New agreement reached in manufacturing, mining and construction

In March 2007, consensus was reached on a new three-year collective agreement for the manufacturing, mining and construction sectors between the relevant social partners. About 350,000 employees are set to be affected by the new agreement. Among the provisions of the agreement are amendments to the working hours’ regulation, an increase in the minimum wage, and a rise in real wages over a three-year period.

In mid March 2007, all of the social partners involved in negotiating the collective agreement for the manufacturing, mining and construction sectors approved the final proposal put forward by the independent mediators (opartiska ordförandena, OpO). The relevant social partners comprised the Association of Swedish Engineering Industries (Teknikföretagen) on the employers’ side and the Union of Metalworkers (IF Metall), the Union of White-collar Workers in Industry (Sif) and the Swedish Association of Graduate Engineers (Sveriges Ingenjörer) on the trade union side.

Unexpectedly, however, 4,500 mineworkers from IF Metall opposed the agreement, demanding a one-year agreement instead of a three-year agreement, along with compensation at national level for underground work (underjordstillägg). According to IF Metall’s executive committee, while the latter demand was acceptable, the mineworkers would largely have to follow the agreement. Finally, at the end of March, the internal dispute was settled when the compensation demand was included.

Main provisions of agreement

More specifically, the new agreement encompasses the following provisions:

• a 10.2% increase in wages for IF Metall and Sif members is to be effective from 1 April 2007 until 31 March 2010. Some 200,000 members from IF Metall and 100,000 members from Sif are covered by this new agreement. At the same time, 30,000 members of Sveriges Ingenjörer are to receive an 8.1% rise in wages;

• the minimum wage for members of IF Metall and Sif is set to increase by SEK 1,400 (about €152 as at 18 April 2007), thereby reducing the gap between the minimum wage and the average wage;

• the length of paid parental leave is to increase by one month and is to be paid on a monthly basis;

• the collectively agreed occupational pension is to be increased;

• improvements are to be introduced in the working hours’ regulation.

Response of social partners

The Chair of IF Metall, Stefan Löfven, announced that he was very pleased with the new agreement, particularly with its provision for an increase of 10.2% in real wages – the largest increase since the collective agreement was first established. The Chair of Sveriges Ingenjörer, Ulf Bengtsson, was equally positive about the agreement, highlighting that it will give members a well-earned rise in real wages over a period of three years. At the same time, the Chair of Sif, Mari-Ann Krantz, acknowledged that the trade union had achieved a huge success through the negotiations and most of its key demands had been met.

According to the Chief Executive Officer (CEO) of Teknikföretagen, Anders Narvinger, the three-year duration of the agreement represents a positive feature, since it will create more stable conditions for employers and in relation to the regulation of working hours. However, Mr Narvinger expressed a note of caution regarding the increased wage costs, which he warned could be problematic for companies that have been performing poorly.

Fears of higher inflation

The National Institute of Economic Research (Konjunkturinstitutet, KI) envisages some risks in relation to the new agreement, particularly with regard to the increased labour costs, which will put upward pressure on inflation and, in turn, lead to higher interest rates. The rise in wages will be at least 10% overall, which – according to KI’s estimation – is more than had been expected. The Director General of KI, Mats Dillén, has stated that the institute will re-assess the outlook for wages. If inflation rises further than anticipated, the Central Bank (Riksbanken) may increase the repro rate (reproräntan) to a higher level than had originally been calculated. Currently, this rate stands at 3.25% and is estimated to rise by an extra 0.25% in the coming months, to take into account the higher inflation rate.

According to Mr Dillén, the increased labour costs will not diminish the current positive economic development in Sweden, but might shorten the country’s economic boom.

Jenny Lundberg, Oxford Research