Tue Mar 3rd, 2009 at 08:21:45 AM EST
One of Sweden's largest manufacturing sector unions said on Monday that its members are willing to allow employers to cut wages in order to avoid more layoffs.
The IF Metall union announced an agreement with the Association of Swedish Engineering Industries (Teknikföretagen) whereby workers could see their pay cut by up to 20 percent.
The exact wage reductions would be decided by companies and local union chapters, and would be combined with periods of furlough and additional training.
This is an astounding development, and contrary to all traditions of the Swedish industrial union movement. This should tell everyone how incredibly grave the situation is.
From the diaries. -- Jérôme. More below.
"This is no normal reshuffling within the industrial sector, this is an emergency situation," said IF Metall head Stefan Löfven in a statement.
"We're now waiting for the government to do its part."
The union calls the agreement a state of emergency which will be in effect until further notice, but no later than March 31st, 2010.
The agreement also requires three months' notice be given should the deal be nullified ahead of time.
"The Association of Swedish Engineering Industries and IF Metall are united in allowing local agreements to lower salary expenses and other compensation by up to 20 percent. During the corresponding time period, companies can arrange skills training. In cases where that isn't possible, workers will be released from their employment to a corresponding degree," said the employers association in a statement.
The Swedish industrial labour union tradition has been to never lower wages but rather see factory closures, because this was seen as a way to hasten structural change and in the long run strengthening the competitivity of the industry at large, much like spraying malaria flies with DDT - eventually, only the immune super flies will remain, and they will then have access to lots of capital and skilled manpower which would otherwise have been used by the less efficient
This mode of operation is obviously very different from the continental tradition (which currently seems to be most popular in the American auto and finance industries), but the workers accepted this solution - which often threw them into unemployment - because of the generous unemployment benefits we have in Sweden and because they felt secure that new and better companies would soon hire them.
There is, however, another very important characteristic of our industrial unions: extreme pragmaticism. That is after all the only option in a nation where exports are 51 % of the GDP.
"This is a way for us to try to reduce the need for layoffs and at the same time reduce costs for the companies," said Anders Narvinger, head of Teknikföretagen.
"In this way, companies are also given the ability to quickly take the offensive when market conditions improve."
"The intention is, in the same spirit of the agreement and layoff benefits, to make it easier for local parties to reach agreements to secure operations and avoid layoffs to the extent possible," writes the engineering industry association.
"In order to strengthen the future competitiveness and competence of our fellow workers, we believe it's desirable to have local parties, wherever possible, reach agreements about companies' internal training or other activities which can take place during the time when no work is taking place," writes Narvinger.
Other sectors such as the steel, mining, and metalworking branch support the agreement.
"Four employers' associations which represent nearly 2,000 companies with 135,000 employees, have signed an agreement with IF Metall to allow member companies within the industrial sector to furlough workers with reduced pay," write the Employers´ Association of Swedish Mine Owners (Gruvornas arbetsgivareförbund), the Trade and Employers´ Federation of Welding Engineering (Svemek), the Employers´ Association of the Steel and Metal Industry (Stål och Metall), and the Swedish Industrial and Chemical Employers Association (Industri- och Kemigruppen), in a joint statement.
This deal can be analysed in several ways. I'm going to talk about the ones that first came to my mind.
- The current crisis resonates most in the industry's mind with the crisis of 1974-1975. At that time the government thought the crisis would just be temporary (not structural) and just subsidised companies to keep producing and build up storage, which was supposed to be sold off after the crisis ended. The problem was that when the crisis was over, demand for these products (like oil tankers) had ceased to exist, and the stored products had to be scrapped. This policy resulted in the opposite of the malaria flie policy mentioned above: at a vast cost it delayed strucutural change, making everyone worse off. The point here is that everyone thinks storage must absolutely not be built up, and that's why the unions are accepting pay cuts and working fewer hours.
- The companies really don't want to fire people, because we're facing a situation where we'll have a shortage of skilled labour when the 1940's and 50's generations retire. The young people must be kept available for the firms, or they might never come back.
- There might be an understanding that this time it's different, that is, the companies that are bleeding now are (with the exception of shitty auto manufacturer Saab) not companies that will be replaced with better companies that bring higher wages or more value added per employee. Indeed, the current crop of suffering industrial companies might very well be the super flies... This leads, paradoxically, to a more protectionist mindset: these companies might go under, and they won't be replaced with better companies, so the unions must do anything to save them!
- If this deal doesn't show how intimate the relation is between the industrial unions and the employers in this country, nothing will.
Off course, even in a very pragmatic union movement there are always militant hotheads...
But IF Metall's agreement with employers didn't sit well with at least some union members.
"We are completely against all forms of wage reductions, as this agreement of course doesn't apply to executives," said Harry Rantakyrö, head of the local 12 chapter of the mining union in Kiruna in northern Sweden, to the TT news agency.
"I'm so angry. We have a central agreement and members must be able to discuss this agreement first," he added.
"It's minus ten degrees here in Kiruna and the wind is blowing hard. But I'm hot with bitterness when I hear things like this."
Finally, what is the role of the government in this?
What is needed is heavily increased public spending on infrastructure projects, increased worker training and education and sweeping tax cuts to compensate workers a bit, and of course, both things will bolster demand.
The increased government debt is an acceptable price to pay, as our inflation has historically been low, our amortisation of government debt has been responsible, and especially as the state can loan money really, really cheaply right now...