Trade unions in a changing political context

The rise of the Swedish Model

The relationship between the trade unions and the state has always been ambiguous in Sweden. This goes back to the formation of what usually has been named ‘the Swedish Model’. Swedish trade unions were established on a wide scale in the 1890s. Early on, they adopted the so-called ‘industrial principle’; organising all workers in a certain workplace and not by occupation or trade. This was especially true in the export industries of wood, iron and steel, but also in the metal engineering industry. In the latter case, the contrast with Britain, for example, was profound: Swedish trade unions also in this industry were strong from the beginning and there was much less in-fighting between different trades. At the same time, centralisation of the trade union movement was rapid. By 1905, the various local metalworker trade unions were organised within the strong and centralised Svenska Metallindustriarbetareförbundet (Swedish Metalworkers’ Union), and were able to conclude a collective agreement with its counterpart, the Verkstadsföreningen (The Swedish Association of Engineering Employers). In general, the level of organisation was high on both sides (Johansson and Magnusson, 2012).

In 1898 the central workers’ organisation, the LO, was formed to provide support for the fast expanding branch-level trade organisations. Initially quite powerless, it could only take action with the agreement of the branch-level organisations (often to the dismay of the LO leadership). Though gradually improving its position, the breakthrough for a stronger LO only came during the Second World War. In 1941 a report commissioned by the LO but in which a large number of branch-level unions participated was published, proposing that more power be put in the hands of the LO (Johansson and Magnusson, 2012). After the war, further steps were taken to increase centralisation, with a focus on wage bargaining. LO’s power peaked in the period 1952–1981 when it was responsible for central-level bargaining with its counterpart, Svenska arbetsgivareföreningen (SAF, the Swedish Employer’s Confederation). Central bargaining also took place to a certain extent in the 1980s, but not as a standard, and since 1990 wages have been bargained mainly at branch level. To what extent this centralised system worked favourably for either side or for both has been a hotly discussed issue for years, without any definitive conclusion being drawn (Lundh, 2010; Magnusson, 2000). Considering that Swedish growth between the 1950s and 1970s – the so-called ‘Golden Years’ – was very high, driving up incomes and the welfare state, central bargaining was at least no hindrance (Magnusson, 2000).

During these three decades, ‘the Swedish Model’ rose to fame. Its meaning is ambiguous, used to describe the rise of Sweden as a welfare nation in general, but perhaps more specifically to characterise an industrial relations landscape with strong central players. While in the 1920s Sweden had perhaps one of the most conflict-ridden labour markets in the industrialised world (Johansson, 1989; Swenson, 2002), this came to an abrupt end in the 1930s. There are slightly different interpretations of what actually happened, but the most common is that, as a consequence of the Great Depression and the simultaneous rise of authoritarian regimes in Europe set on controlling wage setting in particular and the labour market in general, the two key social partners LO and SAF came to the conclusion that it would be better to come to an agreement, thereby keeping out the state. The result was the much-discussed Saltsjöbaden Agreement of 1938 (Saltsjöbaden is a small place in the archipelago just outside Stockholm with a still-existing Grand Hotel – at that time owned by the powerful financial capitalist Wallenberg family – where the negotiations took place) (Johansson, 1989; Lundh, 2010).

The Saltsjöbaden Agreement established some of the fundamental principles guiding the Swedish social partners ever since: free collective bargaining without state involvement and a system allowing workers freely to join trade unions and negotiate for higher wages, while on the other hand accepting the sole right for employers ‘to organise and distribute work’ (the well-known paragraph 23 (later 32) in the SAF statutes). As the Agreement was only a central or ‘framework’ agreement, it opened the door for more specific ones. In the post-war period, a number of agreements were successfully negotiated by both sides, inter alia on vocational training, working conditions and worker participation. Seen from a comparative perspective, the balance sheet of the industrial relations system set up in 1938 has been quite impressive. One precondition was, as we have seen, the high level of centralisation of the social partners. But some caution is required here, as things did not always work as smoothly as it might seem, perhaps most vividly illustrated by the major conflict in the metal engineering industry in 1945. This revealed opposition to the centralising ambitions of the LO – in this case underscored by communist trade unionists protesting against the close relationship between a centralised LO and the social democratic SAP. ²

Up to present times, the bipartite model of free collective bargaining partners has been looked upon as a guiding principle by the two sides of industry in Sweden. Even today, this is clearly voiced when Swedish partners take part in discussions at European level. When confronted with attempts to introduce labour market legislation, the Swedish position is almost always sceptical, to say the least. The labour market is the domain of the social partners, it is argued. More than one senior officer of the European Trade Union Confederation (ETUC) has talked about a ‘Greta Garbo’ attitude of Swedish trade union representatives. ³

As noted above, the relationship between the trade unions and the state has not always been straightforward, as all talk of a strongly welded Swedish Model would seem to indicate. There were indeed important exceptions to the rule of keeping out the state, particularly during periods when the SAP was in power; the classical example was the 1970s when the LO and TCO did not hesitate to support new labour laws enhancing the trade union position proposed by the social democratic government under Olof Palme. The so-called Medbestämmandelagen (MBL, the law on co-determination) and the Lagen om anställningsskydd (LAS, the law protecting employees against dismissal) were a result of this cooperation, but there were also more, including generous state support for the education of union members organised by the trade unions. Without doubt the LO was also a strong supporter of the so-called wage-earners’ funds, a top political issue in the 1970s (see Åsard, 1985; Magnusson, 2012).

As a consequence of this cooperation, the SAF turned its back on the original Swedish Model. During the 1980s and 1990s, the relationship between the LO and SAF became more conflict-ridden, with the latter ultimately officially saying goodbye to any form of organised collaboration with the LO, TCO and the SACO in the early 1990s. In the future, stated the employers, collective agreements would only be negotiated at branch level, and it was obvious that the employers’ preference lay in wage setting directly at the workplace. The SAF was also restructured, becoming mainly a lobby organisation with a new name, ‘Confederation of Swedish Enterprise’ (Svenskt näringsliv). Hence the LO, in particular, found itself in the somewhat odd situation in the early 1990s of having no immediate counterpart.

This step taken by the employers also had other important repercussions, for instance redefining the role of the social partners vis-à-vis the state. Paradoxically, in the heyday of the Swedish Model with free collective bargaining, Swedish governance had become increasingly corporatist (Hermansson et al., 2005). The social partners were guaranteed a seat on the boards of all the most important state boards; from the all-important Labour Market Board to the board of Swedish Television. No law could be put forward without asking the social partners for their opinion. This gave them great influence and a power base of unusual proportions. Simultaneously, it meant that they had to take responsibility for the common good, at least to some extent. But this suddenly became a thing of the past after the employers began to leave the state boards, no longer taking part in central agreements with the trade unions. From the mid-1990s onwards, Sweden's governance definitively became much less corporatist (Hermansson et al., 2005).

The House of Labour

To understand fully the relationship between social democracy and trade unions in Sweden, we must emphasise the importance of the so-called ‘Swedish Labour Movement’, which could also be named ‘the Swedish House of Labour’, underlining its special character. ⁴ In Swedish historiography, the labour movement is most often connected to other popular movements emerging in the late 19th century such as the Free Church and Temperance Movement. The Labour Movement did not consist just of trade unions and the SAP, but also other organisations such as the Arbetarnas bildningsförbund (ABF, Workers’ Education Society), the so-called ‘Folkets hus’ movement (the House of the People), Kooperativa förbundet (KF, the Cooperative consumer organisation) and many others. Together they formed something that can be regarded as a mild version of a ‘total institution’ with hundreds of thousands of members. This House of Labour had hegemonic propensities, with an overwhelming influence on political, social and cultural development throughout the 20th century, or up at least to the 1990s. While there were clearly important internal divisions within this House, it had an overwhelming influence when it spoke with one voice.

The LO often expected SAP governments to act in its favour, emphasising the ‘twin pillars’ of the Labour Movement. But the latter was often not able to do so – as we saw earlier – particularly when governing in a minority position. Moreover, especially in the 1950s and 1960s, macroeconomic stability was threatened by high inflation, leading to clashes between the two ‘twins’. But, at the same time, the expectation on both sides was always that they should stick together.

Hence the Swedish Model was perhaps less strict than it seemed from outside; the LO at times used its special relationship with the social democratic government to ‘threaten’ the SAF with the visible hand of the state if it did not comply with its views. The SAP also had much to gain from being twinned with the trade unions and part of the wider House of Labour. Without doubt this was the key factor behind the Social Democrats remaining in power up to 1976. It might also explain why a predominantly social democratic political agenda to a large degree survived, even when centre-right governments were in power (1972–1982, 1991–1994, 2006–2014). Leading the 2006–2014 coalition government, even the Moderates Party saw it necessary to call itself the New Labour Party – proclaiming that it was more effective than the SAP in achieving full employment and maintaining the Swedish Model.

Increasing tensions

The outbreak of the so-called ‘War of the Roses’ (the red rose was the emblem of the SAP but also a common symbol for the labour movement in toto) during the 1982–1991 social democratic government showed that the coalition between the SAP and the trade unions was not something that could be taken for granted. To a large extent this ‘war’ originated from the ‘third-way’ macroeconomic policy put forward by the Palme government after 1982, with its powerful finance minister Kjell-Olof Feldt as its main architect. Trying to avoid Thatcherism, but also the traditional social democratic policies of Mitterrand in France, Feldt aggressively devalued the Swedish krona in 1982, thereby generating a profit and investment boom with almost full employment. But the flipside was that it led to decreasing real wages for most ordinary employees. The economy became even more overheated during the 1980s with increasing inflation. This led, in turn, to increased tensions between the trade unions in different sectors of the economy, especially between those in the exporting industrial sector and those in the domestic sector. Increased income disparities also led to a more general distrust between the LO and the SAP in 1990, when Feldt suggested major budget cuts to calm an overheated economy that he feared would soon go into recession.

Another factor fuelled the deteriorating relationship between the LO and the SAP in the 1980s: the declining proportion of trade unionists organised by the LO. For many years the white-collar TCO and SACO had acted as the junior partners of the LO. However, from the 1970s onwards they became increasingly powerful and independent of the LO. Increasing divisions within the LO also led to it becoming less of a monolith. This development first emerged in the 1980s when Feldt started taking policy decisions independently of the LO, gaining speed in the 1990s and onwards. The open ‘War of the Roses’ ended with a ceasefire during the recession that took hold of Sweden in the first half of the 1990s – Feldt's fears had come true – and the simultaneous coming into power of a centre-right coalition government. In a situation of steeply rising unemployment and macroeconomic imbalances, the twins again found common ground for opposition. When the SAP returned to power in 1996, many believed that the budget and public sector cuts of the previous government would be reversed. But this was not to be the case. Indeed, perhaps the most important reason for the new centre-right coalition returning to power in 2006 – now under the leadership of the Moderate's Fredrik Reinfeldt – was that a rising share of traditional SAP voters had turned their backs on their party. Reinfeldt showed great skill in playing on the increasing apathy of traditional social democratic voters after the crises of the 1990s and subsequent budget cuts by calling his party the ‘New Moderates’ and ‘the real’ party for working people in Sweden. The previous close links between the LO in particular – but also the trade unions at large – and the SAP could no longer be taken for granted.

Annus horribilis

It was a clear mistake to believe that the Reinfeldt government would not make a difference. One of the first decisions taken by the new centre-right government in 2006 concerned the labour market, changing some of the basic rules governing the unemployment insurance system. For almost a century, this Ghent-style system had been based on independent unemployment insurance funds (‘arbetslöshetskassor’) administered by the trade unions, but to a large extent financed by taxpayers. In comparison to many other countries, it was also quite generous, with an income replacement rate of up to 70–80 per cent (up to a certain ceiling). What the Reinfeldt government did was to increase the level of contributions to the funds. Considering them as part of an insurance system like any other, it was decided that contributions would in future be dependent on the unemployment risk in the particular branch. Together with other ‘reforms’ regarded as ‘unfriendly’ to the trade unions – including in 2007 the closing down of the state-financed Arbetslivsinstitutet (ALI, The Swedish National Institute for Working Life) which since the 1970s had carried out research on working-life issues on behalf of the trade unions – this took the LO by surprise.

For the trade unions, this was not only a sign that the new government (led by the new ‘party of Swedish workers’) was prepared to tamper with some of the cornerstones of the Swedish Model. Would the next step be for it to change the rules of the game on the labour market? The radically increased unemployment insurance contributions were also a direct threat to the trade unions, reducing workers’ willingness to join a trade union. It is usually taken for granted that one of the single most important factors behind Sweden’s high union density has been the almost automatic membership of an unemployment insurance fund when joining a trade union (Kjellberg, 2017). In theory it was (and still is) possible to not be a trade union member and only contribute to the fund, but this was unusual in the past (but is now becoming increasingly prevalent).

A renegotiated model

Following the SAF’s rejection of the ‘old’ Swedish Model in the early 1990s, the LO put a lot of effort into finding a new role for itself and into constructing a new version of the Swedish Model, though some would insist that the old model is still alive and kicking, but now at branch level (Magnusson, 2017). To some extent this is true: the absence of national collective agreements has not prevented collective agreements still being the rule in Sweden, though individual bargaining within specific limits takes place especially in the public sector and Saco-organised areas (Magnusson, 2017). However, the strong emphasis on branch-level collaboration on wages and other matters is regarded by many as the very essence of a ‘new’ Swedish Model.

However, there is one important caveat: the LO has never accepted the existence of such a ‘new’ model. In contrast to the TCO and SACO who without much in-fighting have transformed themselves from central organisations with a corporatist mission to more of service and lobby organisations, the LO has not done so. It has continued to insist that it has a special role to play in relation to both the branch-level organisations and the SAP and the state, upholding the notion of a joint labour movement, the old ‘House of Labour’ with a key role in Swedish polity and society (Johansson and Magnusson, 2012).

The question is the extent to which this ‘House of Labour’ still exists today. It is perhaps true that the ties between the former twins, LO and SAP, are still there to some extent. But this is today most observable at senior levels where executives to a large extent still vote for the SAP, but not necessarily at grass-roots level. The link between the LO and SAP was perhaps mostly symbolic in 1991, the year in which the collective SAP membership of trade union members was abolished. Since then, ties between the SAP and the LO, as well as with the other trade unions, have become much weaker. As already discussed, voting for the SAP is no longer natural for trade union members. Simultaneously, many of the organisations within the ‘House of Labour’ have withered in terms of membership and influence. When the term ‘Swedish Labour Movement’ is mentioned today, it is often within citation marks. Moreover, a little more than 10 years ago the then Social Democrat prime minister Göran Persson questioned whether the trade unions were not just another ‘interest group’ among many others, to the chagrin of the LO.

Even so, the LO did manage to find a role for itself in the late 1990s, which it seeks to keep up by all possible means. The initiative was not of its own making: in 1997 the so-called Industrial Agreement was signed between the industrial branch trade unions and their counterparts on the employers’ side (Elvander, 2000, 2002). This agreement was, in a way, a reversion to an order that had existed before the 1980s, with the export industries setting wage levels for the whole labour market. It has surely strengthened the position of the LO. The Industrial Agreement reflected the fact that Sweden had joined the European Union in 1995 and that Swedish wages now needed to be competitive in a European and global setting (Johansson and Magnusson, 2012; Egerö, 2003). Since then, this agreement has been quite strictly followed – even though challenged at times. Most experts agree that the Industrial Agreement has not only served LO well, but also the Swedish economy at large, helping to maintain a steady rise in real incomes since the late 1990s. It has also played an important role in maintaining the image of a potent LO vis-à-vis branch-level trade unions and the state. The future of the Industrial Agreement is difficult to predict. Two or three years ago, it was under heavy criticism for keeping down wages in the low-wage sectors of the economy (retail, public sector, services, etc.). In the latest bargaining round under the Industrial Agreement in 2017, however, special account was taken of these groups. Without any doubt, there is still life in the agreement (Frisk, 2017).

Prospects for the future

As argued at the outset of this article, the general trends of declining trade union membership and the decoupling of the link between the trade unions and the major social democratic party have not spared Sweden, despite occurring only partially and admittedly more slowly than in many other Western countries. The explanation for this is complex, and cannot be understood without taking into account the specific position of the trade union movement in Sweden as part of a more general labour movement, or House of Labour, an institution which plays a pivotal role in the construction of Swedish society at large. Perhaps in relation to most other countries social democracy has been much more of a hegemon than elsewhere, with an unusually high level of legitimacy. This hegemonic position has also implied that Swedish political, administrative and social institutions, and to a large extent social services, have been built around it. Hence, there are some strong institutional barriers against immediate convergence in a short- or medium-term perspective. Labour market and welfare institutions are path-dependent (Magnusson and Ottoson, 2001; Streeck and Thelen, 2005). The fact that the Industrial Agreement is still respected by the trade unions is, to a large extent, a sign of path-dependency. Highly regarded by governments, political parties and (most) employers, it has nevertheless been questioned by certain trade unions who feel that their members are structurally underpaid (especially school teachers and nurses in the public sector). The Industrial Agreement has, however, been by and large maintained.

At the same time, things can change quite rapidly as we saw in the case of the Reinfeldt government's decision to change the rules of the unemployment insurance system. Shocks of this kind can again lead to decreasing trade union membership and distrust in the ‘old’ institutions.

The possibility for Sweden to withstand the general European trends of decreasing union power and the decoupling of traditional working-class coalitions is, of course, dependent on many different factors. Strong forces such as globalisation and a Third Industrial Revolution mean increased market competition (Magnusson, 2017). While Sweden hosts an economy that, to a large extent, relies on exports, the content of these exports is rapidly changing. The knowledge-based and high-skilled service sectors are growing at a fast rate, while traditional industries face the threat of downsizing and outsourcing to low-cost countries. ⁵ Without doubt, strong unions and a system of collective agreements covering almost the whole labour market have so far helped resist a spiral of wage cuts, especially among less-skilled workers. In fact, real wages have risen quite steadily on a yearly basis since the end of the 1990s, in contrast to many European countries and, particularly, the US where stagnating or even declining real wages for workers and the lower middle class are the norm (see for example Streeck, 2016).

Here, of course, the political future of Sweden plays an important role. As noted above, the Reinfeldt government was careful not to take too much action against the established Swedish Model, upholding a system of strong labour market partners as well as, for example, the labour laws established in the 1970s. What will happen in the next few years is uncertain. A general election is scheduled for 2018 and the centre-left parties have stated in unison – although differing on other issues – that they are willing to ‘reform’ the labour laws and change some of the basics of the Swedish Model, for example, by introducing special wages outside the collective agreements for immigrant workers. To what extent this will actually happen is unclear. Currently, the parliamentary situation in Sweden makes it difficult to form governments, with no party able to govern on its own – though the largest party, the SAP, commands a vote of around 30 per cent. Moreover, it is difficult for it to form a coalition without having to collaborate to some extent with the populist (some would say neo-fascist or racist) Swedish Democrats (SD). Within the centre-right parties backing the 2006–2014 Reinfeldt government there is a clear split on this issue. Thus, the political situation and the outcome for the Swedish Model are currently very unclear, to say the least.

Immigration is undoubtedly the key issue that has led to the SD becoming such an important player in Swedish politics. Immigration, however, also affects the SAP and the trade unions – as well as their relationship with each other. A great wave of immigration to Sweden has led to a situation in which almost one-fifth of the population was born outside the country. While pre-1990 immigration was dominated by people seeking work in traditional industry, post-1990 immigration has involved people seeking refuge from war and other hardships. A great challenge for the future is without doubt to integrate these ‘new Swedes’ and find ways to provide decent jobs for them in a system which as yet does not allow wages lower than those set in the general collective agreements. The Swedish social partners have also rejected the introduction of a statutory minimum wage – with the argument that this would go against the Swedish Model – to cope with the situation.

There are arguments both in favour of and against introducing low-paid jobs. Those in favour argue that more jobs will be created, making integration easier (von Bahr, 2017). ⁶ Those against it argue that it will create a class of ‘working poor’ in Sweden (Stenberg, 2016). Immigration raises further issues for the Swedish trade union movement, which fears that any loosening of collective agreements as the norm in the labour market will create a wage race to the bottom. Under such circumstances, the trade unions would lose some of their legitimacy. Why pay a membership fee when a trade union no longer seems to deliver what it always has in the past: as far as possible protecting members from wage competition and fighting for a ‘fair’ income distribution between profits and wages?

What can happen when members begin to think that trade unions no longer ‘earn’ their support is illustrated by what was discussed here at the beginning: the increasing support for the anti-immigration SD party in recent years. Up to 2015, first the Reinfeldt and then the SAP government led by Stefan Löfven (a former president of IF Metall) adopted a very open-armed attitude towards immigration. Following a period of large-scale immigration (at least 160,000 asylum-seekers in 2015), the SAP has now changed its policy, driven by increasing fear among Swedes generally, but also within the SAP, including rank-and-file trade union members. ⁷ The rise in popularity of the SD is difficult to explain in any other way. Immigration has not led to any decline in trade union membership, but instead has soured the relationship between their rank-and-file, the SAP and the Löfven government. It is no coincidence that support for the SAP and its government now seems to be gaining ground following the SAP’s volte-face on immigration in the winter of 2015–2016, when Sweden started adopting a quite restrictive immigration policy (Svensson and Stiernstedt, 2015).

From a European perspective, the negative view of Swedish trade unions towards wage competition from immigrant workers is illustrated by the famous ‘Waxholm’ controversy which started when a Latvian company, Laval un partneri, was brought in to build a schoolhouse in the small community of Waxholm just outside Stockholm in 2004 (Bruun and Jonsson, 2010). The Swedish construction trade union Svenska Byggnadsarbetareförbundet (Byggnads) picketed the site, demanding that the Latvian firm pay Swedish wages. The case ended up being heard by the European Court of Justice in 2007, which ruled that the trade union had used more force than appropriate. In Sweden, the Reinfeldt government transposed this ruling into the so-called ‘Lex Laval’ which restricted trade unions from using industrial action to stop foreign firms that did not strictly comply with Swedish collective agreements, a measure that caused much bitterness among Swedish trade unions. Furthermore, Swedish unions have a clear standpoint on how the EU Posting of Workers Directive should be interpreted. Defending Swedish workers from wage competition from foreigners has become a key principle for Swedish trade unions. Given that they concurrently uphold the principle of the Swedish Model, stating that the state should not interfere in the labour market, for example by establishing a statutory minimum wage, the position of Swedish trade unions is becoming increasingly ambiguous.

Finally, we will return to the question of the effects of decoupling the trade unions from Sweden’s traditional working-class party, the SAP. Though perhaps not going as far as in many other countries, it is very evident, especially when compared to the situation a few decades ago. Without doubt, in the past such ties were close within the encompassing House of Labour, serving both sides well. As we have seen, however, they were not without conflict. It was for example sometimes a problem for the trade unions to seek higher wages when the SAP was in power and having to cope with rising inflation. As we have also seen, such tensions led to real clashes – the War of the Roses – especially from the 1980s onwards. In the same manner, the close relationship with trade unions was to cause problems for the SAP when in government, for example, it took the support of the unions for granted when putting forward proposals for reforms with political implications. Last, but not least, the construction of the Swedish Model – strong social partners creating collective agreements with a high coverage rate – to some extent created a kind of distance to the SAP, at least when it was in government.

This decoupling within the labour movement might not be such a problem as experienced in many other countries. The SAP still needs the support of the trade unions and will most probably continue to support the Swedish Model and existing labour law restrictions. In the current Swedish political landscape, this role has become more complex than ever before. Should the SAP emerge as the majority party in the 2018 general election, it will have a number of options, each of which will raise problems. The SAP could continue to rule with the Miljöpartiet (Mp, the Green party) and still hope for the support from the Left party. However, this will most likely not give it a majority in parliament (because of the strength of the SD). Another option for the SAP would be to form a coalition with the ‘bourgeois’ parties in the centre (Liberalerna, the Liberals and Centerpartiet, the Centre party). A much less likely government partner would be the Moderates on the right. Whatever happens, this choice will have great implications for the trade unions and the Swedish Model. The perhaps best option for its survival would be the continuance of the present coalition between the SAP and the Greens, but it seems unlikely that it will be able to muster sufficient support in parliament after 2018. A coalition with the centre parties would very probably imply ‘reforms’ aimed at creating a more ‘competitive’ labour market. For the trade unions this could imply a loss of power. To what extent this also will lead to increasing convergence with European patterns of labour market relations is perhaps too early to say at this stage. But it is not at all unlikely.