Problems mainly emerged at the national confederation or political level, whereas Swedish companies usually still have very good industrial relations at the workplace level. This fact sheet concentrates on institutional, legal and political aspects.
During the first half of the 1990s attitudes in many areas changed fast in Sweden. This may above all be the result of what has happened in the rest of EuropeEast and Westsince the late 1980s. In a number of domestic areas it is, however, obvious that old truths die hard.
The most important recent political change is that Sweden became a member of the European Union in 1995. In 1994 the Social Democratic Party formed a minority government after three years with a four-party non-socialist coalition government at the helm.
Some basic facts
Sweden has 8.8 million inhabitants in an area of 450,000 sq km
(174,000 sq mi). This makes Sweden the fifth largest country in
Western Europe (after France and Spain) and means it has fewer
than 20 people per km2. The population includes 1.5 million
people aged 65 or over and 1.8 million people aged 015,
leaving 5.5 million of working age (1664). No fewer than 4.3
millionmore than 49% of the overall populationare part of
the labour force.
Just over a century ago, Sweden was still an agrarian country. At about that time, there began a rapid process of industrialization. In the past 30 years, however, the largest growth in jobs by far has been in the public (especially the municipal) sector. Private enterprise accounts for 65% of employment in Sweden today, the public sector 35%. Comparable figures for 1965 were 79% and 21% respectively.
Sweden depends on its foreign trade. Exports amount to roughly 36% of the Gross Domestic Product (GDP), or about the same percentage as in Denmark or Switzerland. Sweden also still has very high taxes. According to figures from the OECD, Sweden's tax revenues amounted to 53.3% of GDP in 1994, compared with 39.2% in Germany, 34.1% in Britain, and 29.7% in the United States (1993).
Sweden is full of special-interest organizations. A very large proportion of employees still belong to trade unionsmore than 80%. Private ownership of the business sector is nevertheless larger than many people realizemore than 85% and increasing.
During the 20th century, the average real industrial wage has
roughly quintupled, while at the same time the number of
working hours per year has fallen by more than 40%, from 3,100
to 1,800. The table shows annual labour costs for an industrial
worker since 1900, converted into 1995 prices.
| 1900 | SEK | 46,000 |
| 1920 | SEK | 55,000 |
| 1940 | SEK | 76,000 |
| 1960 | SEK | 126,000 |
| 1980 | SEK | 249,000 |
| 1995 | SEK | 266,400 |
SEK 1 (Swedish krona) = USD 0.15 or GBP 0.10 (approx.)
Of the SEK 266,400 paid in 1995, SEK 190,800 consisted of wages (SEK62,300 of which was withheld by the employer for income tax payments) and SEK 75,600 comprised social welfare contributions paid by the employer on behalf of each worker. The corresponding figures for white-collar employees in the business sector were a total labour cost of SEK 380,000: gross salary of SEK 269,100 (of which SEK 109,400 was withheld for income taxes) and social welfare contributions of SEK 110,900.
Employers thus pay very considerable social welfare contributions to the public sector, in addition to meeting payrolls. As of 1996 the figures are 39.9% of annual wages in the case of blue-collar workers (1973: 18.1%) and 41.9% of the salaries of clerical employees. The largest of these items are the fees which finance the national supplementary pension system (13%), the health insurance system (5.3%) and the basic pension (5.9%). To this should be added the 5.9% of pay that is paid individually.
Historical background
Workers in Sweden began to form trade unions in the mid-19th
century. The first union was formed in 1846 when the
Typographical Association was established in Stockholm, but
the concept of organized labour in the modern sense emerged
only after the industrial revolution took off in the 1870s and
1880s. In the 1880s the first national trade unions came into
being, most of them based on the craft principle. In 1898 a
number of unions joined forces to form a central organization
known as the Swedish Trade Union Confederation
(Landsorganisationen i Sverige, LO).
A few years later, in 1902, the employers formed the Swedish Employers' Confederation (Svenska arbetsgivareföreningen, SAF). In 1906 LO and SAF began to realize they had to recognize each other's rights, and they signed the so-called December Compromise.
In this agreement, SAF recognized that the workers were entitled to form organizations and to negotiate. LO recognized the right of the employers to hire and fire workers freely, to direct and allot work and to hire any workers they pleased (i.e. closed shop clauses were ruled out; this is still the case today).
The General Strike of 1909 brought a halt to this early period of cooperation, and for many years conditions on the labour market were unclear, with the employers holding the stronger position. During the 1920s there was much industrial action and new labour legislation began to be passed. Of particular importance were the Collective Bargaining Act and the Labour Court Act, both adopted in 1928.
The 1930s witnessed the beginnings of labour-management cooperation on the basis of greater mutual trust. In 1938 SAF and LO concluded the Basic, or Saltsjöbaden, Agreement, (Saltsjöbaden is a seaside resort near Stockholm where the discussions took place). This agreement was a sort of peace treaty that regulated the relations between labour and management with regard to collective bargaining and industrial action.
Meanwhile, in the early 1930s, white-collar workers had begun to organize themselves into trade unions independent of LO, in many cases by expanding or adapting professional and social organizations formed long before then. The Confederation of Professional Employees (Tjänstemännens Centralorganisation, TCO) was formed in 1944 as the result of a merger between two white-collar confederations, one representing private-sector employees (founded in 1931), the other civil servants (founded in 1941).
The Swedish Confederation of Professional Associations (Sveriges Akademikers Centralorganisation, SACO) was formed in 1947. At first the criterion for membership was a university education, but its recruitment principles later allowed related groups to join. During the 1940s, a number of basic agreements aside from the Saltsjöbaden pact were signed. They concerned safety and health (1942), vocational training (1944), works councils including both employer and union representatives (1946) and time-and- motion studies (1948). During the 1950s, similar agreements were concluded in the white-collar area. Because of these agreements and the cooperative spirit of Saltsjöbaden between labour and management that accompanied them, the number of conflicts on the Swedish labour market remained low for several decades. The relative lack of industrial actions was a strong contributing factor to Sweden's growing prosperity during the 1950s and 1960s. A Swedish Model took shape, characterized by centralized collective bargaining and a steadily growing union influence, an active government labour market policy and very few labour disputes. Companies such as ASEA (now ABB), Astra, Electrolux, Ericsson, Saab, Scania, SKF, Stora, Volvo and others grew strong.
During the 1970s Sweden, like other countries, encountered economic setbacks which to some extent continued during the 1980s and remain evident in 1996. A wide range of labour legislation was adopted, with the 1977 Act on Co-Determination at Work (MBL) attracting the most attention.
The 1980s were characterized by a gap between the views of employers and unions on quite a number of issues, particularly with regard to the employee (or wage-earner) investment funds and on pay policy. If the 1970s were dominated by social matters, the 1980s saw economic matters at the forefront. In the 1990s unemployment, pay policy, the public debt, the EU and immigration have become much discussed issues.
Trade unions
The three union confederations mentioned above dominate the
pictureone for blue-collar workers, one for clerical and most
other white-collar employees and one mainly for university-
educated employees. Over the years LO and TCO in particular
have played a more important role than their equivalents in most
other countries, the main reason being that the Social
Democratic Party has been in power for most of the time
(193276 and 198291and since 1994).
The largest confederation is LO. With its 2.2 million members, LO covers almost 85% of all workers in their field of interest (not all of them blue-collar any more). LO has always cooperated openly and very closely with the Social Democratic Party.
LO today comprises 21 nationwide trade unions with 928 branches and roughly 11,000 local branches or sections. The largest national unions are the Swedish Municipal Workers' Union (Svenska Kommunalarbetareförbundet, SKAF) with 660,000 members, the Metal Workers' Union (Svenska Metallindustriarbetareförbundet) with 445,000, the State Employees' Union (Statsanställdas förbund) with 190,000, the Commercial Employees' Union (Handelsanställdas förbund) with 175,000 and the Building Workers' Union (Svenska Byggnadsarbetareförbundet) with 155,000 members. The LO unions and LO itself have a total of more than SEK 10 billion in their reserve funds in case of labour disputes.
With 1.3 million members in all (1.15 million active members), TCO covers about 70% of all white-collar or clerical employees. The largest of the 20 national unions affiliated with TCO is the Swedish Union of Clerical and Technical Employees in Industry (Svenska Industritjänstemannaförbundet, SIF) with 310,000 members. The second-largest is the Teachers' Union (Lärarförbundet) with 200,000 and then the Union of Municipal Employees (Kommunalanställdas förbund) with 185,000 members. The TCO unions and TCO have about SEK 4 billion in their reserve funds. TCO claims to be politically independent, but often supports the Social Democrats.
The third union confederation, as mentioned above, is SACO, which has 385,000 members. Most of these are employed within the public sector. The largest of the 25 national unions affiliated with SACO are the Association of Graduate Engineers (Civilingeniörsförbundet), with 60,000 members and the National Union of Teachers (Lärarnas riksförbund) with 55,000 members.
For bargaining purposes, unions within TCO and SACO formed alliances in the private (Privattjänstemannakartellen, PTK) and public sector, respectively. Their influence diminished during the 1980s, however. In addition to LO, TCO and SACO there are some smaller unaffiliated trade unions.
LO and to some extent TCO are organized on the industrial principle, which means that employees belong to national unions determined by the economic sector in which they work, rather than by their profession. Some TCO unions as well as the unions within SACO are structured according to the craft union principle.
Union membership peaked at about 86% of all employees in 1986, went down to about 81% in 1991, but has gone up again with growing unemployment (since unions run the unemployment benefit schemes).
Employers
The leading employer organization is SAF, which has 42,000
member companies in the private sector employing 1.3 million
people. Most SAF member companies are small (more than half
of them have five employees or less). At one time SAF was
primarily a negotiating body, but it has followed the example of
LO and TCO and nowadays devotes more energy to influencing
public opinion. SAF has close to SEK 8 billion in its insurance
fund.
In the early 1990s, most of the 37 SAF member federations joined forces in nine groups. The largest of these groups are the General Employers Group (ALMEGA), whose member companies employ 330,000 peopleincluding the state postal services that joined in 1995, the Association of Swedish Engineering Industries (VI) 265,000, the Commercial and Service Employers Association (HAO) 195,000 and the Construction Group with 115,000. Aside from SAF, there are minor employer organizations representing co-operative employers, banks and publishers of periodicals. Publicly owned companies began to rejoin SAF in 1993 after an absence of 23 years.
In 1966, employees in the public sector were granted a major expansion of their right to negotiate and were empowered to take industrial action. The number of people working for the municipal governments and county councils in particular has grown faster in Sweden than in any other country since about 1970.
The National Agency for Government Employers (Arbetsgivarverket) represents government authorities with 250,000 employees. The Association of Local Authorities (Svenska Kommunförbundet) represents Sweden's 288 municipal governments, which have 735,000 employees, and the Federation of County Councils (Landstingsförbundet) represents the country's 23 county councils, with some 305,000 employees.
Collective bargaining
Over the years Sweden has tried to avoid pursuing a
Government incomes policy. Employers and unions were
regarded as strong enough to reach their own agreements on pay
and other conditions of employment. These conditions were
regulated for many years by nationwide collective agreements.
But due to taxation policies, the inflation rate and the lack of
increases in real pay, there was growing interference from the
government on these issues.
The most important function of collective bargaining contracts is to preserve labour peace. If no such contract is in force, industrial action is permitted. Collective agreements also have a norm-creating function, i.e. a company and its unions are not allowed to stipulate conditions which are poorer than those fixed by the applicable collective contract.
In the blue-collar area, wage bargaining used to take place at three stages: national confederation, national union/association and company level. From 1956 to 1982 the bargaining cycle for LO members was as follows: 1. SAF and LO presented a recommendation to their member organizations to conclude collective agreements within a specified framework. Over the years these recommendations became more and more detailed. 2. The national employers' associations and trade unions negotiated sector by sector. (The formal contracts are still usually concluded at this level.) 3. Companies settled the final details with local unions.
Employers and unions outside LO and SAF proceeded in a similar manner with their bargaining rounds. Generally speaking, the agreements were valid for one or two years. If negotiations got stuck, the government appointed a mediation commission. This was the rule rather than the exception for many years.
This system encountered growing criticism. Employers argued that less room was left for adapting contracts to the conditions prevailing in specific industries and companies. Nationally mandated supplements for low-paid employees resulted in very narrow pay differentials. The system became inflationary when the pay recommendation of the national confederations was seen as a floor rather than as a ceiling. The strongest criticism came from the Engineering Employers' Union, which concluded a direct agreement with the Metal Workers' Union in 1983. Later in the 1980s, a variety of bargaining systems were tried in the SAF-LO sphere with varying elements of centralization. In 1990 SAF decided to abandon centralized top level wage bargaining for good and since then negotiations have been carried out at sector level between national employers' associations and national trade unions.
Labour legislation
It was characteristic of the 1970s in Sweden that industrial
relation issues that were previously regulated by agreements
came to be regulated by legislation. Once fundamental economic
and social rights had been achieved, politicians became
increasingly interested in labour relations. Unions wanted to
raise the level of union influence provided by law.
In 1971 the LO Congress (which meets every five years) adopted a wide-ranging program calling for greater worker participation in decision-making and other changes in labour law. TCO adopted a similar program. As a result of these demands, a large number of new labour laws were introduced from 1973 to 1977. Some of the more important ones are described below.
First, however, a few words about the Labour Court (Arbetsdomstolen), which was founded in 1928 and comprises the finaland in most cases the onlyforum for settling legal disputes on labour issues. Its members include representatives from the state, the employers and the trade unions. The court hears some 200300 cases annually.
The Security of Employment Act (1974) increased the influence of trade unions. Dismissal of an employee must be based on so- called objective grounds. Such grounds do not exist if it can be reasonably demanded that the employee be transferred to a different position in the same company. Older employees are entitled to longer periods of notice than younger ones: those under age 25 get one month and then it goes up step by step to six months for those aged 45 and over.
In 1982 an option to hire people on a trial basis for up to six months was introduced in order to encourage the creation of new jobs. In 1994 this period was increased to twelve months and employers got a slightly larger formal say in deciding which employees to keep when there are cut-downs of staff. But in 1995 the previous regulation was re-establisheda move that annoyed most employers.
A 1974 act entitles trade union representatives to perform certain union duties on paid working time. Local branches decide which people are to be regarded as union officials and may to some extent decide how much time they may devote to union activities at the workplace. A 1975 law increased opportunities for employees to be granted leave of absence from work to pursue studies for long or short periods.
The Work Environment Act of 1978 increased the rights of unions to help improve the working environment. The concept encompasses work systems, working hours, and adaptation of work to human factors. Safety representatives may halt dangerous work under certain circumstances. The former SAF- LO-PTK work environment agreement of 1976, which regulates the tasks and responsibilities of the safety committees, is gradually being replaced by agreements settled between SAF member federations and LO/PTK member unions.
The 1980 Act on Equality between Men and Women forbids an employer from discriminating against an employee on account of gender. Men and women shall enjoy equal opportunities for employment, training, promotion and on-the-job development. They shall receive equal pay for work of equal value. Since 1992 employers with ten or more employees have been obliged to devise annual plans for equality-improving measures.
The Vacation Act of 1978 increased the statutory minimum paid holiday from four to five weeks.
Employee involvement
During the 1970s employee participation in decision-making at
the workplace was a much-discussed topic. A long series of
changes took place, some of them controversial. Three levels of
involvement were mentioned: shop floor, company and financial
participation.
Shop floor participation refers to the ultimate purpose of the reforms, i.e. to enhance the individual's influence over his or her own working situation. Companies made considerable efforts to improve the design of workplaces and job content, so as to create a better work environment and increase the opportunities for employees to influence their own job. The influence of the individual is also stressed in the Agreement on Efficiency and Participation of 1982 between SAF and LO/PTK (see below).
Company participation refers to the influence of employees over their workplace through the unions. At this level, union representation in advisory bodies within companies began when the SAF-LO and SAF-TCO works council agreements were signed in 1946. These agreements were replaced in 1977 by the Act on Co-determination at Work (MBL), also called the Act on Employee Participation in Decision-Making.
MBL applies to all workplaces where one or more union members are employed. The law also regulates numerous other issues, such as the right of association and negotiation and rules concerning mediation and conciliation. The parts of the law dealing with employee influence on decision-making attracted the most attention. Their aim is to ensure unions the right of being consulted at different levels in a company, in order to support the rights of the individual union member.
The employer is obliged to consult local unions before implementing decisions that involve a major change for employees in general or an individual union member. If the two sides cannot reach an agreement, the matter can be referred to discussions on a national level. Only after that is the employer entitled to make a final decision. If an employer does not follow these rules, he can be sentenced to pay damages.
The employer also has an obligation to provide information. Unions have access to virtually all company documents. In certain types of dispute, the view of the unions enjoys priority until the dispute has been settled in the Labour Court or by other means. At the request of the union, employee participation in the decision-making can be regulated further through a collective agreement.
SAF, LO and PTK reached supplementary participation agreement in 1982. The main concept of this Agreement on Efficiency and Participation is delegation of authority to foremen and individual employees. The agreement served companies and employees well by bringing participation back to the workplace.
Under another law, local unions may appoint employee representatives to the board of directors of most companies with at least 25 employees. They are entitled to two regular and two deputy board members. In companies with 1,000 or more employees operating in more than one economic sector, unions may appoint three members and three deputy members. Union representatives may never hold a voting majority, however. They have the same rights and responsibilities as other board members, but on certain issues where their union and the company have conflicting interests (such as collective bargaining matters) they are disqualified from the board meetings.
Financial participation, lastly, came to focus on the question of who should own companies. In 1975 LO called for the creation of so-called wage-earner funds. This issue became a major bone of contention in the years that followed.
A number of models for such funds were presented. Five regional funds were implemented in 1984, each with a nine- member board of directors including five trade union representatives. The money was used for buying shares in privately owned companies. Money was collected in this system for seven years (1984 to 1990). The previous non-socialist Government abolished the funds as from 1992.
Level of employment
Sweden has a high participation level in the labour market. The
labour force of 4.3 million people includes over 49% of the
population and nearly 80% of those aged 1664. Of these some
1.0 million peopleclose to 23%work part-time.
The large number of part-timers has mainly been due to the very large increase in the number of women on the job market. During the 1940s, women accounted for about 25% of the labour force. By 1993 this figure had climbed to around 48%. By law, the maximum normal working week is 40 hours. Actual working time, i.e. after taking into account absenteeism and overtime, is about 1,650 hours per year. Internationally speaking, this is a low figure, but it is higher than some years ago.
Registered unemployment in Sweden increased very rapidly during the early 90s to some 9%. Now the rate is about 7.5%. In addition, about 5% of the labour force is involved in government-sponsored labour market programs. Responsible for overseeing these programs are the National Labour Market Board (Arbetsmarknadsstyrelsen, AMS), county labour boards and local employment service offices. Labour market policy focuses on job placement services, employment training and other activation programmes rather than cash benefits.
Unemployment insurance is administered mainly by some 40 benefit societies linked to various trade unions. These societies are formally independent of the unions, however, and are financed by the national government. A general unemployment insurance system was introduced in 1994 including a Government body to serve as an alternative to the union-run benefit societies. This was, however, abolished by the new socialdemocratic government in 1995.
Employment and immigration
In the past 3040 years, the number of immigrants has risen very
substantially. About 530,000 foreign citizens now reside in
Sweden, and an additional 600,000 people have become
naturalized Swedish citizens since the mid-60s. Immigration was
particularly large in the 1960s. Industry needed labour, and
Swedish work conditions were attractive. In 1970 immigration
peaked at 73,000. Since the 1970s immigrants have primarily
been political refugees.
The number of foreign citizens in the labour force has dropped from more than 6% to slightly over 5%. Of the roughly 220,000 immigrants in the labour force, approximately 41% come from the other Nordic countries, primarily from Finland. Immigrants have the same rights on the labour market as Swedish citizens.
Current topics
For some years now, many of the established views in Sweden
have come under question.Various features of the Swedish
Model have been dropped or redefined. Joining the
EuropeanUnion in 1995 speeded up the process of change even
further in some areas.
The labour legislation of the 1970s settled the formal regulation of industrial relation matters for years to come. There have only been marginal changes since. In 1991, however, the new Government appointed a commission of inquiry, which was given the task of conducting a thorough review of existing legislation. A few changes were introduced, primarily in the Job Security Act, but the present government restored the previous legislation as from 1995. Yet another commissionsoon to reportwas established in early 1995 with the view of trying to settle new rules through collective agreements rather than laws.
In 1990 SAF decided that it would no longer be involved in wage negotiations with LO. LO was strongly opposed to this decision for a number of reasons, but LO's member unions have begun to acceptand even appreciatethe new order. In 1995 most pay rounds were held separately, although the final results tended to be more in line with each other than most employers had hoped for. The agreements were, however, settled for varying periods of time, so the collective model seems to be breaking up.
In 1991 SAF took another decision that is a clear break with the past: employers left the governing boards of all public authorities. SAF argues that responsibility for political decisions has become too blurred over the years. Full responsibility should be given back to politicians in order to make them more conscious of the costs and other effects of what is implemented. The unions do not wish to leave, but a new law was introduced stating that unions as well should leave the governing boards of a number of agencies such as the National Labour Market Board.
Pensions are another major issue. Sweden's demographic situation looks good by European standards, but the pension system (the ATP system) does not. A growing number of Swedes are turning to private pensions to supplement what everyone who has been in employment gets from the National Pension Funds (Allmänna pensionsfonden). Future contributions to the funds are expected to be inadequate to cover the rising expenditures of the funds. Pensions will remain a major issue as a major pensions reform is gradually introduced.
In 1991 a major income tax reform came into force. Income taxes were lowered considerably, so that the maximum tax now is the municipal tax (presently about 31%) plus a 20% national levy on taxable incomes over SEK 209,100 (in 1996) a year. This change was well received and has helped to keep pay demands and the level of inflation down. As from 1995, however, the state income tax went up to 25% and other taxes were also raised. The overall tax pressure thus remains very high in an international perspective.
A high unemployment rate during the 1990s has put the generous Swedish social welfare system under very severe strain, adding to a very great budget deficit and a rapidly growing public debt.
Sweden has been a member of the European Union since 1995. This obviously means that Sweden has to implement a number of EU directives in the social area, most of which pass without much ado. Swedish employers and unions, as well as the government, are expected to be quite active in industrial relations and employment matters in the EU: unions within ETUC and the employers within UNICE.
This fact sheet is part of SI´s information service. It can be used as background
information on condition that the source is acknowledged.
Published by the Swedish Institute
April 1996
Classification: FS 3 u Oha
ISSN 1101-6124
Fact Sheets on Sweden