Social partners debate wage bargaining model

The pre-negotiations for the next bargaining round in 2010 have already begun between the social partners in the summer of 2009. However, the parties have not only discussed the prospects for wage increases in 2010, they have also debated whether there is a need for reforming the Swedish wage formation system. The Swedish Trade Union Confederation proposes looking at economic sectors other than manufacturing in terms of setting the trend for wage formation in the future.

The next major bargaining round, which will take place in 2010 and during which about 500 out of 600 collective agreements will be negotiated, has in some ways already begun. The social partners have started to discuss the prospects of the upcoming bargaining round, as well as the principles on which wage bargaining is established in Sweden. The Swedish Trade Union Confederation (Landsorganisationen i Sverige, LO) has opened the debate by introducing a proposal for changing the wage bargaining system in the future. The current system of wage coordination is built on the idea that the social partners in the manufacturing industry conclude an agreement and thereby set the framework for wage bargaining in all other sectors of the economy.


During the spring of 2009, the negotiations on a new national agreement to replace the current one (Saltsjöbadsavtalet) from 1938 broke down between the Confederation of Swedish Enterprise (Svenskt Näringsliv), the Council for Negotiation and Cooperation (Förhandlings- och samverkansrådet, PTK) and LO. The differences of opinion between the social partners regarding whether the Swedish labour market model is in need of reform were irreconcilable (SE0903029I). Over the past decades, the social partners have agreed on the manufacturing sector being the trend-setting industry in wage formation for the other economic sectors. This consensus has now been challenged by both LO and the independent research institute Ratio Institute.

Research institute challenges labour market model

The Ratio Institute has recently organised a seminar where the social partners and other stakeholders discussed the Swedish labour market model. In addition, Ratio has published several books lately, in which the Swedish labour market model is criticised for contributing to an unhealthy centralised wage formation system that prevents new employment and sustainable wage development. In one of its publications, the Ratio Institute compares the employer organisations and trade unions with some form of cartels leading to a distorted wage policy. According to the research institute, the trade unions aim to increase wage rates by preventing workers from accepting wages lower than the minimum wages agreed on in collective agreements, while the employer organisations try to keep wage rates down by preventing competition for labour.

The Ratio Institute argues that the Swedish labour market model is a good system for the people who are part of it. For these people, real wages have increased significantly, which has given them a certain level of security. However, for people without permanent employment or those excluded from the labour market, such as young people and migrants, the situation is quite the opposite as they do not have access to the same level of security, according to a researcher at Ratio, Henrik Lindberg.

Many of the social partner organisations and other labour market experts acknowledge the fact that the Swedish labour market model is under pressure – particularly after the European Court of Justice (EJC) ruling in the Laval Case and the effects of the current recession on the labour market.

Social partner reactions

Employer organisation criticism

In the spring of 2009, when the social partners began to discuss the issue of wage formation in 2010, LO claimed that, despite the economic crisis and its impact on the labour market, there would be scope for a wage increase of about 3% in 2010. This has been strongly criticised by the Confederation of Swedish Enterprise, which argued that such a wage increase would not be possible given the current economic situation and ongoing recession. The employer confederation has also criticised LO for not supporting the general crisis agreement for temporary layoffs that has been concluded between the Union of Metalworkers (IF Metall), one of LO’s member organisations, and the Association of Swedish Engineering Industries (Teknikföretagen) (SE0903019I). The Confederation of Swedish Enterprise accuses LO of contributing to rising unemployment by not concluding similar agreements in other sectors of the economy.

Trade union positions

Regarding the upcoming wage bargaining round in 2010, LO’s President, Wanja Lundby-Wedin, recently stated in an interview that other economic sectors rather than the manufacturing sector should be used to set the norm for wage formation in 2010. Some members of LO and the Confederation of Swedish Enterprise have strongly criticised LO’s initiative in this regard.

IF Metall – an LO-affiliated trade union criticising the initiative – considers that it is too late to introduce a new wage bargaining model for 2010. IF Metall states that there is a need to have a responsible and realistic wage bargaining round in 2010, which takes into account recessionary conditions such that companies will not be forced into bankruptcy. On the other hand, the President of the Union of Forestry, Wood and Graphical Workers (Facket för skogs- trä och grafisk bransch, GS), Per-Olof Sjöo, believes that it could be interesting to look at other economic sectors in terms of wage formation and is open to discussing a reform of the wage formation system. However, Mr Sjöo emphasised that, more importantly, the wage negotiations should not have any negative implications for employment in light of competition from other countries with more attractive wage levels.

Karolin Lovén, Oxford Research

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