Scandinavian Working Papers in Economics

Institute for Futures Studies

No 2005:2: The Employers in the Swedish Model The Importance of Labour Market Competition and Organisation

Torbjörn Lundqvist ()
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Torbjörn Lundqvist: Institute for Futures Studies, Postal: Box 591, SE-101 31 Stockholm, Sweden

Abstract: The way the labour market functions is a crucial factor in any analysis of the Swedish model. Full employment contributed to the growth of what were probably the two most important institutions in this model: centralised negotiations between the social partners and, secondly, the Rehn-Meidner model, involving pay policies based on solidarity with the low-paid. Here, we have examined the role of the employers in the rise, application and fall of the centralised bargaining model. In this respect, the Swedish Metal Trades Employers' Association (VF), the largest and most important employer organisation in the peak association SAF, was the actor whose interests eventually led to the model's demise. The principal cause was discontent over the way this bargaining model worked in practice. The engineering industries felt their interests were being neglected in the giant employer collective. This empirical investigation into an employer organisations's internal actions, combining economic history with organisation theory, shows the importance of the market mechanism for employer policy during full employment. They sought a solution to the problem of wage drift. Significantly, it began by helping to push through centralised bargaining in the 1950s. When wage drift subsequently showed a tendency to decline towards the end of the 1970s, this was seen as a result of more extensive local and regional organisation. Competition and wage drift, it was felt, could be handled better through local collaboration than through large-scale collective action. One of the institutions of the Swedish model had thereby met its end.

Keywords: Employers Swedish Model; Labour Market Competition and Organisation

JEL-codes: J51

23 pages, February 2005

Price: 25 SEK

Note: ISSN 1652-120X ISBN 91-89655-60-5

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