When I meet Johan Sandgren, an advisor at the offices of the white-collar TRR job-security agency in central Stockholm, I expect to find him stressed and exhausted – Ericsson, the Swedish telecoms equipment-maker, has recently announced thousands of redundancies, and Sandgren is now responsible for them. Jobless Ericsson workers turned to TRR for help in their droves, two-thirds of them in Stockholm. But Sandgren is serene. ‘It is what we do all the time, so we didn’t feel that stressed. We had to employ extra counsellors and open more offices, but it is normal for us,’ he says.
Ericsson’s troubles had seen the company make several rounds of redundancies over the previous decade, so TRR knows what to expect. In 2017–18, many workers took redundancy voluntarily, with a financial package. There was a lot of negativity surrounding the company and many were tired of working there anyway, says Sandgren, who has been addressing meetings of hundreds of Ericsson workers since the redundancies were announced. The jobs market for skilled engineers is favourable, so their prospects are good. ‘You can almost feel the difference when you stand on a stage in front of people who are hoping for a new future’, Sandgren says.
As we saw earlier, the purpose of Sweden’s unusual model of wage bargaining is to maintain the productivity of the economy overall, which in turn requires a well-functioning ‘transition system’, whereby those who lose their jobs can move quickly into other sectors. With the government’s gradual exit from active labour market policy, the job-security agencies have been left to take up the slack.
TRR was established in the mid-1970s when restructuring started to hit white-collar jobs. Unions and employers realised they needed something more than the government-run job centres, which were focused on blue-collar workers and the long-term unemployed. Now almost 98 per cent of all white-collar workers facing redundancy come to TRR. If you are an engineer at Ericsson focusing on telecoms production that has now moved to Asia, you might need some training to take a job in IT, for example. TRR has funds for that. If you are a programmer and you don’t have the latest skills, TRR can get them for you. On-the-job training is quite common in big companies, but it rarely has certification – TRR can help with that too.
Then there is the counselling that Gunilla Stensson found so useful (see Chapter 5). When employers handle redundancies badly, it hits people’s self-confidence. The combination of a long period at the same employer and shoddy treatment during the transition is a particularly damaging mix: you only know that your competence is good within the company, you don’t know your market value, and you are in bad shape to face the future. Sandgren says: ‘We get people to feel they have value, a place in the market, to have self-belief. We complement our counselling with a lot of therapy – we know that psychological and physical ill health are growing, and work-related stress is a reason. Companies are downsizing and people are doing more. Also, people are becoming more aware of stress. At TRR people can open up, for the first time they can talk about how they feel.’ Like most industrialised countries, Sweden has a fast-growing mental-health problem in the workplace, costing the economy billions every year through lost productivity, social benefits and healthcare. The job-security agencies at least recognise its existence and see counselling as a necessary part of helping people who have lost their jobs.
All the same, when Sandgren visits companies, it is common that half the workers in the audience don’t realise they have protection from TRR, and are delighted when they find they are entitled to it. It is a largely hidden part of Sweden’s welfare system that people only discover when they are laid off. And because it is away from the public eye, there are few statistics and even fewer studies of how it works.
‘Sweden’s welfare state today can come out rather poorly in comparisons with other countries, but this system doesn’t show up in those studies,’ says Lars Walter, associate professor of management at Gothenburg University’s Business School, and one of the few academics to have studied the job-security agencies. ‘There is no legislation, it is not public policy, but it is really important – it is such a unique phenomenon.’ His research on the agencies found they work well, the basic premise is sound, and 80 per cent of laid-off workers are back in a job within a year. But nobody planned it, there is no oversight, and nobody knows exactly what its consequences are for society as a whole. ‘It is a system that just happened,’ Professor Walters says.
Sweden’s transition system has no equivalent in Europe. According to Lennart Hedström, the head of TRR, the transition system is ‘lubrication for the labour market’. It is easier to make a person redundant if you know they will get professional support, he believes. Ultimately, the job-security agencies don’t create any vacancies. In the event that job creation should dry up, no amount of role-playing or confidence-building will get people back into work. But 45 years since the first agencies were established, the system still works, and works well. ‘In the seventies the ideas were totally different,’ says TRR’s Sandgren. ‘But time has shown that this old model still fits, both on an individual and company level. It’s a solid part of society. The biggest reason for this to fly is that everyone is happy with it.’
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So what does Swedish business think of a system in which companies cannot pay their workers what they want? For many major industrialists, the gains outweigh the disadvantages. Leif Johansson, the business leader we met in Chapter 3, believes the Industry Agreement was a ‘milestone’ that has prevented hostile moves by both unions and employers, while ensuring that the competitiveness of Sweden’s exporters has not been damaged by high wage settlements in other parts of the economy. ‘This is a mechanism in which disputes are handled by independent mediators, it makes strikes and lockouts a last resort,’ he says. The institutions of the Industry Agreement have been strong enough to make it difficult for aggressive employers or unions to do something dramatically different. ‘It sounds like a rather rosy picture of how wonderful Sweden is,’ Johansson continues. ‘But when you run a country like this that is exposed, as we are, to international competition, of course there are tensions. However, at a national level we have made it stick.’
For Carl Bennet, billionaire industrialist and investor, the ‘special relationship’ with the unions is based on an understanding that Swedish industry needs constantly to adapt and change. This is a flexible system that fits the demands of globalisation: ‘With that system, we have an attitude towards globalisation that is not negative – people are always questioning changes, but we have a social system that gives the possibility to go from one job to another and have a certain security during this time.’ Consequently, Bennet believes, people are not so scared about what might happen to them when they lose their jobs, and they are more prepared to adjust.
High wages also force companies to be innovative, says Stina Ehrensvärd, Swedish-American entrepreneur and founder of high-tech company Yubico: in the US, low wages have not made the country more efficient. Instead, people sit and do really simple tasks.
High salaries have forced us in Sweden to automate, to use technology. That is one of the good side effects of having high salaries – we fully embraced the internet as a way to automate. When we started Yubico we felt like that too, it all had to be automated, this was in our mindset. And because of that we have been able to lower the costs more than if we were manufacturing things in Asia. After the initial investment of robot automation, it provides lower cost at a higher quality.
Another example of this mechanism in action is Stockholm’s innovative financial technology, or fintech scene, according to Pär Hedberg, founder of STING (Stockholm Innovation and Growth) a business incubator for some of the capital’s most promising start-ups. ‘The minimum salary you can pay here is much higher than in other countries, and as a result, many large companies are forced to rationalise and be extremely competitive,’ he says. The big banks in Sweden are very cost-effective compared to other countries, because they have been forced to use new technology earlier, which in turn has seen innovative bank employees leave to pursue financial innovations themselves.
Hedberg sees a further positive aspect of Sweden’s broader social welfare system – it fosters an entrepreneurial culture. An advantage of having a welfare safety net is that if you fail, you are not forced to lose your home. ‘It allows people to dare,’ he says.
Niklas Adalberth, co-founder of Klarna, a successful fintech start-up, says Sweden’s welfare provision was an additional incentive for him to pursue his entrepreneurial goals as a student, even though he had little experience beyond flipping burgers: ‘The worst thing that could happen was maybe I would have a one- or two-year gap in my CV, which no one really cares about.’
Jane Walerud, the investor we met earlier, agrees. If you are an entrepreneur in the US and you have a spouse and children, you need expensive health insurance. If your child has a bike accident, you are in trouble. In the US, entrepreneurs are very young; they need to have no responsibilities. ‘Here in Sweden, if someone gets hurt it makes no difference; if the company goes bad, you are still okay,’ Walerud says. ‘So I get to invest with 40-year-old entrepreneurs who know their stuff, who know their industry. Can you imagine being 40 in the States and doing that?’
Silicon Valley seems oblivious to the value of experience. The average age of entrepreneurs supported by Y-Combinator, a company that invests in thousands of tech start-ups in the valley, is 29. Sweden, by contrast, recognises the cost to society of making 45-year-olds feel as if they can no longer contribute. ‘We need to keep people employable and keep their knowledge up to date, because Sweden needs all the engineers we can get,’ Walerud says. It is easy to recruit British engineers to work in Sweden, she adds, because the UK doesn’t value them like it should.
One consequence of the system’s focus on skills and competitiveness is that Sweden has a relatively small share of low-skilled adults, and at the same time a pool of highly skilled people, with a strong participation rate in adult learning. This makes the country better prepared than others to benefit from globalisation, says the Organisation for Economic Cooperation and Development (OECD). Swedish workers have literacy, numeracy and problem-solving skills well above the average, plus some of the highest readiness to learn rates.
However, it is a constant battle to ensure the nation’s skill set matches its economic needs. It is not the supply of competent people so much as the supply of the right sort of competencies, says Pontus Braunerhjelm, professor of international business and entrepreneurship at Stockholm’s Royal Institute of Technology. Many more Swedes today have university education, for example, but there is an increasing mismatch between the output of the country’s universities and the needs of the economy. ‘Labour training and retraining – the possibility to be part of a labour-market programme that increases your chances of being employed again – has diminished quite substantially,’ Professor Braunerhjelm says.
Let’s leave the final word to one of the more remarkable phenomena to have emerged from the resurrected Rehn–Meidner model – the TCO, the huge and fast-growing white-collar trade union we met in Chapter 2. Between 2006 and 2011, Sweden lost 450,000 jobs to automation – roughly 90,000 every year, or 2.5 per cent of the workforce. But the TCO leadership hasn’t blinked. Eva Nordmark, the TCO’s leader, says:
I am in favour because we have strong social dialogue and strong welfare. Collectively bargained transition support systems mean that if you lose your job you don’t have to be poor, and you get support to find new work. The same is true when digitalisation leads to structural change. You shouldn’t be marginalised if you lose your job. This is important not just for each of my members, but for the whole of society.