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Swedish wages plagued by record-low increases

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16:51 CEST+02:00
Wages in Sweden have increased at historically low rates so far this year, according to preliminary figures from the National Mediation Office (Medlingsinstitutet).

Private sector wages increased at a rate below 2 percent, according to the agency, a rate even lower than that experienced in the wake of the Swedish banking crisis in the early 1990s.

The National Mediation Office's Bo Enegren reckons that one would have to dig far back in the statistical records to find a lower rate of increases.

“It's a very clear downshift in wage increases,” he told the TT news agency on Monday.

The preliminary figures will likely be revised upwards somewhat, but wage agreements indicate that and adjustments will be minimal.

The historically low rate of wage increase can be attributed to the unusually low wage agreements forged between unions and employers last winter in the wake of the recent global economic downturn.

“It's not that surprising,” said Enegren.

For the economy as a whole, the rate of wage increases only reached 1.5 percent, although the figure will likely be adjusted upwards even further because a large number of municipal employees haven't yet received their locally negotiated wage increases.

Sweden's in-work tax credit programme (jobbskatteavdraget) also plays a role in dampening wage hikes, according to the National Institute of Economic Research (NEIR).

“In the long run, it doesn't have such a large effect on pre-tax wages, but in the short run pre-tax wage increases and be muted somewhat because more people are entering the labour market,” NEIR head Mats Dillén told TT.

The pace of wage increases to which the Swedish economy has now shifted down are good for employment.

According to the NEIR's last wage creation report, a labour force cost increase of 1 to 2.5 percent per year over a three year period is optimal for private sector jobs and production.

While NEIR still agrees with the conclusions of its report, it sees 2010 as a “low point” because wage agreements offered so little in 2010.

“From very low levels, the rate of wage increases will increase a bit ahead to 2012,” said Dillén.

The National Mediation Office, founded in 2000, is charged with mediating labour disputes and promoting an efficient wage formation process. It is also responsible for gathering and publishing public statistics relating to wages and salaries.

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