Economy looms large in 2011–2012 wage bargaining

A new wage bargaining round is about to begin in Sweden, and the difficulties in evaluating and forecasting the state of the economy have polarised the social partners. Unions want substantial wage increases to compensate for low pay rises over the last few years. Several unions have also indicated that they will break from following the lead of the norm setting collective agreement in industry and manufacturing. This would have a big impact on Swedish industrial relations.

Background

During the 2011–2012 bargaining round, over 500 of Sweden’s 650 collective agreements will be up for renewal, affecting roughly 2.8 million employees. This is the biggest round in recent years.

The first negotiations, in the industry and manufacturing sector, are set to start on 30 September and end on 30 November 2011. Since 1997 this sector has been given a norm-setting role in wage negotiations due to its exposure to international competition (SE1105019I). Other sectors will follow suit, until the last agreement is signed at the end of the summer 2012.

Initial demands

The Swedish Trade Union Confederation (LO) presented its initial demands on 5 September. These include a 3.5% wage increase, with a monthly guaranteed minimum rise per full-time employee of SEK 860 (€94 as at 9 October, 2011). LO is also asking for an additional increase of SEK 100 (€11) per month for workers in sectors with an average monthly full-time income of less than SEK 22,400 (€2,458), specifically targeting sectors dominated by women with low incomes.

The Confederation of Swedish Enterprise (Svenskt Näringsliv) was quick to criticise the demand. They calculate the total wage increase proposed by LO to be 6.1%, including wage drift and additional demands. They say this will jeopardise international competitiveness and exacerbate the economic downturn.

Economic context

Despite disagreements over issues such as fixed-term employment and the increasing of low wages, it is the overall performance of the Swedish economy that looks likely to be the dominating factor in the bargaining round.

The radically shifting prognosis of the Swedish economy, reflected in the 2012 budget (in Swedish) presented by Minister of Finance Anders Borg on 20 September, suggests that the Swedish economy is facing uncertain and unpredictable times. This will no doubt put pressure on the unions to show restraint in their demands.

During the bargaining round of 2009–2010 the unions agreed on moderate wage increases because of the global financial crisis and the general economic uncertainty (SE1006019I). However, after the recent, relatively strong, performance of the Swedish economy unions will be less willing to strike such a bargain again.

There is also the issue of timing. Depending on what happens in the economy during the autumn of 2011 and spring of 2012, sectors that renew their agreements later may find themselves in a radically different position from the industry and manufacturing sector. This could pose a challenge to the bargaining model, as the industry agreement has traditionally set the norms for collective bargaining in Sweden.

Trade union discord

Another threat to the industry agreement comes from within the LO. The Union of Metalworkers (IF Metall), the Food Workers Union (Livsmedelsarbetareförbundet) and the Forestry, Woodworking and Graphic Workers’ Union (GS) have all announced, for the first time in decades, that they will not rally behind the common bid because they disagree over the issue of the gender pay gap (SE1109039I). In response to this, the Swedish Municipal Workers’ Union (Kommunal) announced on 23 September that it will also no longer accept the underlying principles of the industry agreement.

This may have serious implications for the future of the industry agreement as it is dependent upon unity among the social partners. In addition, the discord will no doubt weaken the bargaining position of the LO.

Commentary

The competitiveness and structure of the Swedish economy look sound from an international perspective. However, they could be seriously affected by the Eurozone crisis and the possibility of a double-dip recession. The question is to what extent these uncertainties will affect the bargaining round.

One way of confronting the precarious economic situation is to negotiate shorter agreements. This was done during the global financial crisis. But trade unions could be wary of entering into such agreements, as this would again postpone real wage increases.

One thing is clear. The mood of austerity permeating the current Swedish political debate fits well with the argument and agenda of Swedish employers.

Mats Kullander and Martin Bodensten, Oxford Research

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