Sweden: Social partners put forward ideas to revise the Swedish model

Employers’ organisations and trade unions agree that the Swedish model needs to adapt to meet changing conditions on the labour market, but have different ideas on what needs to be done. The arguments used by the social partners and an account of how the negotiations to revise the system are evolving are presented.

The Swedish model – need for reform?

The Swedish labour market model is based on social partner dialogue and negotiation on collective agreements, rather than government regulation. The model was established through the Saltsjöbaden Agreement, a central agreement reached in 1938 between the Swedish Trade Union Confederation (LO) and the Swedish Employers' Association (SAF), which later became the Confederation of Swedish Enterprise (SN). The agreement specified the rules of the social partners, such as how to resolve matters of dispute, the dismissal of workers, industrial action and so on.

In the past few years, the future of the Swedish model has been publicly questioned. Globalisation, free mobility and tougher competition have altered the circumstances of the labour market and the Saltsjöbaden Agreement is generally considered to be outdated. The question of whether the model will survive has been addressed by social partners and the Swedish government, with all parties agreeing that there is a need to update the model in order for it to stand the test of time.

Thus, negotiations on a new central agreement began in 2007. The participating parties were the Council for Negotiation and Cooperation (PTK), LO and SN. Their joint goal was to create modern rules for the labour market, well-adapted to the conditions affecting employers, trade unions and employees.

LO wanted to improve opportunities for young people in the labour market, strengthen employment protection, introduce increased rehabilitation measures and increase protection in the event of dismissal. In contrast, SN wanted to regulate the right to take industrial action, especially solidarity action and action directed towards companies where the trade unions concerned had no members.

The negotiations collapsed in March 2009 after the parties were unable to reach a compromise on the issue of solidarity action and the trade-off between employment protection and labour market flexibility.

Even though the discussions were abandoned, the original reasons for them remained. The new conditions brought on by free mobility and globalisation had resulted in a number of as yet unresolved issues. Therefore, talks on resurrecting the negotiations started a few years later, only this time the discussions were divided into: (1) SN versus PTK; and (2) SN versus LO.

Recent negotiations between SN and PTK

The negotiations between SN and PTK mainly concerned adjustment support and potential changes to the order of priority rules stipulated in the Employment Protection Act. Adjustment support, the assistance received by workers who have been laid off due to labour shortages, has been a matter of dispute between the social partners for many years. PTK demanded a new adjustment agreement for those workers laid off due to health problems and also that the agreement should include temporary workers not offered continued employment. An additional demand from the employees’ side was a new competence insurance for all those employed.

The order of priority rules, as stipulated in the Employment Protection Act, have also caused friction. The law states that, in the event of a work shortage, those employees who have been employed the longest have the right to any remaining jobs. This creates a 'last in, first out' system on the labour market, something that employers are generally highly critical of. Because of this, SN drafted a new agreement that focused more on competence and less on length of employment (in Swedish).

In connection with the security–flexibility trade-off and in addition to wanting the Employment Protection Act to remain unchanged, PTK wants civil servants to get the opportunity to study and keep 80% of their salary in order to increase their employability. The trade unions’ focus on employability is due to their concern that length of employment is no longer enough to be secure on the labour market (in Swedish).

While SN was positive to PTK’s proposals for adjustment guarantees, what finally broke off the negotiations in December 2013 was the lack of consensus regarding the order of priority rules. The two parties have yet to find a compromise that enables agreement. However, the Vice-President of SN, Christer Ågren, still believes there is a possibility of reaching an agreement due to the importance for all parties that the competence issue is resolved. He has called for regular talks to see how to move the discussions along (in Swedish).

Recent negotiations between SN and LO

When in autumn 2014 the government declared its intention of introducing new legislation to solve the problems with temporary employment, the social partners reacted both quickly and negatively. Feeling that the Swedish model was being threatened by government intrusion, LO and SN made a joint statement in October 2014 that they would start discussing new regulation of the labour market. The presidents of both LO and SN highlighted the dangers of government interference, emphasising the risk of a ‘ping-pong policy’ if the labour legislation was to change with every new government and that the conditions need to be stable for the sake of both employers and employees.

The parties therefore agreed to discuss the possibilities for deeper negotiations about developing the Swedish model and labour market regulations in a way that would strengthen Sweden’s competitiveness as well as providing employees with security and good working conditions. The aim, as declared by SN President, Carola Lemne, is a labour market that works so that the companies can develop and survive in an ever-changing world and that employees can also develop. At this stage, neither LO nor SN want to comment on the potential for reaching a new central agreement to replace the Saltsjöbaden Agreement, with both LO and SN stating that these negotiations are just a first step (in Swedish).

At present, discussions revolve around employment security, the adjustment capability of companies and employees’ skills development. But, like the discussions between SN and PTK, the negotiations between SN and LO are mainly dominated by the order of priority rules. The employers argue that putting a lot of resources into skills development is a contradictory measure if competence is not taken into account when there is a labour shortage and employees have to be laid off. The trade unions, however, stress the importance of employment protection. Overall, the parties are cautiously optimistic about the potential for reaching an agreement (in Swedish).

Commentary

The labour market is transforming and the social partners will have to adapt. Their joint reactions to instances of government intervention clearly demonstrate a common interest in keeping the Swedish model alive. And while the negotiations between SN and PTK appear to have halted almost completely, there seems to be a willingness from both parties to revive them. In the case of SN and LO, the discussions are moving along, albeit slowly, and there are grounds for optimism. After all, the trade unions are by no means alone in feeling the effects of the altered conditions on the labour market. A recent study by the Joint Committee of the Nordic Social Democratic Labour Movement (SAMAK) describing the development of the Swedish welfare state and labour market (in Swedish, 4.1 MB PDF) mentions increased risk of wage competition and conflict as well as increased transaction costs for the employers as factors that are likely to encourage employers to negotiate. But before an agreement can be reached, there are major issues that remain to be resolved, the most pressing ones being adjustment, skills development, and the trade-off between employment protection and labour market flexibility.

In summary, all parties seem in favour of protecting the foundation of the Swedish labour market model – something that could be noticed from the success of the new video released by the Swedish Confederation of Professional Employees (TCO) celebrating doing business Like a Swede. And while the road towards a new central agreement is undoubtedly long, the ongoing negotiations can be considered a sign that both sides are becoming increasingly willing to compromise.

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