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Home Opinion An opportunity Löfven can’t afford to miss
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State of the Left - Sweden

An opportunity Löfven can’t afford to miss

Agneta Berge - 10 March 2016

The embattled Swedish Social Democrats must seize the chance to capitalise on the opposition’s stance on low-wage jobs

The Swedish Social Democratic party hit a new low in November as it polled its lowest support since the 1970s when Statistics Sweden’s big party poll first began: a mere 27.6 per cent compared to over 40 per cent just eight years ago.

The weighted average of all major Swedish polls now has it rated even lower than in November.

Consequently, a growing number of Social Democrats – activists as well as politicians – demand that their prime minister, Stefan Löfven, give them a new vision, a new reform agenda, something – anything – that can lift the back party up to decent levels. Or at least just stop its fall.

As it turns out, that is just what they might get. Not thanks to the genius of Löfven though, but rather to the scheme of his principal oppositional parties.

The big political conflict in Sweden now is low-wage jobs. The many refugees that have come to Sweden lately, our persistently high unemployment levels, and the declining degree of unionisation and workers bargaining power have all led to a focus on wages. But what ultimately lit the spark is that this year, the collective agreements of some 3 million Swedish employees are to be renegotiated. For those who wish to see lower wages, now is the time to act.

Which is precisely what the four conservative and liberal oppositional parties that formed the previous Swedish government have done. Over the past weeks, each has declared that it is ready to take political action in order to create new lower-wage jobs. In fact, three out of the four have presented explicit policy proposals for this purpose.

In a country where minimum wages are determined by law, and hence by politicians, designing such policy would be straightforward. In Sweden, however, minimum wages are regulated in collective agreements that are the product of negotiations between labour unions and employer organisations.

Explicit low-wage job policies must therefore either sidestep – and potentially undermine – the Swedish wage-setting model by creating new forms of employment that pay some fraction of a minimum wage, or they must completely scrap the model and let politicians set the salaries. The oppositional parties have proposed both.

The idea is to change the job structure in order to quickly create more ‘simple jobs’ that match the current skill levels of many refugees. But changing the job structure takes time and it cannot be guaranteed that new simple jobs will add much to the total number of jobs, instead of just replacing some that already exist. Nor can it be guaranteed that they will survive for long before they are automated.

Any potential employment contribution from lower wages must also be weighed against its price. Damaging the Swedish labour market model can cost economic stability, foreseeability, flexibility and real wage growth. Workers and their kids can get stuck in poverty. People in precarious jobs can be forced to reduce their wage claims. Incomes that are cut due to efforts to employ refugees can add to existing antagonism. And if wages are undercut, why should an employer hire a newly arrived refugee who does not speak Swedish, instead of someone who already knows both the job and the language?

In fact, an employer that hires a migrant that recently came to Sweden can already get generous subsidies, with as much as 80 per cent of the salary paid by the government for one to three years. Labour cost wise, this arrangement is difficult to beat. Despite this, the subsidised employments have not been a huge success.

There simply does not seem to be such a thing as a low-wage quick fix.

As the former president of the Swedish industrial and metalworkers’ union, Stefan Löfven knows this all too well. Which means that the oppositional parties have just entered his turf. On top of that, they have shifted the political focus from the refugees towards a traditional left-right conflict over the interests of the very core electoral base of the Social Democratic party.

Put differently: Stefan Löfven has just been served with that ‘something’ that social democrats have been demanding from him.

Judging by recent media manoeuvres, the otherwise careful and compromise-seeking Löfven is game. So far, however, only in words.

In April, the government presents its spring amending budget for 2016. Here it must take action and address the root causes of the current conflict: the human capital levels of the recently arrived refugees, the high unemployment levels, and workers’ reduced bargaining power. All of which are intertwined.

This is Stefan Löfven’s opportunity to defend the Swedish labour market model as well as the interests of the social democratic core electoral base, and give party activists and politicians the push that they seek. In other words, it is an opportunity that he cannot afford to miss

Agneta Berge is an economist and contributor to Swedish magazine Fokus

This article is a contribution to State of the Left – Policy Network's monthly insight bulletin that reports from across the world of social democratic politics

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The Policy Network Observatory promotes critical debate and reflection on progressive politics. It is centre-left orientated but determinedly challenges social democracy. It is pro-European but restlessly questions EU institutions and practices.

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