‘Inertia’ of Swedish model bashed by firms

Swedish companies, relatively unscathed by the European debt crisis, dislike the Swedish economic model's inertia, want reforms to boost their competitiveness, and want to adopt the euro, their representatives say.

'Inertia' of Swedish model bashed by firms

“I think Sweden should join the euro… We benefit a lot from the single market, which is not sustainable without the single currency,” said Urban Bäckström, who heads the Confederation of Swedish Enterprise (Svenskt Näringsliv), the country’s main employer’s organisation representing some 60,000 businesses.

European Union member Sweden rejected the common currency in a 2003 referendum and Bäckström acknowledged that “we haven’t lost anything so far,” by standing outside the bloc.

According to a December poll however, nearly nine out of 10 Swedes want to hold onto their krona.

“It’s not a short-term matter for Sweden (but) more of a long-term one,” Bäckström said at a meeting with international media.

But if Sweden wants to remain competitive in the long run, industry players insist it must act soon, not only to move towards embracing the euro but also to reform Sweden’s womb-to-tomb welfare state, which is seen weighing heavily on business flexibility.

The problem, many say, is that Fredrik Reinfeldt’s centre-right coalition government has proven hesitant to introduce far-reaching reforms since coming to power in 2006.

“They don’t have to do much because they didn’t promise much,” joked Elisabeth Thand Ringqvist, the head of the Swedish Federation of Business Owners, representing some 70,000 entrepreneurs.

While the Financial Times named Sweden’s Anders Borg the world’s best finance minister last year, Thand Ringqvist, who served as an advisor at the Swedish enterprise ministry between 2006 and 2010, said she felt he had done little but deal with the here and now.

The real question, she said, is “What do we need to do now to be somewhere in 10 years?”

And the main answer? “You need to loosen the laws… (The existing) laws lock people in,” she told AFP, insisting that present labour laws in Sweden make it difficult for employees to change jobs and locations.

Reinfeldt recently proposed helping people change careers at 50, but according to Thand Ringqvist, current Swedish labour laws would prove a major obstacle to that plan, since employees who switch companies after 20 years lose all the benefits of seniority that otherwise largely shield them from layoffs.

Reinfeldt also recently suggested gradually pushing Sweden’s retirement age up to 75 from today’s 65-year limit, but the proposal was met with wide-spread criticism.

“Why not 85?” ranted Bäckström, insisting that it was “more important to get young people to work than forcing people to work more.”

Not long ago, Swedes were on average entering the workforce at the age of 21, he said, lamenting that today the average jumping-off age is 28, sporting multiple degrees and accumulated personal experience.

“There are many years lost,” he said, blaming the government for not taking advantage of the years of economic bliss to lower taxes, which remain among the highest in the world, or reform the labour market.

“The trick is not to have high tax rates, but high tax revenues,” he said, insisting the Swedish model with its generous tax-financed welfare state “can be sustained if we correct a few things.”

Without questioning globalisation, which benefits large Swedish companies like Atlas Copco and Ericsson, Bäckström stressed the need to “improve the climate in Sweden” for small businesses too.

At the end of January, blue collar union leader Stefan Löfven took over as head of the Social Democrats, which have been in opposition and crisis-mode since 2006 following virtually a century of dominating Swedish politics and overseeing the creation of the Swedish welfare state.

The arrival of someone so heavily focused on labour issues at the top of the main opposition party could be a good thing, Bäckström said, pointing out that Löfven “could force the government to introduce reforms.”

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‘Labour migration helps Swedish firms compete’

Swedish companies need to keep the power to hire foreign workers, argues Karin Ekenger of the Confederation of Swedish Enterprise (Svenskt Näringsliv), who fears a return to letting government agencies and unions determine who can work in Sweden will hurt firms' ability to compete globally.

'Labour migration helps Swedish firms compete'
Labour migration helps Swedish firms compete

That Sweden’s main trade union confederation, LO, wants to return to a system where government agencies and unions, rather than employers, determine who can work in Sweden is nothing new. But LO’s approach is inconsistent with the conditions governing the Swedish economy. We are a small country in a globalized world, and thus strongly dependent on both the free trade and open borders. Labour migration, therefore, makes it possible for Swedish companies to compete in the global arena.

The proposal from LO of a mandatory labour market assessment means that large occupational groups will be prevented from coming here to work. But according to the law, employers must pay foreign workers who are granted work permits in Sweden at least the same salary, give them the same conditions, and the same assurances as those enshrined in Swedish collective wage agreements or what is considered common industry practice. What then, does LO have against people employed in Sweden under those conditions? There is no government official or trade union representative who can better know what a business’s needs are and who is best suited to fill them than employers themselves. This is true irrespective of industry.

Obviously, it is important that the rules are followed and that pay and other conditions are the same as others in the Swedish labour market; it’s important not only for the individuals who choose to come to Sweden, but also for our member companies who otherwise would suffer from unfair competition. But the solution is not, as LO wants, a return to giving government authorities the power to review employers’ hiring decisions. Instead, what is needed is increased cooperation among public agencies, not only when it comes to pre-employment checks, as the case today, but especially when it comes to post-hiring checks, as well as increased powers to sanction employers that don’t comply.

There are difficulties associated with making employment offers legally binding, as LO wants to see. In the context of Swedish conditions, it’s very unusual to write binding contracts as long as eight to ten months in advance. A lot can happen during that time that can justify deviations in the original offer, deviations that are allowed within the framework of applicable collective agreements and standard industry practice. For example, a forestry planting in the north depends on when the ground has thawed, something that is difficult to predict accurately far enough in advance.

However, we share LO’s perception that it should be easier to get permanent residency in Sweden and that the need to maintain ties to one’s first employer and the sector be removed. The latter strengthens an individual worker’s ability to change employer if he or she isn’t satisfied with their working conditions.

It’s also obvious that the Swedish Migration Board (Migrationsverket) needs to work on cutting processing times for non-certified companies, which most are, and something many companies currently point to as a major obstacle.

Karin Ekenger works with labour market and labour migration issues with the Confederation of Swedish Enterprise (Svenskt Näringsliv), Sweden’s largest business federation representing 49 member organizations and 60,000 member companies.