Swedish union erodes Latvian firm’s profits

Latvian construction company Laval un Partneri posted a sharp drop in turnover and minuscule profit in 2004, blaming the poor results on a conflict with Swedish trade unions over alleged wage-dumping, the head of Laval said on Tuesday.

“The conflict with the Swedish builders’ unions was definitely the main reason for our poor financial results last year,” Guntars Tiltins, director of the construction company, told AFP.

The company recorded turnover in 2004 of 1.389 million lats (1.98 million euros), down 32 percent from 2003, and just 2,962 lats in profit, which shrank 20 times from the previous year.

In 2003 the company’s net sales were 2.042 million lats and profit 59,600 lats.

“Our work was focused mainly on Swedish orders. We don’t have them any more,” Tiltins said, adding that Laval was in the red at the end of the first quarter of this year.

Laval un Partneri, a small construction company, was founded in 1998. Tiltins is the sole shareholder. The Latvian company won a tender to renovate a school in a suburb of Stockholm and to build an apartment house in Sweden last year.

But the Swedish builders’ trade union paralysed the construction projects, saying the salaries paid to the Latvian labourers brought into the Nordic state to carry out the construction were too low by Swedish standards.

Tiltins has said that the Latvian workers in Sweden were being paid about 1,000 lats (1,423 euros) before tax.

Laval filed a claim with the Swedish labour court in December 2004 saying the Swedish trade union should lift the blockade, but the court ruled that the Swedish unions were within their rights and said that collective labour agreements in the country where the work is being done must apply.

In April, Laval’s Swedish subsidiary went bust, with backruptcy lawyer Örjan Jarvin blaming the blockade by unions.

Latvian Prime Minister Aigars Kalvitis last year submitted a complaint to European Commission President Jose Manuel Barroso, asking that the EU look into the legality of the Swedish trade unions’ blockade and examine whether Sweden has implemented EU directives about free movement of people and services.

Sweden is one of three older EU member states that opted not to bar workers from new member states from their job market. The other two were Britain and Ireland.

Latvia joined the EU in May last year.


For members


Explained: Why is Sweden so worried about the EU’s minimum wage plan?

EU labour ministers meet in Brussels on Monday to discuss the European Commission's planned minimum wage directive. Why is the proposal causing such unease in Sweden?

Explained: Why is Sweden so worried about the EU's minimum wage plan?
Customers visit a branch of McDonalds in Stockholm. Photo: Stina Stjernkvist/TT

What’s happening on Monday? 

EU ministers responsible for employment and social affairs, including Sweden’s Eva Nordmark, will meet in Brussels for a two day meeting at which they hope to adopt a European Council position on a directive imposing “adequate minimum wages” on all EU countries. Once the Council, which represents member states, has agreed a common position, it will begin negotiations with the European Parliament and the European Commission. 

What’s Sweden’s position on the minimum wage directive? 

Sweden has been, along with Denmark, one of the most vocal opponents of the directive, arguing that it threatens the country’s collective bargaining model, in which unions and employers set wages without government interference. 

But on Friday, the government dropped its opposition, together with country’s umbrella union, the Swedish Trade Union Confederation, arguing that a compromise proposal put forward by the European Commission would protect Sweden’s wage autonomy. 

A majority of the members of the Swedish parliament’s employment committee are backing the government’s new stance, but three opposition parties, the Moderates, the Christian Democrats, and the Sweden Democrats, are opposed to the change in position. 

“I am extremely happy that there is broad support and majority backing for us to continue with the negotiations, to stand up for what we have come to so far, and do everything we can to protect the Swedish wage-setting model,” Sweden’s employment minister Eva Nordmark (S) said after a meeting with the employment committee on Friday. 

READ ALSO: Why Sweden doesn’t have a minimum wage and how to ensure you’re fairly paid

Why did Sweden make its dramatic last-minute u-turn? 

Sweden’s government judges that, after the compromise, the directive will no longer mean that Sweden is forced to bring in a statutory minimum wage. 

“I consider, together with experts in the civil service and experts in the unions and employer organisations, that there is no requirement for Sweden to bring in a statutory minimum wage,” Nordmark told TT. 

She added that agreeing to sign up to the directive would give Sweden the ability to take a deeper part in the negotiations giving it the power to make sure that important exceptions are made for Sweden. 

Denmark, however, is still resolved to say ‘no’ to the directive. 

Surely a minimum wage is a good thing? Isn’t Sweden supposed to be a high-wage economy? 

Sweden is certainly a high-wage economy, but that is largely thanks to its model of collective bargaining, under which wages are generally set by negotiations between employees and employers for each sector. 

If the directive sets a precedent allowing governments, either at a national or EU level, to interfere in this process, or for those who disagree with the result of the collective bargaining agreement to appeal to government entities, it could undermine the Swedish system. 

Who is still worried? 

More or less everyone. While the Swedish Trade Union Confederation is supporting the government’s decision, its vice chair Therese Guovelin, described the European Commission’s compromise proposal as simply “the least bad compromise proposal” the union had seen.

She has previously described the European Parliament’s position that the directive should apply to the entire European Union as “a catastrophe”.

“That would mean that a disgruntled employee who is not part of the union, could take their case to court, and would then end up at the EU Court, and it would then be them who would decide on what should be a reasonable salary,” she explained. “In Sweden, it’s the parties [unions and employers’ organisations] that decide on that.”

Tobias Billström, group leader for the Moderate Party, said he was concerned at the role of the European Court in the directive. 

“There are big risks with this,” he told TT. “The EU court might decide to interpret this directive as applying across the board, and then we might end up with what we wanted to avoid. The Moderates have as a result been against this development, and it’s important that Sweden gets to decide itself on the Swedish labour market.”

What might happen now? 

The European Parliament might try to remove the wording and the exemptions which Sweden hopes will allow its employers and unions to retain control of wage-setting. 

Mattias Dahl, chief executive of the Confederation of Swedish Enterprise, which represents employers’ groups, said that the government needed to stand its ground in the upcoming negotiations, reiterating that he would have preferred that the European Commission had not sought to give itself such a role in the Labour Market.  

Nordmark said that Sweden did not intend to back down to the parliament. 

“These are important red lines for us. If there are demands from the European Parliament that push in a different direction, we can lean on the Swedish opinion and what we stand for,” she said.