Wage Formation Report
Wage Formation Report 2019
2019-10-16
Wage formation can boost employment
Wage Formation Report 2018
Wage Formation Report 2017
Wage Formation Report 2016
2016-10-05
Social partners can influence unemployment
Wage Formation Report 2015
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Wage formation can boost employment
The Swedish economy is in a slowdown phase, and unemployment has risen sharply in recent months. Profitability in the business sector is currently close to the historical average. In manufacturing, profitability is likely to fall as export growth and business conditions deteriorate. The social partners can help keep unemployment down by showing wage restraint. However, further subdued wage growth may mean that very low interest rates continue to be needed to meet the 2 per cent inflation target.
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Many reasons for limited wage growth in the current boom
Variables such as resource utilisation, inflation expectations and productivity growth are not sufficient to explain recent years’ weak wage growth. This year’s Wage Formation Report analyses a variety of possible explanations for how wages have moved.
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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.
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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.
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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.
Economic conditions for wage formation
Wage Formation in Sweden
is a summary of the annual report
Lönebildningsrapporten
(in Swedish), analysing the economic conditions for wage formation in Sweden.