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Breaking: Swedish industrial wages to be cut by up to 20 %!

by Starvid 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 flies firms.

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.

  1. 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.

  2. 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.

  3. 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!

  4. 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...

Display:
This is no usual wintry street as [minister of finance] Anders Borg talks about. This is an icy surface leading to an abyss.

- IF Metall head Stefan Löfven

This far 11 % of IF Metall members have lost their jobs. Without the kind of radical action just taken, that number might reach 25 % by summer.


Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Tue Mar 3rd, 2009 at 04:27:28 AM EST
European Tribune - Breaking: Swedish industrial wages to be cut by up to 20 %!
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.
Not to worry, ECB President Trichet assures us that there is no risk of deflation in the Eurozone. To quote Krugman
What's the weather like on his planet?


Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Migeru (migeru at eurotrib dot com) on Tue Mar 3rd, 2009 at 04:45:41 AM EST
Trichet couldn't assume that irresponsible behaviour of people, could he?

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers
by Martin (weiser.mensch(at)googlemail.com) on Tue Mar 3rd, 2009 at 10:17:30 AM EST
[ Parent ]
No, everyone knows economic actors are rational.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Migeru (migeru at eurotrib dot com) on Tue Mar 3rd, 2009 at 10:19:21 AM EST
[ Parent ]
Ok, if there is no cut in hourly wages, but only the number of hours worked is reduced, there is no deflationary pressure by this.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers
by Martin (weiser.mensch(at)googlemail.com) on Tue Mar 3rd, 2009 at 10:21:07 AM EST
[ Parent ]
Would laying off 20% of the workers have a different deflationary impact than reducing everyone's working hours by 20%?

The demand reduction is the same.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith

by Migeru (migeru at eurotrib dot com) on Tue Mar 3rd, 2009 at 10:23:38 AM EST
[ Parent ]
I think it should be the same.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers
by Martin (weiser.mensch(at)googlemail.com) on Tue Mar 3rd, 2009 at 10:26:40 AM EST
[ Parent ]
So, "if there is no cut in hourly wages, but only the number of hours workedworkers is reduced, there is no deflationary pressure by this"?

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Migeru (migeru at eurotrib dot com) on Tue Mar 3rd, 2009 at 10:27:46 AM EST
[ Parent ]
At least no direct. The main reason why layoffs usually have deflationary pressure is, because with a higher unemployment the supply of the production factor labour is higher. If the reduction of workers occurs in a highly unionised branch or country, then I wouldn't expect to an automatic transfer from higher unemployment into lower wages and lower prices.
As production and therefore supply is cut along with the reduction in demand, this should cancel the lower wage sum as well. Perhaps even have a positive effect, because the gov't moves into bigger deficit with automatic stabilisers. Or in this situation, where only hours are cut, probably only very few of these workers will seek a second job, which would eliminate the pressure on wages completely.

If you have any suggestion for a mechanism how this should create deflation, I would be very interested, but I don't see one.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Tue Mar 3rd, 2009 at 10:50:45 AM EST
[ Parent ]
Is it too obvious to suggest that this would decmiate disposable income, which would spread low demand across sectors of the economy which would otherwise be immune?

That's why it's bad - with a four day week some workers might at least consider second jobs, small businesses or other sources of income.

With the same hours being worked for less cash, spending drives off a cliff and demand falls even further, while unwanted products continue to pile up, because buyers can't afford them.

The UK solution has been to temporarily lay off workers, sometimes with minimal pay, sometimes with nothing at all. That doesn't work any better.

But the problem is strategic. It's not that there isn't useful work these people could be doing, and being paid for.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Mar 3rd, 2009 at 12:41:17 PM EST
[ Parent ]
Is it too obvious to suggest that this would decmiate disposable income, which would spread low demand across sectors of the economy which would otherwise be immune?
I have already answered that before. The supply takes a hit of the same size. So there is no tilt in the balance of supply and demand.

That's why it's bad - with a four day week some workers might at least consider second jobs, small businesses or other sources of income.

Perhaps, but not a large share of them. After all there is the assumption, that this is a temporary thing. One has to resort to other measures, if the workers can't go back to full hours in a couple of months. More over even with high unemployment European countries have managed to stay out of deflationary spirals for the last decades.

With the same hours being worked for less cash, spending drives off a cliff and demand falls even further, while unwanted products continue to pile up, because buyers can't afford them.

That would be a catastrophe. If workers are responsible they will refuse to work for lower hourly wages, even if they get laid off otherwise. If I have understood Starvid correctly (not in the diary, but in the comments below), there is no reduction in hourly wages in Sweden. Workers in highly unionised branches should even demand increases of at least 2.5% in hourly wages. An hourly wage reduction is only a beggar your neighbour policy, and Sweden is already highly competitive.

The UK solution has been to temporarily lay off workers, sometimes with minimal pay, sometimes with nothing at all. That doesn't work any better.

That is at least partially a problem of the gov't. Until the current turmoil is over, it would be useful to increase and prolong unemployment benefits.

But the problem is strategic. It's not that there isn't useful work these people could be doing, and being paid for.

But not currently in the production of cars. So it is not useful to have these workers working in the company and produce for stock piling.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Tue Mar 3rd, 2009 at 01:02:42 PM EST
[ Parent ]
Here's a thought: Why don't we take all these useless car factories and re-tool them to make electric trains?

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Mar 3rd, 2009 at 02:53:08 PM EST
[ Parent ]
Well, quite.

Also windmills, PVs, electric cars for use in city centres - even Boris is getting enthusiastic about this now - and etc.

Or we could pay people less to produce things which aren't selling. Fail.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Mar 3rd, 2009 at 03:47:07 PM EST
[ Parent ]
The spending for retooling alone would be enough to reinflate the global economy. You'd pretty much have to through out all the machines and start over.

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman
by dvx (dvx.clt ät gmail dotcom) on Wed Mar 4th, 2009 at 10:00:33 AM EST
[ Parent ]
While this might be a reasonable thing to do under specific conditions, I think that setting these conditions requires action by people, that are neither you, nor me, nor the involved corporations and trade unions, but those who can make a credible comittment for future buying of electric trains.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers
by Martin (weiser.mensch(at)googlemail.com) on Wed Mar 4th, 2009 at 05:41:40 PM EST
[ Parent ]
The personal automobile is going to go extinct within the next two and a half decade, when people begin to realise that 140 $ oil was not a one-time thing. There is only one viable alternative for overland bulk cargo and personnel transport (well, two if you count river barges as "overland").

There's gonna be a market, alright.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Mar 5th, 2009 at 11:53:00 AM EST
[ Parent ]
Not so soon. Even 1000$ oil wouldn't stop people from driving. At least not in Europe - and at such a price some demand destruction elsewhere should occur.

And I doubt that the personal automobil is going extinct anyhow. You can use internal combustion machines with hydrogenium (synthesized e.g. from water with wind or nuclear energy), biodiesel, natural gas, ... and you can have cars based on compressed air and electric cars (again with plenty of possible renewable sources). I simply can't see the terrible energy scarcity, that would be required to end the car.

For sure people will drive less, and the average weight of the cars will be reduced. But that isn't the end of the car.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Thu Mar 5th, 2009 at 12:17:08 PM EST
[ Parent ]
Prohibitive gasoline price levels for overland transportation in Denmark are about three times current gasoline prices (that's where the marginal cost of driving four people in a car exceeds the cost of four long-distance rail tickets).

Of course, your milage may vary (pun sorta intended) with your local gasoline tariff structure and rail ticket prices.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Mar 5th, 2009 at 01:11:18 PM EST
[ Parent ]
If I have been earning five days' pay for five days' work, and am suddenly reduced to four days' pay for four days' work, that's going to hurt.

Enough, possibly, to make me unable to decline an offer from another company for four and a half days' pay for five days' work.

Isn't that a mechanism by which this could contribute to wage deflation?

by Sassafras on Wed Mar 4th, 2009 at 05:28:33 PM EST
[ Parent ]
What this is in effect a reduction to a six hour (or well, six hour and 24 minutes) workday. Supporters of stuff like the French 35 hour workweek should be celebrating...

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Wed Mar 4th, 2009 at 05:45:16 PM EST
[ Parent ]
Hmm,

we continentals are boring people sticking to jobs, hoping for better times.
I really don't think that a lot of people working shorter are changing their jobs. Industry jobs are relatively well paid. It doesn't necessarily pay more to switch job, when you have some qualifications for what you do, and the most likely employers for you all have the same collective bargaining agreement with the unions. And if the economy goes up, an increase in worked hours is easier to reestablish, than a fight on higher hourly wages won - plenty of examples for that.

More over, who is going to offer you any job in these times? There are few corporations, that suffer from undercapacity. They are happy, when they have work for the people, that they already have.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Wed Mar 4th, 2009 at 07:07:03 PM EST
[ Parent ]
I expect you have threshhold effects in the way demand reduction happens. I would think that a 20% reduction across workers is less disruptive than 20% of workers being laid off - there's a smaller chance that they will fall in arrears on mortgage payments, lose their house or other such irreversible things that tend to happen when people take a big hit.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Wed Mar 4th, 2009 at 02:21:41 PM EST
[ Parent ]
But then you don't get the countercyclical effect of unemployment relief - with 20% being unemployed, you don't get an actual income reduction of a fifth...

Un roi sans divertissement est un homme plein de misères
by linca (antonin POINT lucas AROBASE gmail.com) on Wed Mar 4th, 2009 at 06:36:57 PM EST
[ Parent ]
In Germany and Austria, as well in the case of hours reduction the gov't pays some money out to reduce the shortfall in monthly income for the workers.
See the wikipage for Kurzarbeit. The monthly wage reduction has to be at least 10% that the gov't takes action and pays for 2/3 of the net difference to the full pay.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers
by Martin (weiser.mensch(at)googlemail.com) on Wed Mar 4th, 2009 at 07:15:44 PM EST
[ Parent ]
Not sure about that. The swedish unemployment subsidies are - for all their faults - really well adapted to industrial workers. If you have worked a year or more and done the bureacracy right, you will get about a year and a half on 80% of your former salary. So, in effect there is more demand reduction this way. Unless the rules for part-time unemployment covers this, which is more then I know. The rules keep on changing.

From a crass economic standpoint, if you first work less for a year and then is fired anyway you will get 80% of the lower wage (that is 64% of the wage you had before the crisis). Though from a social standpoint it is better to have everyone working 80%, as the effects of being shut out from productive society can be pretty harsh.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Thu Mar 5th, 2009 at 04:56:06 AM EST
[ Parent ]
... in Denmark as well, particularly in Aluminium and other export-heavy sectors.

But calls have gone out from Arbejderbevægelsens Erhvervsråd1 saying that this is A Very Bad Idea, because the problem is not with competitiveness, it is with a lack of demand, which is not solved by wage cuts - quite the contrary, they make things worse. (Translation into ET-speak: This is a demand-side crisis, and trying to solve it with supply-side policies is - at best - a beggar-thy-neighbour strategy.)

- Jake

1) AE-rådet are the serious people employed by the labour unions to try to spread a little sanity in public debate.

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Mar 3rd, 2009 at 04:49:19 AM EST
JakeS:
this is A Very Bad Idea, because the problem is not with competitiveness, it is with a lack of demand, which is not solved by wage cuts - quite the contrary, they make things worse
If wage cuts still result in a larger aggregate income for the workers than unemployment subsidies, then the wage cuts are a stop-gap measure.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Migeru (migeru at eurotrib dot com) on Tue Mar 3rd, 2009 at 04:51:30 AM EST
[ Parent ]
Assuming that they are in an A-kasse, and assuming that they are mostly unskilled labour, it will not result in a noticeably larger income than unemployment subsidies.

Skilled labour is another story.

Still, it's nothing that higher unemployment subsidies cannot solve.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Mar 3rd, 2009 at 05:05:41 AM EST
[ Parent ]
Well, the idea here is to meet a lack of demand by reducing supply - which naturally means fewer hours worked, and hence lower wages.

Wages per hour will not be reduced by this plan.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Tue Mar 3rd, 2009 at 04:59:33 AM EST
[ Parent ]
Oh. I didn't catch that angle. Well, that does make it much less objectionable. Although any wage-reducing deal that does not require the equity holders to go all the way down to a return of [German sovereign debt plus reasonable risk premium] and does not require upper management to take a drastic haircut (to the level of - say - university professor or mid-level public bureaucrat) strikes me as socialising losses from previously privatised gains.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Mar 3rd, 2009 at 05:03:52 AM EST
[ Parent ]
Breaking: Swedish industrial wages to be cut by up to 20 %!
If this deal doesn't show how intimate the relation is between the industrial unions and the employers in this country, nothing will.
Have you read Galbraith's The New Industrial State, yet?

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Migeru (migeru at eurotrib dot com) on Tue Mar 3rd, 2009 at 04:53:33 AM EST
Gah, no!

But I'm going to order it today, damn it! :-)

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Tue Mar 3rd, 2009 at 05:03:34 AM EST
[ Parent ]
We are completely against all forms of wage reductions, as this agreement of course doesn't apply to executives

That was my first thought: And management?  What do they give up?

We all bleed the same color.

by budr on Tue Mar 3rd, 2009 at 08:07:13 AM EST
For their excellence in negotiating such a deal with the unions, top management gets a huge bonus of course. At least, that's how it works in the US.

"It Can't Be Just About Us"
--Frank Schnittger, ETian Extraordinaire
by papicek (papi_cek_at_hotmail_dot_com) on Tue Mar 3rd, 2009 at 11:26:23 AM EST
[ Parent ]
It appears to me that the vast European investment in CDOs and swaps is a limiting factor on what US officials can do with the AIG and Citibank fiasco.

Ireland alone has such a massive holding of US debt "assets" that a radical revaluation here seems like it could tip it over.

by rootless2 on Tue Mar 3rd, 2009 at 08:38:42 AM EST
The first people to get pay cuts should be politicians.  Until that's a fact, we are all screwed.  We'll eventually get there.  Don't know what the world will look like by then.  Like Mordor, perhaps.

They tried to assimilate me. They failed.
by THE Twank (yatta blah blah @ blah.com) on Tue Mar 3rd, 2009 at 09:03:24 AM EST
HP announced a similar plan a couple of weeks ago. The CEO's reduction package speaks for itself...

February 19, 2009 (Computerworld)  Hewlett-Packard Co. has cut about 9,000 employees so far as part of the planned layoff of nearly 25,000 workers that it announced in October. Now HP is reducing salaries and cutting back on travel in an effort to avoid being further wounded by the sharp knife of the economic recession...

Instead of making more job cuts now, HP CEO Mark Hurd said during a briefing on the Q1 results yesterday that the company is cutting salaries, "significantly reducing travel" and eliminating or lowering various types of discretionary spending.

Hurd himself will take a 20% cut on his $1.45 million base salary, for a reduction of about $290,000. But stock awards and bonuses helped to increase his total compensation to more than $42 million last year, according to a filing that HP submitted to the U.S. Securities and Exchange Commission.

HP said in a statement issued after the Q1 briefing that the base pay of other members of its executive council will be cut by 15% and that oher executives will take 10% salary cuts. The base pay of exempt employees -- typically defined as salaried workers -- will be reduced by 5%, and nonexempt -- i.e., hourly -- employees will have a 2.5% reduction.

HP also said that it will cap matching contributions to workers under its 401(k) plan at a maximum of 4% of eligible employee contributions.

http://www.computerworld.com/action/article.do?command=viewArticleBasic&articleId=9128266&in tsrc=hm_list

Nope, no deflation here!

by asdf on Tue Mar 3rd, 2009 at 09:47:38 AM EST
The company I work(ed) for is doing something similar - six weeks of unpaid vacation during 2009 and a few benefit cuts. When I get home I might actually be able to go back to the job during what will be then be accepted as an economic depression.

you are the media you consume.

by MillMan (millguy at gmail) on Wed Mar 4th, 2009 at 10:56:49 AM EST
[ Parent ]
Wow, this is scary.  But somehow it feels right--in a strange way.  We have to start realizing that we are in a new, changed situation.  The ground has shifted and we have to react to that.  I think the fact that the unions were willing to do this shows trust that the government is doing everything they can, and in the society.  It seems they must believe that the savings from the wage cuts will not be wasted and squandered.

I think in the US, it would be harder for workers to believe that if they agreed to wage cuts --for the good of "all"--that they wouldn't be devoured by the powers that be and essentially wasted, instead of tilled back into the common soil for the future well-being of all.

by jjellin on Tue Mar 3rd, 2009 at 09:52:01 AM EST
Nordic Countries Plunge Into Recession as Export Markets Fail | Bloomberg Feb. 27

The extent of the Nordic region's economic downturn was highlighted today as Denmark confirmed it was in the worst recession in three decades while output in Sweden and Finland shrank the most in at least 17 years.

The Nordic region is more vulnerable than most to the slump in exports triggered by the global recession. Swedish exports from companies such as Ericsson AB, the world's largest maker of wireless networks, and truck maker Volvo AB, make up about half its GDP. In Finland exports account for about a third of the economy. The average export exposure in the U.S., Japan, and the European Union is only 10 percent to 15 percent, according to Robert Bergqvist, chief economist at SEB AB in Stockholm.

According to the Swedish Embassy, "Sweden is an exporting nation. In 2003, 44 per cent of the country's GDP came from export and 60 per cent of all goods produced were sold abroad."  

The largest trade flows are with Germany, United States, Norway, United Kingdom, Denmark, and Finland, according to wikipedia article.

Sweden shipped 11% of total exports to Germany and, in return, received 19% of total imports from Germany.  In contrast, Sweden made $9.6 billion in its trade with the US, a drop in the bucket compared to the trade with its 'Near Abroad.'

This suggests the Swedish government needs to take immediate steps to co-ordinate economic policy with its major trading partners mostly in the EU.  Palliative measures, such as 20% wage reduction, may work for the short term, tho' there are arguments against, but will not "solve" the problem, long term.

 

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Tue Mar 3rd, 2009 at 11:16:39 AM EST
My RW clients fall into several camps: political - no change in budgets, sustainability related - upping budgets to grab market share, entertainment - probably no change, though I've heard of future less program subcontracting and more done in house, which suits me. The rest are still waiting to see the effects of the steep downturn. For some it might mean an opportunity, for others disaster. For instance, will consumers cut back on holiday travel and invest in upgrading their sauna instead?

You can't be me, I'm taken
by Sven Triloqvist on Tue Mar 3rd, 2009 at 11:35:42 AM EST
[ Parent ]
I've heard various folk rumours about what folk 'will do'. Such as:

  1. People will spend money to renovate their homes rather than buying somewhere bigger.

  2. People will continue to spend money on hobbies, and because of this magazine subscriptions will stay robust.

  3. People will take holidays in the UK rather than abroad.

Considering that one person I know is on a three day week and another has been in manufacturing not-quite-redundancy job limbo for four months, and that these don't seem to be unusual experiences, I'm having trouble reconciling these suggestions with reality.
by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Mar 3rd, 2009 at 12:47:59 PM EST
[ Parent ]
I guess there are differences across the EU, and that these differences may be only time lags.

You can't be me, I'm taken
by Sven Triloqvist on Tue Mar 3rd, 2009 at 01:07:42 PM EST
[ Parent ]
I assume this is the source you used: http://www.thelocal.se/17936/20090302/

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,"

Most people would call this a cut in working hours, not a cut in wages.

Most unions does not have a millitant attitude against cutting working hours in times of crisis.

Any proof of this being a "historic shift" in swedish labour union attitudes will have to include evidence that swedish labour unions have always opposed these kinds of measures before. I will be surprised if this was so. But feel free to prove me wrong.

by Trond Ove on Wed Mar 4th, 2009 at 09:20:14 AM EST
Good point on cut in working hours, not cut in pay/hour. Though training is somewhat a grey area as training during workhours (not un-paid, in addition to) is common in Sweden. I know for a fact that Metall has locally entered into this type of deals before, though I think the scale of it is new.

To further clarify, this is the Metall union deal. They organise anything related to metallproduktion. The Paper union - organising paper mill workers - has rejected a similar deal.

Though it is big enough that other unions, like the forestry union and the printers union has come out to say that they reject the notion of it:

"Vi gör en annan bedömning" "We make another assessment"
"Vi gör en annan bedömning än fack och arbetsgivare inom verkstadsindustrin". Det skriver Grafikerna och Skogs- och Träfacket i ett gemensamt pressmeddelande rörande IF Metalls krisavtal."We make another assessment then unions and employers in the engineering industry." This writes the Printers union and the Forestry union in a joint press release regarding IF Metall crisis agreements.
Meddelandet skickades ut i dag. Det beskriver fackens syn på dagens kris som, enligt dem, inte beror på för höga kostnader (löner till exempel) för företagen. Problemet är snarare brist på efterfrågan.The message was sent out today. It describes the trade union view on the current crisis, according to them, not due to too high costs costs (like wages for example) for the companies. The problem is rather a lack of demand.
I det läget hjälper inte sänkta löner, menar facken. De pekar också på regeringens ansvar för den ekonomiska krisen.In this situation it does not help with lowered wages, says the unions. They point also to the government's responsibility for the financial crisis.


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by A swedish kind of death on Wed Mar 4th, 2009 at 09:44:32 AM EST
[ Parent ]
Most people would call this a cut in working hours, not a cut in wages.
That's what I said.

Most unions does not have a millitant attitude against cutting working hours in times of crisis.
That's - also - what I said. Or well, I said industrial unions. The unions who are not exposed to international competition are freaking out completely. Let me quote an official from the Transport union: "The employer want to kill us [literally "beat us to death"] and our highest union management today has joined in and killed us..."

I shit you not. Some of these people are batshit insane.

It becomes even more tasteless when one consider what this is about: solidarity, sharing the available jobs during the crisis of the century. It's the same principle that supports our solidaric high-tax welfare system: everyone skips desert to make sure the least productive member of the family gets enough food not to starve to death.

But when these people are the ones who might have to skip the desert, solidarity is thrown in the bin.
 

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Wed Mar 4th, 2009 at 05:45:13 PM EST
[ Parent ]
Have management and equity holders taken their haircut yet? They're the first to grab the money and run when things are going well - they should be the first to take haircuts when the going gets tough. Otherwise, you're privatising profit and socialising risk.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Mar 5th, 2009 at 11:58:32 AM EST
[ Parent ]
I'm certainly not.

Supply must be reduced, and you either do that by reducing the workforce by 20 % or you reduce the working hours of the workforce by 20 %. Those are the alternatives here.

And I hardly think you want your management to work 20 % less during the crisis of the century. That they are often grossly overpaid is another issue.

And the quity holders not taking a haircut? Have you by any chance noticed how share prices have developed since the crisis began?

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Thu Mar 5th, 2009 at 03:31:32 PM EST
[ Parent ]
No, that management are grossly overpaid is precisely the issue. The management is effectively a class of "super duper equity holders" in that they get all the upside when things are good, and - so far - none of the downside when things go sour.

The justification, in the capitalist system, for downturns is precisely that it forces overpaid and underproductive parts of the political economy - and these days, the most obviously underproductive and overpaid part of the political economy is the management class - to take a haircut. If this haircut fails to materialise, then capitalism isn't working as advertised.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Mar 5th, 2009 at 04:17:55 PM EST
[ Parent ]
I am not aware of any law of physics that says that a 20 % reduction in output must be accompanied by a 20 % reduction in payroll. Since there is unemployment, that's purely a distributional question: Who gets to take the haircut. So far, it's workers and - to some extent - equity holders. Management has been exempt, as have bondholders.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Mar 5th, 2009 at 04:21:24 PM EST
[ Parent ]


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