Charlotta Stern /Ratio/ on How the Swedish labor market really works. Lecture for the Conservative Institute of M. R. Stefanik, Bratislava.

1. How the Swedish labor
market really works
Charlotta Stern, Ratio

2. • Contracts should be voluntary
Union power to coerce employers to sign
collective agreements is a violation of freedom
• Conflict weapon is powerful
Restrictions on yielding them are weak
Foundation of the model is coercive
Swedish model and classical liberal principles

3. Share of employees who are members in unions (percent,
2000–2018
Källa: Kjellberg 2020
0
10
20
30
40
50
60
70
80
90
2000 2005 2010 2015 2018
Slovakia 11,1 percent in 2019

4. Strict employment protection legislation
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
USA CHE CAN AUS AUT GBR EST DNK JPN NZL IRL ISL DEUKORNOR POL ESP FIN LUX GRCSWE FRA BEL ITA PRT NLD CZE
Individuella uppsägningar Kollektiva uppsägningar
Källa:
OECD, version 2019.
Slovakia 2.51 in 2019

5. Labor costs are high
Total labor cost, EUR per worked hour in 2019

6. Inequality - Income inequality - OECD Data
Compressed wage structure (gini)
Slovakia is green
Sweden is yellow

7. Minimum wages are high
Minimum wages are
set in collective
agreements
Sweden’s excepted from
new EU-regulation!

8. Short history of the
model
Or: what happened in Sweden?

9. 1938 Saltsjöbadsavtalet

10. Rapid social change, recession, and poverty!
Amalthea, sunk in 1908 because she was carrying English strike breakers

11. Storstrejken (general strike) 1909

12. Ådalen 1931

13. Self-regulation (but under political threat)
Saltsjöbadsavtalet -- order, at last!

14. Swedish model 1.0
Neutral state
Centralized labor market with strong
cartels on both sides
Peace and prosperity

15. State intervention -- “New labor law”
1970’s
Social change by legislation
• Employment protection
• Co-determination
• Work safety legislation
• Extended union rights
Swedish model 2.0

17. • The Riksbank (central bank) to keep
inflation at 2 percent (1993), legal
reform in 1999 giving more autonomy
from politics
• Swedish National Mediation Office
2000
Swedish model 3.0

18. “The mark” is the wage increase
norm for the entire economy
Wage setting re-centralized
Export industry sets “the mark”
”The mark”
1997 Industry agreement
2,5%

19. Real and nominal wages, inflation 1970-2020
-5.00
0.00
5.00
10.00
15.00
20.00
Nominallön Inflation Reallön
Swedish model 3.0
”The mark era”
Swedish model 2.0
”Normless era”
Source:
Medlingsinstitutet and
SCB

20. Conflicts are low – number of strikes 1980-2016
Swedish model 2.0
”Normless era”
Swedish model 3.0
”The mark era”

21. Polycentric system a’la Ostroms
Sweden in 2020
744 collective
agreements
88 percent of
employees
covered
Source: MI 2020

22. Relations employers-unions were good (1991)
CEO trust unions
Rather good or good faith
Unions trust CEOs
Rather good or good faith

23. Hans L. Zetterberg 1927-2014
”Invisible Contracts”
i.e. positive relational bonds
within companies, or social
trust

24. I am proud to work in my company, percent
0
5
10
15
20
25
30
35
40
45
50
Absolutely do not
agree
Do not agree Neutral Agree Absolutely agree Non reply
1997 2015

25. I will work hard to help my company succeed
0
5
10
15
20
25
30
35
40
45
Absolutely do not
agree
Do not agree Neutral Agree Absolutely agree Non reply
1997 2015

26. Institutional reforms
and the future of the
Swedish model

27. Saltsjöbadsavtalet 2022

28. 2. Skill development during employment
1. Less strict employment protection
2. Work-study support
1. Paid skill development during employment
2. Individual choice and labor market relevance
3. Student loans and top-ups in collective agreements
Liberal reforms, overall

29. If unions and employers establish good relations:
• Constructive – repeated interactions build
social capital and trust
• Sustainable – reaching consensus through
negotiations – skin in the game
• Functional -- division of power state and
parties
Despite coercive underpinnings, polycentrism
works reasonably well

30. Implications for a
slovak audience?

31. Burkean-Smithian-Hayekian attitude
• Learn from others, persuade by their example
but do not try to imitate
• Particularities of the Scandinavian countries
cannot be imported
History and culture

32. Different versions over time
Same with the organization of the welfare state
Post-1990's crises
- Reforms with choice and exit
- Privatizations of telecom, pharmacy, ...
Swedish model(S)

33. Piece-meal reforms are possible
Be ready when reform window opens
Ideas and research make a difference
Classical liberal ideals and messy reality

34. • Classical liberal infrastructure
• Employer association (SAF/SN)
pro-market not pro-business
• Structural support to liberal think-
tanks (Timbro) and research
institutes (IFN, Ratio)
Unique to Sweden?

35. Thank you for your attention!