Social dialogue, short-time work and COVID-19 in Sweden
In response to the 2008 financial crisis, the Swedish social partners developed a mechanism aimed at dealing with short-term shocks to employment. The Swedish government later extended the approach called ‘short-time work’ to become a country-wide policy, which proved to be beneficial when coping with the challenges later raised by the pandemic.
Short-time work refers to a reduction in an employee’s hours of work. During periods of short-time work, an employee’s wage is typically reduced to reflect the reduction in working hours. Yet wage reductions happen at a much lower rate than working hours. For example, the current legislation in Sweden permits a 7.5% reduction in an employee’s wages for a corresponding 60% reduction in the employee’s working time.
Source: Swedish Agency for Economic and Regional Growth (2022).
Following the 2008 financial crisis, the Industrial and Metal Workers Union (IF Metall), a Swedish trade union and Global Deal partner, found that many of its members – some 60,000 blue-collar workers – had experienced unemployment as a result of the economic instability.
To address the problem, IF Metall looked to negotiate a collective agreement directly with its employers’ counterpart.
The two parties reached an agreement in 2012; it was the first agreement on short-time work in Sweden and laid the groundwork for the short-time work legislation in the decade to come.
When short-time work agreements were first proposed, union members were wary of the policy but evidence collected after their implementation proved that the agreements saved between 15,000 and 20,000 jobs, despite the late implementation of the policy.
Moreover, although under the 2012 agreement employers paid more wages than the labour time they received, doing so allowed companies to retain their workforce – many of whom had been trained for the jobs they occupied. This approach ensured that setbacks in production and additional workforce costs were minimised once demand resumed.
Ultimately the agreement negotiated between IF Metall and the employers proved important not only for the workers and employers involved but for the industry and economy more generally.
The success of the 2012 collective bargaining agreement created a base of support for short-time work agreements from trade unions and employers alike. By 2014, short-time work agreements were introduced labour-market-wide in Sweden via Act (2013:948) on Short-time Working, with social dialogue considered to be a precondition for their implementation.
Now overseen by the Swedish Agency for Economic and Regional Growth, the Act is based on the agreement on short-time work negotiated by social partners in 2012. Importantly, it includes a stipulation that the Swedish government would commit to subsidising the wages of workers placed on short-time work which helped to garner greater support among employers.
When the COVID-19 pandemic arrived, the Swedish government issued emergency provisions and funding, and short-term work agreements were activated en masse. In the first six months alone, IF Metall was involved in negotiating 3,000 local short-time work agreements affecting 90,000 workers – or 40% of all of the trade union’s members.
These agreements have proven most useful in industry. Tommy Thunberg Bertolone, a member of the expert team advising the government on the national expansion of short-time agreements, cites the experience of full-time steelworkers. The short-time work agreements were introduced in March of 2020. “By August and September 2020, they were back to full-time work again. […] These were people who could have been unemployed, but unemployment basically did not increase. If you compare this to unemployment rates in 2008, this is a big difference”. Ultimately, though industrial workers lost some money, they remained happy because they kept their jobs.
However, the experiences of workers in other sectors (such as the hospitality and service sector were short-time work agreements were less used) have been more mixed.
The Swedish government’s expert group on short-time work is now looking to establish rules and protocols on how such agreements will be used in post-pandemic times.
Social dialogue can be used to manage labour-market crises and disruptions. In Sweden, social partners successfully mobilised short-time work agreements to meet the challenge head-on and avoid mass lay-offs when COVID-19 hit.
High levels of trust between social partners and social dialogue can yield rapid responses in times of turmoil. Due to the high levels of trade union membership and collective bargaining coverage in Sweden, social dialogue is regarded as a key mechanism for regulating work and stakeholder trust in industrial relations institutions.
Social dialogue can inspire legislative change. The encouraging outcomes of the agreement negotiated by the social partners after the 2008 financial crisis led the Swedish government to introduce short-time work agreements labour-market-wide through a legislative act in 2013.
Social dialogue can provide for more flexible implementation. By requiring a collective agreement as a condition for accessing the short-time work scheme, the latter can be adjusted to the unique needs of social partners at the local level.
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