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Many reasons for limited wage growth in the current boom

Variables such as resource utilisation, inflation expectations and productivity growth cannot sufficiently explain recent years’ weak wage growth. This year’s Wage Formation Report, published today, analyses a variety of possible explanations for how wages have developed.In the previous economic boom, wage growth in the private sector accelerated gradually to peak at an annual rate of just over 4 per cent. In the current boom, it held below 2.5 per cent until this year. Recent years’ wage growth has been lower than can be explained by productivity growth and inflation expectations. This

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

Social partners can influence unemployment

The economic boom will continue in 2016-2017, and there are shortages of labour in many sectors. Divisions in the labour market are also growing, with much higher unemployment among those without the required skills and qualifications. The social partners can contribute here with measured pay settlements and minimum wages that ease entry into the labour market for groups currently excluded. Such are the conclusions of the NIER’s report Wage Formation in Sweden 2016, published today.Both the labour force participation rate and the employment rate are high in Sweden relative to other

Low as well as high pay increases present risks

The participation rate and the employment rate are high in Sweden relative to other countries, but unemployment is also high. The social partners can normally hasten a return to lower unemployment through wage formation with support from monetary policy, but monetary policy cannot be made much more expansionary in the current situation. Very low pay increases will not therefore lead to lower unemployment. Changes to minimum wages and active labour market policies could, however, permanently reduce unemployment. Such are the conclusions of the report Wage Formation in Sweden 2015, published

A divided labour market – challenge for the social partners

The Swedish labour market contains a divide between those who are firmly established and those who are not.  Collective agreements take little account of the less well established. To address these structural challenges, both labour market policy and the social partners need to take vulnerable groups into account.The Swedish labour market is functioning well at an aggregate level. Labour market participation is high among both women and men, and wage formation has generally been responsible. At the same time, unemployment is high, and there are major structural challenges. For example,

Pay settlements bring stability, but major challenges remain

Given the weak economic outlook, the year’s central pay settlements were in line with previous patterns. However, there are also some worrying signs in the labour market. The average period of unemployment will soon be up at the levels of the early 1990s crisis. The long time to fill vacancies despite high unemployment points to matching problems which could prevent a permanent decrease in unemployment. In addition, the long-term unemployed do not seem to be having a moderating effect on wage formation. Such are the conclusions of the latest Report on Wage Formation in Sweden from the

Smaller Pay Increases and Lower Interest Rates Can Mean More Jobs

The next few years will be marked by high unemployment and low productivity growth in the business sector. Pay increases at the central and local levels are expected to average 3 percent per year in 2013–2015, and unemployment will decrease to 7 percent, though not until 2015. Economic recovery could proceed faster if more limited pay increases were backed up by a lower policy interest rate. One factor making it harder to reduce unemployment more quickly, however, is that firms face growing problems in finding personnel with the right qualifications. This is the NIER’s assessment in the

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