Increased risk of unemployment in industries with low wage flexibility

Wages generally adjust to variations in regional unemployment in the Swedish labour market, but this flexibility varies between industries. Wages in industries where national pay settlements are particularly normative do not seem to be affected to the same extent by the labour market situation. Instead, workers in these industries run an increased risk of becoming unemployed. Such is one of the conclusions of the report Wage Formation in Sweden 2017, published today.

In large parts of the private sector, there is significant adjustment of wages to the regional labour market situation. More flexible wages help reduce variations in unemployment over a business cycle. However, this wage adjustment differs between industries depending on how wages are determined and on the wage structure. Wages in industries where national pay settlements are particularly normative do not seem to be affected by the regional labour market situation. These industries also employ more people who are at higher risk of unemployment. Workers in such an industry therefore face more frequent periods out of work when demand drops off.

Weak productivity growth impacts wages

Productivity growth has been weak in Sweden since the financial crisis. This is however an international phenomenon, which indicates that there are, at least to some extent, common explanatory factors. Possible reasons for this weak productivity growth include dwindling gains from information and communication technology, lower growth in the most technologically advanced nations, and a protracted economic downturn which has resulted in low investment. At an aggregated level, productivity growth in Sweden is also being eroded somewhat by a shrinking manufacturing industry but a burgeoning service industry. Services are more labour-intensive by definition, resulting in lower productivity. An international comparison of productivity at industry level shows that Sweden is a European leader in the manufacturing industry. Swedish manufacturing is competitive, and the falling employment rate in the industry should not be interpreted as a sign of weak competitiveness. In some service industries, such as hotels and restaurants, wholesale and parts of the transport sector, productivity in Sweden is comparatively low and some way off the leading countries.

About the Wage formation report

Wage Formation in Sweden presents the economic background to wage formation in the coming round of collective bargaining. The aim of the report is to assist the social partners and the National Mediation Office with high-quality analysis. The NIER expresses no opinion on how wages and salaries in general should develop.

Read the report here: www.konj.se

For further information:

Ylva Hedén Westerdahl, Director of Forecasting, +46 8 453 5972
Sarah Hegardt Grant, Head of Communications, +46 8 453 5911

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