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Unions 21
| Blog post

The state’s role in the Swedish labour market model

By Lise Donovan and Magnus Lundberg, Legal Advisors, TCO Sweden | 5 min

In TCO’s everyday work, it feels like we are in a constant battle with the rest of Europe about how to achieve the best possible conditions for European workers and at the same time not deny workers in Sweden the benefits of the Swedish labour market model.  

Even if our model is far from perfect, there is one thing on which the Swedish trade unions, the employers’ organisations and the state agree: our model works well for all three of us and most probably better than any other model would. But what is true for a consensus-oriented society like Sweden may not be true for any other country. 

Some essential features of the model are worth fighting for: strong and well represented labour market organisations and a particular role for the state. 

The model is based on a mutual respect and trust between, and within, all three parties. This didn't occur overnight, rather over a century. And it came, and still comes, at a cost. Along the way, trade unions have not only been taking an active part in creating nationally responsible wage formation but also in agreeing boundaries to some core trade union rights, like the right to strike. It has not always been easy for trade unions and occasionally there has been internal criticism from members. It requires truly democratic unions that know their members well and have their support. This model has resulted in good – or at least satisfying – wage development and working conditions and a peaceful labour market. But it is important to point out that strikes are called when necessary, although they are normally few, short and effective.

A pre-requisite for the model is that collective agreements cover a large part of the employees in the labour market. The average unionisation rate is about 70 per cent and 90 per cent of all workers are covered by collective agreements in Sweden, without statutory obligations. This is due to the fact that the employers are also well-organised in Sweden.

Before comprehensive labour law legislation was introduced in Sweden, the main social partners in the private sector agreed on wages and other conditions in collective agreements, first locally, then nationally. The national social partners also agreed on provisions regarding the right to belong to a union, to negotiate, and to take industrial action. This was underpinned by legislation in the 1970s, however, to this day it doesn’t include regulations on wages, since there is broad consensus this is a matter for the social partners.

Another key feature of the Swedish labour market model is that disputes are resolved in the first instance through negotiation between the parties and not in the courts. 

Since the 1970s, labour law legislation is partly mandatory and partly semi-mandatory. The state’s role is to decide what needs to be mandatory, what should be semi-mandatory and what will be left for the employer and the employee to agree on. Semi-mandatory means that if the social partners deem it necessary, they can agree on deviations in collective agreements. Certain deviations can be agreed in local or national collective agreements with wide room for benefit to both employers and  employees.

Nowadays, when we talk about labour market legislation, for example how to implement an EU directive, the three parties argue for their different standpoints with the goal of reaching a satisfactory solution for each of them. 

It might sound like this works very easily and smoothly, but it doesn’t always and has never done so. Respect and trust have varied over time, differ between various governments and it’s something we must work on constantly.

A new development is that the government occasionally offers the social partners the chance to find a suitable collective agreement solution and, under certain conditions, will transform it into legislation. This happened a couple of years ago regarding employment protections concerning ‘just transition’ and upskilling. 

There was a little controversy that the government had suggested the social partners reach an agreement on a legal area, but nevertheless the social partners fulfilled their part. The government put the content of the collective agreement into legislation. But what has happened now is that the government has not fully delivered when it comes to the funding it agreed to take responsibility for.  

Right now, there is an ongoing argument where the national social partners are feeling, to a certain extent, betrayed by the government because of this. This matter will probably also be resolved in a peaceful manner, but the question is what significance it will have for the future. Will the social partners continue to be positive to suggestions by a government that does not keep its promises?

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