• Sweden's news in English
 
jobs_header_v3

'Sweden's entry-level wages are too high'

The Local · 18 Mar 2014, 11:37

Published: 18 Mar 2014 11:37 GMT+01:00

Facebook Twitter Google+ reddit

Typically, someone who starts a new job must go through a learning curve. It takes some time to become better at a new job. This is not least the case for young people with little or no previous job experience. Therefore, the starting salary tends to be relatively low, and to grow with time. Sweden is however unique in that the starting salary is relatively high compared to that of experienced workers.

In a new report, Susanne Spector, economist at the Confederation of Swedish Enterprise, illustrates this by comparing the wages of a newly hired individual to someone who has worked in the same place for over 15 years. In the average rich EU country the more experienced worker will earn around 50 percent higher in wages. In Sweden the difference is a mere 20-percent increase.

The laws of economics work in the same way in Sweden as in other European nations. Experienced workers are typically more productive than new ones. The difference is that Swedish labour unions have long prioritized raising the entry-level wages. And so, a situation has been created where new employees are often paid more than what is motivated by the productivity of the worker.

As a response, employers become reluctant to hire new employees. Like many other commodities, when the price and demand of new jobs do not match, problems are created on the marketplace. Firstly, few entry-level jobs are created. And secondly, those that exist often go to friends or family. In fact, fully seven out of ten new recruitments into firms are obtained through personal contacts.

Demanding high entry-level wages might, at first glance, seem to be a way to encourage young people to have a good start to their careers. But the effect is the opposite, since the wage levels make entering the labour market quite difficult. The immediate effect is high youth unemployment. Most young people in Sweden do enter the labour market, but even they can suffer from the lack of entry-level jobs, since the lack of entry-level jobs slows down the transition to employment.

During recent years, a number of studies have shown that early unemployment can “scar” individuals. Even somewhat delayed entry makes it more difficult to gather the social capital needed to progress in one’s career, slowing down long-term wage growth and increasing future risks of unemployment. The scarring effects of youth unemployment have been shown to remain up to twenty years later in life.

The current practice of demanding unusually high entry-level wages favours the few young people who do not have trouble getting their first jobs, often with help from family and friends. It creates significant disadvantages to the majority whose labour-market introduction is slowed down and, of course, to the employers who hire fewer new people than they would otherwise like to.

Normalizing entry-level wages to mirror those of other rich EU states could mean significant improvements for the Swedish labor market, benefiting most in the long term. In a country with no formal minimum wages, it is up to employer organizations and labor unions to negotiate a common solution. 

Nima Sanandaji, a Swedish writer of Kurdish origin, has written numerous books and reports about policy issues in Sweden. He is a regular contributor to The Local.

The Local (news@thelocal.se)

Facebook Twitter Google+ reddit


Your comments about this article

Today's headlines
Swedish Lucia advert sparks love and hate online
Photo: Janerik Henriksson / TT

An advert for Sweden's Åhléns has unleashed a heated online debate after the department store chain unveiled a new campaign featuring a dark-skinned child, whose gender wasn't obvious to all, dressed as a Lucia.

IKEA founder Kamprad suffers broken hip
Photo: Thord Nilsson / TT file picture

Ninety-year-old IKEA founder Ingvar Kamprad has suffered from a broken hip, which temporarily resulted in him being hospitalised, but is now in good recovery, his assistant said on Sunday. He may have to skip the traditional IKEA Christmas celebrations in his native Älmhult though.

What are Swedish values? Many Swedes are unsure
Photo: Erik Johansen / TT

Although perhaps one of the hottest potatoes in the Swedish political debate right now, many Swedes still find it hard to pinpoint exactly what Swedish values are, a new study shows.

Swedes protest cutbacks in personal assistance budget
Demonstrations were held in 25 towns and cities across Sweden on Saturday. Photo: Janerik Hansson / TT

Thousands of people staged demonstrations across Sweden on Saturday to protest recent cutbacks in the budget funding personal assistance for people with disabilities.

Police launch manhunt after deadly Stockholm shooting
No suspects have yet been arrested over the attack. Photo: Claudio Bresciani/TT

Swedish police have launched a massive manhunt after masked gunmen barged into a Stockholm café and shot two people to death late on Friday.

Sweden has fourth happiest workers in the world: report
Is Swedish fika the secret? Photo: Fredrik Sandberg/TT

Sweden is home to the fourth happiest workers in the world, an international survey has claimed.

Here's how much Ikea staff are getting for Christmas
Christmas comes early for Ikea staff. Photo: Vegard Wivestad Grøtt/NTB scanpix/TT

Staff at Ikea are getting an early Christmas treat in the form of millions of euros to share between them.

Sweden threatens action to stop Facebook 'hate and lies'
Should Facebook crack down on hate speech? Photo: AP Photo/dapd, Timur Emek

Sweden could impose legal obligations on Facebook as a last resort if the social network does not crack down on hate speech and fake news, the culture and democracy minister has threatened.

In pictures
This is what Sweden's new Icehotel looks like
An artist's impression of the hotel in winter. Photo: PinPin Studio/Icehotel

The famous Icehotel in Jukkasjärvi has just opened its new year-round section. Have a look at some of the first pictures of one of the world's most unusual hotels here.

The Local List
Sweden's pioneering free press act turns 250
It doesn't look bad for 250 years old. Photo: Regeringen

On the day of its 250th anniversary, The Local looks at five facts worth knowing about Sweden's groundbreaking Freedom of the Press Act.

Sponsored Article
Smart songwriters: Sweden's next big music export?
National
Final proof that Sweden has NOT banned Christmas lights
Sponsored Article
Why Stockholm attracts so much talent from abroad
Travel
IN PICTURES: Stockholm's new myth-busting Viking museum
The Local Voices
Job market matchmaker hooks up 1,300 newcomers and Swedes
Blog updates

14 November

Hello darkness, my old friend (The Diplomatic Dispatch) »

"I started thinking about November’s blog for The Local at the end of October, as the…" READ »

 

6 October

10 useful hjälpverb (The Swedish Teacher) »

"Hej! I think the so-called “hjalpverb” (auxiliary verbs in English) are a good way to get…" READ »

 
 
 
Sponsored Article
18 Stockholm innovations to keep an eye on
Gallery
People-watching: November 30th
Sponsored Article
Sweden to Hong Kong: The Local guide
National
This is how cold it's going to get in Sweden this week
Gallery
Property of the week: Skellefteå
National
Inside Sweden's perilous Sami reindeer pilgrimage
Sponsored Article
Programmers' bootcamp: Change your life in 12 weeks
The Local Voices
'My name is Sami and I am a proud Swede - it hurts when people say I'm not Swedish'
Sponsored Article
We visited 5 'murder spots' in Malmö
National
Swedish Advent 'less popular than Christmas Eve'
Gallery
People-watching: November 25th-27th
Sponsored Article
Why Stockholm startups are teaching kids to program
Swedish city to put all workers through LGBT course
Sponsored Article
Smart songwriters: Sweden's next big music export?
National
The five weirdest attacks on Sweden's giant straw yule goat
Gallery
People-watching: November 23rd
Sponsored Article
'Learning to trade gave me the life I wanted'
The Local Voices
'Swedes are stylish: you need to dress well if you want to fit in'
Sponsored Article
Stockholm: leading the way in clean energy innovation
National
Critics slam Swedish paper's Donald Trump cartoon as anti-Semitic
Sponsored Article
Michael Björklund: 'Being a chef is crazy work'
National
Men call Sweden's mansplaining hotline for mansplaining tips
Sponsored Article
We visited 5 'murder spots' in Malmö
Gallery
Property of the week: Gotland
Sponsored Article
HIV in Sweden today is not like it was yesterday
Gallery
People-watching: November 18th-20th
Sponsored Article
Mette Helbæk: ‘We have a basic human need to connect'
Culture
Shooting starts on The Bridge 4
Sponsored Article
Terje Håkonsen: 'I try to make everything count'
Travel
Sweden's ten most beautiful places
Sponsored Article
Lina Thomsgård: 'I try to break down barriers every day'
The Local Voices
Having a Swedish girlfriend didn't help this Egyptian evade culture shock
Sponsored Article
'We wanted to turn ideas into action'
Gallery
People-watching: November 16th
Culture
What the world of Harry Potter would look like... set in Sweden
National
Here's where Sweden's best non-native English speakers live
The Local Voices
This new book by a Syrian writer gives refugee children their own hero
Politics
Do Swedish polls underestimate support for Sweden Democrats?
3,496
jobs available