Centralised wage bargaining and structural change in Sweden

M. Alexopoulos, J. Cohen
2003 European Review of Economic History  
There is a general consensus among scholars that centralized wage bargaining played a key role in the ability of Sweden to maintain wage moderation in the early post-WW II period. Conventional wisdom suggests that it worked through one of two mechanisms; internalization of the negative externalities associated with excessive wage settlements or implicit contracts that favoured cooperation between capital and labour over conflict. We contend, instead, that centralized wage bargaining was
more » ... ed because Swedish firms and unions adopted the Rehn-Meidner plan. In this environment, centralized wage bargaining was used to facilitate wage compression from below and promote labour release. Wage moderation then was a result of shifts in the labour supply. In the final section of the paper we argue that excessive wage compression in the 1970s sapped the morale and effort of skilled workers, pushed down productivity and profits and eventually led to the demise of centralized wage determination.
doi:10.1017/s1361491603000121 fatcat:uciooktaxrgvjohmhh32uqjp2y