Nothing is sacred in the debate about the Swedish model

When Stefan Löfven, Prime Minister for the transitional government, told a press conference it should be possible to combine flexibility for companies with safety for workers, there was audible murmurs among the reporters. Was he expressing a willingness to compromise on employment rights as a part of government negotiations with the Centre Party? Or was it simply a way of trying to bring the Centre Party’s Annie Lööf to the negotiating table?

Employment protection important for LO support

Karl Petter Thorwaldsson from LO, the Swedish Trade Union Confederation, made his views clear in an op-ed in Aftonbladet on 2nd November, titled “Do not backtrack on employment rights, Löfven”. LO will not meddle in the government negotiations, but will fight for secure jobs. He points out that many LO members are struggling with precarious employment conditions. 

“They are forced to sleep with their mobile phone next to their pillow, constantly alert and ready to take any extra hours offered, in order to afford food and rent,” writes Karl-Petter Thorwaldsson.

He also does not believe there is any reason to weaken employment security by making it easier for employers to fire workers. If that were to become a reality, it would hurt those “who employers for some reason or other consider to be difficult or less profitable,” writes Thorwaldsson and sums up LO’s position: “Any government pushing for employment security, great wages and expanded welfare can also count on LO support.”

Stefan Löfven claimed the conversations with the Centre Party had never approached negotiations on single issues. His aim had been to seek out different alternatives to form a government through conversations. Employment rights could, however, become an issue for debate if both parties could approach each other.

The example highlights the role labour market policies play within the different Swedish political parties – the centre-right parties’ support for companies’ freedom and competitiveness are often at odds with the Social Democrats and Left Party’s defence of job security.

Complicated government negotiations

It has been more than nine weeks since the Swedes went to the polls, and the country is left with complicated government negotiations, to say the least. The red-green block is a fraction bigger than the Alliance, but has no majority. Nor have the four parties which form the centre-right Alliance – the Moderates, Centre Party, Liberals and Christian Democrats. 

The stumbling block for the Alliance is whether to seek support from the Sweden Democrats, which the Centre Party and the Liberals told voters they would not do.

For weeks there has been talks and disagreements and the situation can without doubt be described as locked. Nobody yet knows what a solution will look like, but the kind of government that emerges could have big consequences for employment rights and labour market policies, according to the think tank Arena Idé’s Labour Market Report 2018. 

The think tank belongs to the Arena group, a non-partisan, non-profit organisation that cooperates with trade unions, popular movements and companies. In their Labour Market Report 2018 the journalist and author Mats Wingborg has gathered all the political parties’ labour market policies as expressed in parliamentary motions, political statements and during annual conferences. 

Six areas where changes might be coming

The conclusion is that there are major ideological differences between the parties over employment rights, but also when it comes to just how much politicians should be able to influence wages – an issue which traditionally has been the social partners’ responsibility. The report studies 21 labour market policy issues, but Mats Wingborg highlights six areas which could face considerable change if there were to be an Alliance government with support from the Sweden Democrats. 

Employment protection

One issue where the Centre Party in particular has positioned itself far from the red-green alternative is employment protection. The Centre Party wants to remove priority rules for all companies with fewer than 50 employees. The rest of the centre-right parties want five people, rather than two which is the rule today, to be exempt from the classic rule of “last in, first out”.   

Lower starting salaries

The parties in the Alliance have also agreed to pass legislation to allow for lower starting salaries for so-called inträdesjobb(entry jobs) for young people and the newly arrived. The Sweden Democrats do favour apprenticeships, but according to Wingborg the proposals are not that far apart. If a future Alliance government were to pass minimum wage legislation, it would interfere with the Swedish model, where wages are agreed by the social partners and not by politicians. 

LO President Karl Petter Thorwaldsson writes in Aftonbladet on 2nd November: “The social partners agree on salary levels, not politicians.” He continues: “During this election we have heard politicians talk about bringing in legislation to cut wages in order to get young and newly arrived people into work. We believe this would be completely the wrong thing to do. First of all, it would have a knock-on effect and reduce wages for other groups. Secondly, it is a direct threat to the free negotiations where trade unions and employers decide wage levels through negotiations.”   

He points out that there is already an agreement between trade unions, employers and the government on so-called etableringsjobb(startup jobs) for newly arrived and young people who struggle to enter the labour market.

Shutting down the employment service?

All of the Alliance parties, as well as the Sweden Democrats, want to abandon the Swedish employment service in its current form. Private actors should be given the task instead, they argue.

Trade unions’ right to take sympathy action

The Alliance and the Sweden Democrats also agree to limit trade unions’ rights to take sympathy action.

Probationary employment 

In case of a centre-right government, expect more precarious jobs. The parties propose to increase the time limit for probationary employment from six to twelve months, but Wingborg says the SD’s view on this is yet not clear. The centre-right parties, however, are more inclined to accept temporary and time-limited work than the Left Party and the Green Party. They are for instance opposed to contracts allowing people to work during busy times in the mornings and evenings. This is common within the health and care sector. The Sweden Democrats are also opposed to this, but have not put aside money for solving the problem in their proposed budget.

Fixed-term contracts

The political blocks disagree on temporary employment, including so-called general fixed-term contracts which were introduced by the Alliance government in 2008. Employers are not obliged to justify the fixed-term nature of the contracts. The centre-right parties are also more positive to so-called repeated fixed-term contracts, which is common in the media sector. This means people can work on fixed-term contracts for several years, and Sweden has been criticised by the EU Commission for this. The centre-right parties are also more positively inclined towards self-employment and temping work.

Debate about the industry’s role in wage formation

Employment rights and labour market policies aside, there is uncertainty in other areas too. Wage formation is also up for debate. For more than 20 years, the industry has set the so-called “cost mark”. This has acted as a starting point for industry trade unions and industry employers when agreeing on what wage increase should be the norm for all trade unions for the duration of an agreement. 

But the model is now being challenged by five LO unions – Byggnads, Fastighets, Elektrikerna, Målarna and Seko all question the industry’s role in setting wages. Lars Calmfors, Professor of National Economics at the Research Institute of Industrial Economics, also joined the debate recently with a new report. He proposed “the cost mark” would work less well in the future as the demand for labour – including in elderly care – will increase due to an ageing population. 

“If these sectors are to meet their labour needs, wage increases must probably be higher than what suits the industry,” Lars Calmfors wrote in an article published by Dagens Nyheter on 28th October. He argued more trade unions should be able to take part in the cost mark negotiations. 

The industry partners immediately launched their counter attack, partly led by chief negotiator Anders Weihe at the Association of Swedish Engineering Industries. He called Lars Calmfors a lackey for the above mentioned trade unions. Meanwhile, a report from the National Mediating Office shows wage rises within sectors with labour shortages have been higher than the cost mark.

One of the Swedish agreement model’s sacred cows could be about to be sacrificed, while the ideological differences between the centre-right and centre-left concerning employment rights and labour market policies are becoming clearer. It remains to be seen how these differences will shape the next four years.