Together, the Swedish Trade Union Confederation (LO) and TCO, a white collar union federation, lost 173,000 members during the year.
LO chair Wanja Lundby-Wedin points to unemployment insurance (a-kassa) reforms enacted by the Alliance government as the main cause for the drop in union membership.
"Many members with tight household budgets feel they can't afford to be in a union when a-kassa premiums become higher," she said to Göteborgs-Posten.
The reforms, spearheaded by Employment Minister Sven-Otto Littorin, resulted in higher premiums for unemployment insurance, while at the same time reducing the overall level of benefits to be paid out.
According to a study by Lund University sociologist Anders Kjellberg, overall union membership dropped from 77 percent to 72 percent in October 2007 alone.
"It's a historic drop. One needs to go back 35 years to find similarly low levels of union membership as today," he said.
Sture Nordh, the head of TCO, admits that trust and confidence in unions has been dropping for several years, with fewer people recognizing the value of union membership.
Union membership statistics bear out Nordh's observations, showing that LO membership rolls have fallen by 450,000, or 21 percent, in the last ten years. TCO has lost 74,000 members during the same time period.
Total LO membership stood at 1.68 million members as of November 2007. The latest TCO figures from June 2007 show a total membership of 975,000.
There are several factors contributing to the long term drop in union rolls.
More of today's workers receive higher levels of education or choose to work in the ever-expanding services sector, at the same time that employment opportunities in the traditionally union-heavy manufacturing and public sectors are dropping.
In addition, fewer workers join unions and more members tend to drop out during times of high employment and economic growth. The retirement of the generation of workers born in the 1940s is another contributing factor.
Finally, both TCO and LO have also had a hard time attracting young people.
Today's youth choose temporary and fixed-length contracts more often and have a much looser connection to the labor market than workers in earlier generations. Moreover, surveys show that many young people simply don't see the benefits of union membership.
To counteract the prevailing negative attitudes of young workers toward unions, TCO and LO are working hard to explain the role of unions in looking out for workers' interests.
"Young people in Sweden have among the highest starting salaries in the world as well as a high rate of wage equalization," said LO's Lundby-Wedin.
"There isn't anything that one can take for granted; rather, it is the result of collective bargaining."