Proposed youth salary sparks debate

In response to the high youth unemployment rate in Sweden compared with the EU average, the Swedish Liberal Party has rallied behind the Swedish Centre Party in its ambition to cut pay for young people aged 15–24 to increase their competitiveness in the labour market. This has sparked intense debate among social partners as they not only disagree over the issue of pay differentiation and wage flexibility, but also want to protect the labour market from political interference.

Background

According to Eurostat figures, the harmonised unemployment rate of young people (aged 15–24) in August 2011 was 23% in Sweden compared with the EU27 average of 20.9%. The high unemployment rate is frequently debated and is seen as one of the major failures of the Swedish labour market. While all actors across the labour and policy spectrums consider it vital to find ways to break the self-enforcing trend of unemployment and social exclusion among young people, they have different views about both what causes the problem and how to combat it.

Call for lower wages for young people

In the run-up to the congress of the Liberal Party of Sweden (Folkpartiet liberalerna), which started on 14 October 2011, the chair and the executive board of the party inflamed the debate further by announcing support for introducing lower wages for young people – so called ‘youth salaries’ (in Swedish). According to the Liberal Party, a youth salary featuring a significant wage cut for young people’s wages in relation to other age groups would increase the pay spectrum and make young people more competitive on the job market.

This is not a major change of course for the Liberal Party. Rather it is one proposal among several in line with the party’s ambition to challenge the fundamental structure of the Swedish labour market model. And it is not alone in this endeavour. The Swedish Centre Party (Centerpartiet) has previously indicated support for lower wages for young people. Together, the two coalition parties form a group inside the Swedish government advocating a clear shift towards increased flexibility in the labour market.

These claims are supported by the Confederation of Swedish Enterprise (Svenskt Näringsliv), which thinks lowering wages for young people will make it significantly easier for them to establish themselves on the job market.

Trade unions’ response

In some labour sectors, youth salaries are commonplace. The Swedish Building Workers’ Union (Byggnads) already has agreements in place accepting lower entry wages for young and inexperienced workers. The same is true for the Union of Metalworkers (IF Metall), which has accepted locally negotiated lower entry wages for young people as, according to a statement (in Swedish), it believes this can have a positive effect if targeted at specific sectors. However, in line with the Swedish Trade Union Confederation (LO), IF Metall thinks wage differentiation will not help in combating youth unemployment overall. Instead it fears that targeting the wage levels of a specific age group may result in decreased wage levels for all.

Drawing on the OECD Employment Outlook 2006 published by the Organisation for Economic Co-operation and Development (OECD), the Swedish Confederation of Professional Employees (TCO) claims there is no clear empirical evidence for wage differentiation of young people. In an article (in Swedish) on the website of the Swedish television company SVT, TCO Chair Eva Nordmark concludes that the introduction of youth salaries is the wrong way to combat youth unemployment. TCO would rather see strong educational reform targeting young people with incomplete high school grades in particular, since they constitute the most disadvantaged group in the job market.

Political interference

The youth salaries proposal has also been criticised by the National Mediation Office (Medlingsinstitutet), which acts as an impartial referee between the social partners. Its Director General, Claes Stråth, is highly critical of the fact that political parties are interfering in what he sees as a matter between the social partners, particularly since the social partners are currently negotiating the biggest wage negotiation round in years, and that one of TCO’s main demands is to raise minimum wages (SE1109019I).

Commentary

With the four-party centre-right coalition, Alliance for Sweden (Alliansen), in government the big question is to what extent the Liberal Party and the Centre Party can influence the biggest party in the coalition (Moderaterna) to move away from the traditional Swedish labour market model.

Mats Kullander and Martin Bodensten, Oxford Research

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