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Sandro Scocco
Senior Economist
Swedish Trade Union Confederation, LO
105 53 STOCKHOLM
Sweden

As we all have agreed upon there have been great changes in the labour market during the 90s. The Employment Outlook last year pointed out that the direction of the changes is almost the same in all countries. A Liberalisation of the labour laws, weakened collective bargaining and cuts in the unemployment benefits. But the starting point for this move towards an increased power given to market forces has varied significantly from country to country. One could argue that even though the direction of change is clear, it is not so clear what kind of labour market system a country can maintain.

Even though this could be seen as banal I believe it is a very important point to make today. We sometimes get so mesmerised by the direction of change that we forget that even though the direction is the same, the diversity of labour market systems even in Europe is still great. It is a bit of an economist's sickness that we are only interested in the derivative and not the level. For Sweden which is in the middle of the "war of models", a difficult discussion has been led. The ILO in one of their reports (Employment Revival in Europe) noticed that the Swedish model was, nowadays in disreputation. This is true, but at the same time Sweden has achieved an unsurpassed increase in employment during the last three years.

But at the same time, one must acknowledge that we have made changes in the labour market in the same direction as everybody else, but one must also see that these are really only marginal differences to the original model. Basically it is still the old Rhen-Meidner model. It is impossible to explain the tremendous increase in employment in Sweden, we have halved the unemployment rate since mid 90s, with these small changes. During the last five years the Swedish model has recovered from its sickness and once again proved to be rather successful. We have an employment rate for women which is internationally very high, we have also an employment rate for men which is high, we still have a social security system which is internationally seen as well functioning, the share of precarious jobs is low in international comparison and so forth. Many of the classical welfare states attributes remain. To explain Sweden's high employment growth the last three years one must seek elsewhere then these marginal adjustments of the labour market.

So then where do we stand today? Are the changes we have seen on the labour market the consequence of changes in production? Or were many changes really due to a different power relation between employers and employees. The boring truth is that it is both. There are differences in the production system that create a pressure for institutional changes, but there are also changes that are solely due to a different power relation between labour and capital.

Sweden stands on the threshold of a new institutional setting of the labour market. We have an industrial agreement, which today is a rather strong institution on the labour market, and it is a vertical integration of the labour market, where white-collar workers and blue-collar workers integrate and negotiate together. The traditional Swedish negotiating system is horizontal. The Swedish Trade Union Confederation organises all blue-collar workers, but no white-collar workers. So now we are having a system with both horizontal and vertical access and the question is how will they interact in the future? Another question is whether blue-collar unions and workers will loose power because of this and whether inequality will increase because of weaker blue-collar unions? Blue-collar unions have for historical and structural reasons been a very strong political power in Sweden, much stronger than the white-collar unions which is also reflected in income distribution, social security, taxes and so on.

The main reason for white-collar workers and blue-collar workers to come together and negotiate together on the industrial side is due to changes in the production. For example, due to technological change which have made blue- and white-collar work more and more similar in today's industry. So this type of integration is coming from a change in production, but it will also have effects on the political system. So we have big issues ahead, which are triggered off by changes in the production.

But on the other hand, is the new flexibility, including more precarious work and increased uncertainty in the labour market conditions, really a consequence of changes in production? The Swedish experience is that it is not. When unemployment was high there was an increase in precarious jobs, but when unemployment started to decrease we also saw a decrease in precarious jobs. In countries where employees have a strong position institutionally due to social protection, labour laws, high unionisation and so on, the share of precarious jobs is low. This varies then with the bargaining power of the employees, i.e. unemployment. It has very little to do with for example knowledge intensity. One of the most knowledge-intensive branches in Sweden are IT-consultants, who also have the highest degree of permanent employee contracts.

So it is difficult to say that this is a consequence of the production. It is rather a consequence of different power relations. I would like to connect also to what Robert Castel said before, that if one had this discussion, also in Sweden, in the mid 90s, when all these books were coming out with the title "The end of" something - I think we would be more pessimistic about the possibilities to maintain a decent society. The argument was that globalisation and technology changes would mean the end of both work and the welfare state.

We have much more reason to be optimistic today than we had in the mid 1990s. We can all - presumably - agree that the dullest scenarios concerning globalization will not be realised. We are not seeing an accelerated increase profit margins in the companies, and hence no general decrease in wages in the developed countries (however we see increase income inequalities), The government can still collect enough taxes to maintain the welfare state. In the late 90s we have seen an increase in employment and not the end of work. The competition from developing countries has also proven not to be harmful to industrialized countries. On the contrary, if one considers the growing export markets for developed countries, they seem to be the winners.

More important is the issue Robert has highlighted, namely the demographic situation. If we will experience an increase in growth rates due to ITC and higher productivity, then this would imply a much tighter labour market in the future. The problem would then rather be shortage of labour then excessive supply. Wage control would be an important issue for employers. If we role out at completely deregulated labour market in Europe, then the question is - who can deliver wage control and what will the price be for the employers?

There is a undoubtedly a role for the unions in the future, it will be different but it will be a rather strong role and there is also a possibility of stronger international and domestic regulatory regimes - even though the trend has been the opposite for the last twenty years. The trend, which the Employment Outlook pointed out, can't continue endlessly. It is going to shift - the question is only when - and I personally believe we are standing in the middle of the shift right now. Thank you.