Enterprise Foundation (Stiftelsen Fritt Näringsliv, SFN), the Centre for Family Enterprise and Ownership (CeFEO), the Confederation of Swedish Enterprise (Svenskt Näringsliv), the Swedish Research Council (Vetenskapsrådet) and the Swedish Association of Local Authorities and Regions (Sveriges Kommuner och Landsting, SKL).

In the report, the authors state that the social partners have lost much of their legitimacy in the labour market and that the Swedish model needs to be replaced. The following three options are suggested.

  • The labour market will be regulated by legislation and collective agreements will become generally applicable.
  • The labour market will be deregulated, and regulations concerning collective agreements and labour disputes will change or be abolished. The social partners will lose much of their power and the national minimum wage will be an important factor.
  • The existing model will be modernised. Negotiations between the national-level trade unions and employer organisations and collective agreements will be combined with legislation that limits the right to industrial action.

The report was discussed at a conference organised by the Ratio Institute. Among those present were representatives from a number of employer and trade union groups, including the Confederation of Swedish Enterprise, the Swedish Confederation of Trade Unions (Landsorganisationen i Sverige, LO), the Swedish Confederation of Professional Associations (Sveriges Akademikers Centralorganisation, SACO) and the Confederation of Professional Employees (Tjänstemännens Centralorganisation, TCO). The social partners believe in the nature of the current labour market model; nevertheless, they concede that it has to adapt to new realities to be sustainable and competitive.

Negotiations for new agreement

This acceptance of the need for change is reflected in the fact that the Confederation of Swedish Enterprise, LO and the Council for Negotiation and Cooperation (Privattjänstemannakartellen, PTK) negotiated on a new central agreement this year (SE0709029I). The social partners agree that it is their task to regulate conditions in the labour market. However, they do not agree on how they should do this.

The negotiation representative of the Confederation of Swedish Enterprise, Jan-Peter Duker, states that the organisation wants to renegotiate the Employment Protection Act (Lagen om anställningsskydd, LAS, 1982:80 (in Swedish)) and curtail the right to industrial action. Mr Duker argues that the extent of such action has to be proportionate to the conflict and that sympathy protests should be prohibited. Furthermore, the confederation’s expert in labour legislation, Lars Gellner, believes that collective agreements have to be negotiated more often at local or individual level.

LO and PTK generally focus on the same issues. They are seeking common solutions to improve the opportunities for young people and immigrants in the labour market. Better rehabilitation measures, stronger employment protection and social security in the case of job termination notice, and improved conditions for temporary employees are other priority issues for the trade unions. Moreover, LO states that it is not willing to accept less favourable rights concerning industrial action; likewise, PTK is not prepared to agree with the Confederation of Swedish Enterprise on this matter. LO emphasises that the negotiating trade unions and employer organisation should strive for high membership density.

The negotiation partners agree that they have to find a solution to the issue of migrant workers with temporary jobs in Sweden (SE0801029I, SE0804039I, SE0806019I). The Laval case underlined that the current situation needs to be changed. LO insists that collective agreements should cover migrant workers in Sweden.


Previous attempts have been made to negotiate a new central agreement during the 1970s and the 1980s. However, these attempts did not result in a new agreement. This time, the social partners seem to agree that they need to gain more influence in the labour market and that a new central agreement is a precondition for a well-functioning labour market.

Thomas Brunk, Oxford Research

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