Unions agree to wage reduction

Industrial relations have been under strain in Sweden following a surge of redundancies during the autumn of 2012. Weak market demand is putting pressure on businesses and companies are looking for other ways of cutting costs, including restructuring and wage reduction. High-strength steel producer SSAB has reached an agreement to reduce working time and wages after difficult negotiations with unions. This follows a similar wage-reduction agreement at the Swedish airline SAS.

Background

According to recent statistics (in Swedish), 62,000 Swedish workers lost their jobs in a surge of redundancies during 2012. While the situation is difficult, the number of redundancies has yet to reach the high levels experienced in 2008–2009. However, recent forecasts issued in a press release (in Swedish) from the Public Employment Service (Arbetsförmedlingen) are that the labour market cannot be expected to recover in the near future.

Projections for 2013 and 2014 show declining employment, and the prediction is that unemployment will only peak in 2014, at about 8.5% of the labour force. Similarly, forecasts on the recession from the National Institute of Economic Research (KI) are pessimistic. It is thought that Sweden’s gross domestic product (GDP) fell during the last quarter of 2012, and recovery is not expected until the end of 2013.

Collective agreements adjusted

Businesses have been hit hard by weak market demand. In addition to the surge of redundancies, many companies are implementing restructuring and other cost-cutting measures.

High-strength steel producer SSAB announced 450 redundancies in October (ERM Fact Sheet 22193), 150 of which affected the site in Oxelösund, a town with a population of 10,000 on the east coast of Sweden. In November, the company management proposed a reduction in working time to 80%, and a pay cut to 90% at the production sites around the country. The local branch of the Union of Metalworkers (IF Metall) at the site in Oxelösund rejected the deal.

In response to the union, the company approached workers individually with new conditions. Local union leaders interpreted these moves as being in breach of the collective agreement. Through a press article (in Swedish) they directed strong criticism at the company. However, negotiations were reopened and the sides reached an agreement.

The deal was reached on a collective basis, but workers had to accept the new conditions individually. At least 70% of the staff had to be willing to participate for the measures to be implemented. After the deal was accepted, the company continued the process of obtaining individual agreements, now supported by the union.

Industrial relations under strain

The union had accused the company of breaching collective agreements by attempting individual negotiations. However, Johan Wiig, Site Manager at Oxelösund, said workers had contacted the company management individually, and that employers were allowed to agree on reduced working time and pay with employees.

After the new agreement was in place, Mr Wiig said he was happy that the company would be able to adjust costs quickly in a way which allowed management to avoid layoffs.

Emil Carlsson, IM Metall’s local union Chair, was quoted in a press article (in Swedish) saying that the initial deal must be interpreted as an attempt to dump wages. The Swedish Trade Union Confederation (LO), umbrella organisation for 15 major blue-collar unions, commented in an online newspaper article (in Swedish) that they did not see any problem with such a deal. However, the Swedish Paper Workers Union (Pappers), one of the few unions not affiliated to LO, was critical.

Reacting to the charge of ‘wage dumping’, SSAB Executive Vice-President of Communication Helena Stålnert was quoted in a newspaper article (in Swedish) saying that once the company showed sizeable profits, the reduction in wages would be compensated through the company’s profit-sharing system. This repayment model was instrumental in the unions settling the agreement.

Commentary

The difficult economic situation is putting pressure on industrial relations in general. Another example of strained negotiations saw unions at Scandinavian Airlines (SAS) accept downgraded collective agreements in November 2012 after ultimatums were issued by the company management.

The case was noted by academic labour market experts as being in conflict with the Swedish model for collective agreements. Unions have traditionally been wary of accepting deals that include reductions in wages, although a similar deal was negotiated in 2008–2009 for vehicle manufacturer Scania (SE0903019I, SE0906019I).

Emilia Johansson and Hjalmar Eriksson, Oxford Research

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