Labor Market

• Introduction
• Labor Supply and Wage Rates
• Trade Unions
• Labor Legislation
• Conditions of Employment
• Temporary, Subsidized, and Youth Employment
• Industrial Democracy
• Vacation, Sick Pay, Unemployment Insurance
• Maternity and Paternity Leave
• International-Oriented Workforce
• Women in the Workplace
• International Labor Market
• Visas, Work Permits

Introduction

The Swedish labor market has a number of features which, when combined, make it relatively unique in Europe. These features include:

• Competitive wage scales for qualified labor.
• Ample supply of highly-skilled workers and managers.
• Constructive relations between employers and trade unions.
• Mutual respect between labor and management.
• Minimum government involvement in collective bargaining and union-employer contracts.
• Few labor conflicts.
• Industrial democracy that works.
• Worker familiarity with international business demands.
• Majority of workers accustomed to using computers.
• Widespread knowledge of English in the workplace.
• Acceptance of latest labor saving systems and equipment.
• The industrial world's highest percentage of women in the workforce.

Labor Supply and Wage Rates
The Swedish labor market situation changed dramatically as a result of the recession in the early 1990s. Sweden had a chronic labor shortage for many decades, coupled with high wages. Today, the labor supply is plentiful, and as a result of depreciation of the krona and productivity gains, wage costs are competitive with those in western Europe. (See also chapter on Wages.)

Unemployment in the mid-1990s reached record-high post-war levels, due largely to sharp cutbacks by state and municipal governments. In the late 1980s, roughly half of the labor force was employed by public agencies. In 1996, one-third was publicly employed.

The dramatic labor market changes resulted in about 7 percent of the workforce being unemployed in 1996. Another 4.5 percent was employed in government-financed training, education and other job programs.

Part of the public employment reduction was due to extensive privatization in recent years. Not only have state-owned companies been privatized, but private companies are now competing for public services that were once monopolized by state, county or municipal agencies.

Sweden's labor force totals about 4.3 million, or about 70 percent of the working age population. The percentage of working women is almost the same as men. However, about one-quarter of those employed, mainly women, work only part-time.

Although Sweden is well-known for its many international export companies, manufacturing employs only about 20 percent of the total labor force. This provides an indication of industrial efficiency.

As a result of the historic policies of trade unions to eliminate low-paid jobs and equalize wages, there are relatively small differences between the wage levels of highly-skilled and entry-level industrial workers. However, changes are under way here as unions recognize the need to compensate workers for special talents and individual efforts in education and training.

One of the unique features of Sweden's wage rate structure is that managers, engineers and technicians are paid considerably less than their counterparts in Europe. This is despite the fact that engineers and other university graduates are well-organized in strong unions.

There are considerable regional differences in labor supply. The three metropolitan areas of Stockholm, Gothenburg and Malmö generally have tighter labor markets, especially for skilled workers, engineers and technicians, than rural areas, the vast far northern region, or smaller towns that had been affected by cutbacks or the shut-down of a major employer.

The fact that most households rely on two incomes means that families do not readily move to new localities if only one member gets a new job. This creates a relatively stable workforce. It also means higher unemployment rates in non-metropolitan areas, making municipalities there especially eager to attract and assist new industries and employers.

Trade Unions
Swedish labor is well-organized. About 85 percent of blue-collar workers and 75 percent of white-collar workers are union members.

Unions are organized into three main confederations: The Trade Union Confederation (Landsorganisationen), known as LO, with 21 national unions, primarily blue-collar workers; the Central Organization of Salaried Employees (Tjänstemännens Centralorganisation), TCO, with 20 national unions, mainly clerical and technical white-collar workers; and the Swedish Confederation of Professional Associations (Sveriges Akademikers Centralorganisation), SACO, made up of 25 national unions of university graduate engineers, teachers and other professionals.

LO, and to some extent TCO, are organized on an industrial basis, with unions covering all workers in one industry without regard to occupational category. For example, the Metalworkers' Union (Svenska Metallindustriarbetareförbundet), the second largest union in LO, covers all Volvo blue-collar employees, whether they work as assemblers, painters, electricians or in maintenance or warehouses.

Employers, too, are well-organized. The Swedish Employers' Confederation (Svenska Arbetsgivareföreningen), known as SAF, is the dominant association of private employers, representing some 45,000 companies and organized into 35 industrial groups. Organizations for negotiating with public employee trade unions are the National Agency for Government Employers (Statens Arbetsgivarverk), the Federation of County Councils (Landstingsförbundet), and the Association of Local Authorities (Svenska Kommunförbundet).

Under a system that dates back to the late 1930s, basic union contracts are negotiated at a national level. For example, basic contracts are negotiated between the Construction Workers Union and the Association of Building Contractors, or between the Forest Industry Workers Union and the Forest Industries' Employers Association. These contracts serve as a basis for specific contracts by local unions and companies.

Contracts almost exclusively cover wages, salaries and other compensation. Social benefits, holidays, sick leave, pensions, etc., are primarily covered by national legislation.

This so-called "Swedish model" of labor negotiations, with local contracts based on central framework agreements, contributes to Sweden's enviable record of labor peace. Employers and unions are equally strong as they meet over the negotiating table. Even though there can be extremely tough bargaining, there is a general feeling of mutual respect and understanding between the parties. In some cases, such as the Graduate Engineers' Union (Civilingenjörsförbundet), the union also partly serves as a professional organization.

If contract negotiations are stalemated, the parties may ask for a government-appointed mediator. Strikes and lockouts, as a last resort, are rare. In Europe, Sweden is generally among those countries having lost least time as a result of labor conflicts. The Government traditionally plays no official part in labor negotiations. There is no legislation regulating the internal affairs of unions or employer organizations.

However, the Trade Union Confederation, LO, has historic close ties with the Social Democratic Party. This is Sweden's largest party and has been in power since 1932, except for 1976-82 and 1991-94, when non-Social Democratic coalitions held office. Employers recognize the reality of the political power behind unions, just as unions recognize the economic power of companies.

In recent years, there has been a movement, strongly promoted by the Swedish Employers' Confederation, SAF, to allow local unions and companies to work out contracts that are more independent of central agreements. This would enable stronger, expansive companies to pay higher wages and offer more attractive benefits, or, conversely, to allow struggling companies exposed to tough foreign competition to offer lower wages. Unions generally oppose softening of the present system.

Labor Legislation
Swedish labor legislation primarily covers the rights of union activity, settlement of disputes through the Labor Court (Arbetsdomstolen), working environment and safety, industrial democracy measures, and prohibition of discrimination by sex, race and national origin.

Protection of individual employees, which is insured through legislation in many countries, is usually covered in Sweden through collective bargaining agreements. Such agreements form a standard for relationships between employers and employees even in those parts of the labor market where no collective bargaining agreements exist. Thus, in practice, Swedish collective bargaining agreements cover the entire labor market.

The question of open shop, with non-union employees, and closed shop, where only union members are employed, is of no great significance in Sweden. The fact that the vast majority of workers are organized in unions has made this issue irrelevant. Although there have been cases of employers' refusing to sign union contracts, Sweden's historic system of labor-management relations is too strongly embedded in the character of the nation to expect any major changes in the foreseeable future.

Legal disputes involving labor issues are settled by the Labor Court, founded in 1928. Its panel of judges includes representatives of the State, employers and trade unions. Cases could involve such things as claims of wrongful dismissal, breaches of union-
employer contracts, discrimination, or illegal wildcat strikes. The court hears about 300 cases annually.

Conditions of Employment
Under the Employment Security Act of 1982 (Lagen om anställningsskydd, LAS), an employment agreement is normally valid for an indefinite term, and an employee under such an agreement is considered permanently employed (tillsvidareanställd). As such, he or she may not be dismissed or made redundant except on specific grounds, and only after proper notice is given according to collective bargaining agreements and established practices.

A common basis for job termination is lack of work. Other acceptable reasons for termination can be absence from the job without cause, refusal to accept orders, insobriety, a distinct lack of abilities, and criminal activities directed against the employer.

Employers are required to issue written notice of termination of employment. Employees under 25 years of age are entitled to one month notice, over 25 two months, and over 45 six months notice. During the notice period, the employee is entitled to full pay and benefits even if there is no work. Persons dismissed due to lack of work are normally entitled to re-employment priority within one year of unemployment.

Employers may lay off workers temporarily because of lack of work. Laid off employees continue to receive full benefits, while the employer may receive compensation from a special insurance fund set up by the Swedish Employers' Federation and Trade Union Confederation.

In job termination or lay-offs, employers are required to follow the "last in-first out" rule. This regulation is under review. Departures from the formal provisions of the Employment Security Act may be made through collective agreements.

Disputes over grounds for job termination can be settled by the Labor Court. Until the Court ruling is made, the employee is entitled to continue to receive all pay and benefits. Employers violating the Employment Act (Arbetslagarna) may be subject to pay damages.

Temporary, Subsidized, and Youth Employment
There are several forms of employment other than permanent. These are for specific time periods and are covered by special regulations. They include temporary stand-in employment, employment during exceptionally busy periods, not exceeding six months in a two-year period for the same employee, fill-in jobs during holidays, employment until a youth starts compulsory military service, working for a limited period after statutory retirement age, and seasonal jobs in agriculture, forestry and tourism.

In addition, there are several forms of subsidized employment programs established in recent years to help young people and others who are unemployed. The main types are as follows:

Trial Employment enables an employer to hire a person for up to six months on a trial basis. If employment continues, the person automatically becomes permanently employed. The employer need not justify terminating employment after six months, if desired.

The Workplace Introduction/Youth Induction Scheme provides work experience for young people aged 20-24. The program involves four months of on-the-job training. During training, the youths receive a state allowance and a contribution of SEK 1,000 monthly from the employer.

The Municipal Follow-Up Youth Program enables municipalities to assist in providing jobs for youths under 20. Local private employers can participate.

Wage Subsidies are paid by the State to employers hiring physically or mentally handicapped persons. Subsidies can be paid for four years, with possibility for extension. Subsidies are flexible, depending on work capacity, but are generally up to 80 percent of a monthly wage of SEK 13,700 (in 1996). In some cases of severe handicap, the subsidy may be 100 percent of wage costs.

Industrial Democracy
The decade of the 1970s was noted for Parliament's passing a number of important labor laws. Several broke new ground in the field of industrial democracy.

The Employment Security Act of 1974 (Lagen om anställningsskydd), established regulations on dismissals, transfers, and length of notice for dismissed and laid-off employees. The system of "last in-first out" has come under criticism since it could severely hurt some companies, especially in high-tech industries. Some modification of the law is expected.

The Employment Act (Arbetslagarna) entitles union representatives to perform certain duties on paid, working time.

Later amendments to the Act allow for hiring personnel on a trial basis, especially young people, and allowing increased opportunities for employees to take time off for studies for long or short periods.

The Working Environment Act of 1978 (Arbetsmiljölagen) gained international attention since it empowered local safety shop stewards to shut down a job he or she considers unsafe, until a ruling can be made by a professional state inspector. Only a handful of jobs have ever been shut down by local stewards.

The Act on Employee Participation in Decision-Making (Medbestämmandelagen, MBL), passed in 1976, also gained international attention. The law provides unions with the right to be consulted on a wide range of issues that could affect employees. These could include such things as major investments, changes in a corporate organization, sale of the company or some of its activities, use of subcontractors, appointment of managers, or implementation of new technologies or processes. Employers are obliged to provide information and consult with labor representatives before making a final decision. However, employees have no formal veto power on managerial decisions. Disputes are settled by the Labor Court.

A later agreement between the Swedish Employers' Confederation and trade unions shifted codetermination and employee participation issues to the actual workplace involved, rather than to a central level. This made the system much more practical and effective for both sides.

Sweden's joining the European Union, and implementation of various EU directives, strengthened employees' rights to negotiate on collective dismissals or on changes in company ownership. Now, an employer must negotiate with all trade unions affected, not only those having collective agreements.

Another law that gained international attention in the 1970s was the Act on Management Representation (Lagen om arbetstagarrepresentation i styrelsen). This empowers local unions to appoint employee representatives to company boards. Unions may name two regular and two deputy members to boards of directors of companies with at least 25 employees, and three board members and three deputy members in companies with more than 1,000 employees.

Union representatives may never hold a voting majority. They have the same rights and responsibilities as other board members, but are disqualified from participating in meetings on issues where the union and the company may have conflicting interests, such as in labor contract negotiations.

It was not surprising that after this legislation went into effect the Trade Union Confederation immediately organized courses to educate employee representatives about corporate board duties, company finance and related topics. The Trade Union Confederation has always given highest priority to training and education of members, having very early recognized that knowledge is a powerful tool for worker advancement.

When the law on union board representation was passed, one fear of management was that there would be language difficulties. A number of Swedish multinational companies were accustomed to holding board meetings in English, out of consideration to foreign board members. But union representatives accept this, even if a blue-collar union representative may need a translator's help. Language is no major problem.

Now, after 20 years of experience, an overwhelming majority of chief executives and board members agree that the system has far more advantages than disadvantages. Most executives say employee representatives on boards provide valuable "shop floor" input to decision-making, and at the same time make it easier to convey information "from the top down".

Vacation, Sick Pay, Unemployment Insurance
The Vacation Act of 1978 (Semesterlagen) increased the statutory paid minimum annual vacation to five weeks, from the previous four weeks. This long vacation period, and the desire for Swedes to enjoy the relatively short summer, means that most employees take vacations during July. This is changing, however, due to a more international corporate environment.

The work week, by law, is 40 hours. Overtime is regulated by law and union contract. General overtime is limited to 50 hours per calendar month, and a maximum of 200 hours per year. Extra overtime can be taken through agreement with local unions.

Unemployment insurance, which is administered by unions with state support, provides payment of 75 percent (in 1996) of normal wages for a maximum of 300 days. However, if a person then works for a while and is again laid off, he or she is entitled to pay for another 300-day period.

Maternity and Paternity Leave
The state social insurance system, mainly financed by employers' contributions, covers sick pay, occupational injury pay, and maternity/paternity leave pay. These payments amount to 75 percent of normal income.

Mothers or fathers are entitled to 18 months of leave from work after the birth of a child, with the state social insurance system paying 75 percent of the normal wage for up to one year, up to a maximum of SEK 271,500 per year. The parents decide who will draw the parental benefits, but one month is reserved for each parent. Fathers may also take 10 days of leave in connection with the birth. Parents are entitled to leave to care for sick children, up to a maximum of 120 days per child per year, with benefits paid by the insurance system.

International-Oriented Workforce
Because of the large Swedish export and multinational companies, many of which are 100 years old or more, workers know that it is necessary to produce products and provide services that are competitive in foreign markets. The Swedish workforce is highly receptive to the latest technologies, processes, standards and designs.

For example, trade unions were early supporters of companies' installing industrial robots to take over unhealthy, dangerous or highly-repetitive manual jobs. As a result, Sweden not only has a very high percentage of sophisticated robots in use, but is home to the world's largest industrial robot producer.

Swedish labor is well educated, with one recent OECD study noting that Sweden has one of the world's highest levels of literacy, including understanding of quantitative reading. Most foreign visitors are pleasantly surprised and impressed with the extent of English spoken, not only at the managerial and technical levels but also on the shop floor. English language studies start in the third or fourth grade.

A national effort was launched several years ago to make every high school graduate computer literate. But computers and automated production systems had become common in the workplace years earlier, as companies automated to overcome constant labor shortages. This means that Sweden today probably has one of the world's highest percentages of people working regularly with computers, about 60 percent according to a 1996 study.

Because of Sweden's historic export companies, and its traditional free trade policies, most corporate managers and engineers have international working experience.

Women in the Workplace
As noted, women make up close to 50 percent of the employed workforce. Women started to be recruited for traditional men's jobs back in the early 1960s, when there were severe labor shortages. An extensive municipally-financed system has been established to provide daycare for children of working parents. There are only a few daycare centers provided by employers.

The Equality Act of 1991 (Jämställdhetslagen) prohibits discrimination on grounds of sex. Employers are also obliged to adopt measures to achieve equality, with a target being that women hold at least 40 percent of jobs in every category. However, women are still greatly underrepresented in managerial and executive positions.

A 1994 law prohibits job discrimination on grounds of race, color, national or ethnic origin, or religion.

International Labor Market
Since the 1950s, the Nordic countries (Denmark, Finland, Iceland, Norway and Sweden) have had a common labor market, enabling citizens of any of the countries to work and live in any other country, receiving full and equal social and residential benefits. As a result, a large number of workers from Finland moved to Sweden, where jobs were plentiful, in the 1960s. Since the 1970s, immigrants have been mainly from the Middle East and former Yugoslavia, and have been granted residence as political refugees or on humanitarian grounds. There are about 500,000 foreign citizens residing in Sweden.

Sweden's joining the EU, of course, enables citizens of EU nations to take jobs in Sweden without restrictions. The same applies to the other European Economic Area, EEA, countries of Liechtenstein, Norway and Iceland, although citizens of the latter two are also covered by the Nordic agreements.

Executives or specialists from non-EU countries have no problem in obtaining working and residence permits when employed by Swedish or foreign-owned companies. A resident permit entitles the foreign citizen to the same social welfare benefits as a Swedish citizen and subjects the person to the same taxes. Families of such foreign employees are naturally also equally covered, with full access to such things as healthcare under the national healthcare system, daycare, and admission to public schools and universities.

Visas, Work Permits
Citizens of most countries need no visas for a visit to Sweden of less than 90 days. But to work and live in Sweden, citizens of countries not in the EU or EEA need a work and residence permit sticker attached to a passport before entering the country. Applications are available at Swedish Consulates. Applicants must have a valid passport.

Some Consulates are authorized to issue work permits immediately for specialists, executives or others in key business positions. If one is employed by a foreign company, the employer must submit a letter stating salary for the time of employment. Such permits are also granted to applicants' immediate families.

Applications for other workers must be approved by the Swedish Immigration Board (Invandrarverket). Processing time is estimated at two to three months. A work permit is generally granted to cover an acute shortage of specially-qualified personnel needed in the Swedish labor market. An applicant is not permitted to enter Sweden until the permit is granted and attached to the passport. The passport is kept at the Consulate General until the application is approved.

Work permits are time-limited, but can be extended. Such permits do not entitle the holder to immigrate or acquire Swedish citizenship. If a permit is valid for more than six months, a spouse may obtain a work permit for the same period without regard to the needs of the labor market.

© 1996 by Invest in Sweden Agency