• Sweden's news in English
 
app_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

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.

Story continues below…

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)

Your comments about this article

Today's headlines
Nobel Prizes 2016
Nobel Literature Prize announcement delayed
Haruki Murakami (pictured) is one of the bookmakers' favourites. Photo: Bernat Armangue/AP/TT

The delay is due to 'arithmetic', an academician said.

Horny elk hold up Swedish hunt
One of the randy animals in question. Photo: Mikael Fritzon/TT

The giant things just can't contain themselves.

Sweden to ban masks but not burqas at football matches
A masked supporter at a Stockholm derby football match last year. Photo: Janerik Henriksson/TT

The ban is designed to curb violence at sporting events in Sweden, but it must also follow conventions on religious freedom.

Video
Heckler humbles Swedish golf champion with perfect putt
Henrik Stenson met his match in the final practice for the Ryder Cup. Photo: Charlie Riedel/AP/TT

Well that wasn't supposed to happen...

Presented by Invest Stockholm
Stockholm: creating solutions to global challenges

It’s no secret that Stockholm is serious about sustainability. We took a look at how the city's emerging startups are tackling global challenges, making the world a better place.

Warm weather melts H&M profits
An H&M store in central Stockholm. Photo: Maja Suslin/TT

A warm autumn may be good news for Swedes, but it was bad news for Sweden's biggest clothing brand.

Rail delays after heavy winds batter Sweden
The weather is expected to clear up. Photo: Anders Wiklund/TT

Commuters were advised to take it easy in traffic on Friday, after harsh winds toppled trees across roads and railways across Sweden.

Homes
In pictures: Eight traditional Swedish tiled stoves
A tiled stove. Photo: Wrede Fastighetsmäkleri

The traditional Swedish masonry stove (kakelugn) is still a popular feature in many homes today. Houzz.se's Amanda Strömberg has found out more.

Volvo recalls 127,000 cars worldwide
Volvo is recalling 127,000 cars. Photo: Björn Lindgren/TT

Do you own a Volvo? Read this.

The Local Recipes
Swedish food: How to make sweetened lingonberries
Sweetened lingonberries. Photo: John Duxbury/Swedish Food

Possibly the most Swedish food there is. Food writer John Duxbury shares his recipe with The Local's readers.

Sponsored Article
‘I view the world in a different way now’
Gallery
People-watching: September 28th
Sponsored Article
Top 7 tips to help you learn Swedish
National
Aliens' sex lives? Why Swedes want Nasa to send a condom into space
Analysis & Opinion
'If Sweden really wants startups, drop the red tape on migration'
Blog updates

27 September

Cutting your nose …. (The Diplomatic Dispatch) »

"Last week, Jeremy Browne, the Special Representative for the City of London, visited Sweden. Jeremy was…" READ »

 

7 September

Svensk or svenska? (The Swedish Teacher) »

"Hejsan! My inbox is full of questions :-). Here’s one about when to use “svensk” and…" READ »

 
 
 
Sponsored Article
Expat finances in Sweden: the Common Reporting Standard
Gallery
Property of the week: Gotland
Sponsored Article
Let's Talk: a personal Swedish language tutor in your pocket
National
Trump an 'embarrassment' Springsteen tells Sweden
Gallery
People-watching: September 23rd-25th
Politics
Russian Sweden Democrat aide resigns over suspect deal
Sponsored Article
Retiring abroad: ensuring your health is covered
National
Muslim teacher leaves job after not shaking male colleague's hand
Sponsored Article
'Creating a sense of home': Collective living in Stockholm
Travel
Why we adore autumn in Sweden
Gallery
People-watching: September 21st
Sponsored Article
Life in Jordan: 'Undiscovered treasure'
National
Stockholmers hunt killer badger after attack on neighbourhood hipster cat
Sponsored Article
Gran Canaria: 'So much more than beaches'
The Local Voices
Why this Russian developer is committed to helping refugees - with tech
National
Six key points in Sweden's budget plan
Sponsored Article
Why Jordan is the ‘Different’ East
The Local Voices
How a Swedish name finally made recruiters notice this Iranian's CV
Sponsored Article
How to vote absentee from abroad in the US elections
Gallery
Property of the week: Luleå
Sponsored Article
Why Jordan is the ‘Different’ East
Gallery
People-watching: September 16th-18th
Sponsored Article
Retiring abroad: ensuring your health is covered
Culture
Why Swedish TV has given these kids' trucks a sex swap
Sponsored Article
'There was no future for me in Turkey'
National
TIMELINE: Everything you need to know about the Julian Assange case
Sponsored Article
7 reasons you should join Sweden’s ’a-kassa’
Gallery
People-watching: September 14th
Sponsored Article
‘Extremism can't be defeated on the battlefield alone’
Politics
Why Sweden is putting troops on holiday dream island Gotland
Sponsored Article
Stockholm: creating solutions to global challenges
The Local Voices
'What I mean when I say: I came here to blow myself up'
Society
VIDEO: Are Swedes that unfriendly?
Features
INTERVIEW: How Arthur the jungle dog opened hearts and minds
Gallery
Property of the week: Smögen, Västra Götaland
Society
Sweden's ancient forest tongue Elfdalian fights for survival
The Local Voices
'Whenever I apply for jobs I’m treated like an unwanted stranger'
The Local Voices
Is Swedish bosses' ignorance keeping refugees out of jobs?
3,006
jobs available