Social Europe

politics, economy and employment & labour

  • Themes
    • Strategic autonomy
    • War in Ukraine
    • European digital sphere
    • Recovery and resilience
  • Publications
    • Books
    • Dossiers
    • Occasional Papers
    • Research Essays
    • Brexit Paper Series
  • Podcast
  • Videos
  • Newsletter

Why trade unions at work do work

Carl Melin and Ann-Therése Enarsson 10th February 2020

Trade unions are often represented as slow-moving and ossified. Yet, as Sweden shows, they are key to adapting flexibly to a world of work in rapid flux.

trade unions
Ann-Therése Enarsson

In various international comparative studies—ranging from innovation to social equality—Sweden, along with the other Nordic countries, continually rises above the competition. This applies not only to welfare or social justice but also to conditions for business, as in the Forbes ranking of best countries in which to do it.

In an earlier report from our think tank, Futurion, Prof Jesper Strömbäck took a closer look at a range of indices, showing that Sweden ranked among the top five in most and the top ten in close to all. If we can dismiss the notion of magic in the Scandinavian water, we can assume the explanation probably lies in how the social system is constituted.

trade unions
Carl Melin

One of the social components common to the Nordic countries is a significant trade union movement. From previous studies, we know that strong unions contribute to better economic development and well-functioning labour markets.

This, among other takeaways, was confirmed in an Organisation for Economic Co-operation and Development report, Negotiating Our Way Up, which appeared at the end of last year. Also in 2019, Futurion published a report finding evidence that trade unions not only had positive effects on the economy as a whole but also on individual businesses, as well as on workers’ adaptability to a transforming labour market.


Our job is keeping you informed!


Subscribe to our free newsletter and stay up to date with the latest Social Europe content. We will never send you spam and you can unsubscribe anytime.

Sign up here

The Nordic model—combining economic efficiency with social benefits and a high incidence of collective bargaining—allows employers and employees to find solutions adapted to the varying circumstances of companies and industries. This creates greater flexibility than in labour-market systems where politicians regulate the conditions by law or where employers can freely determine the working conditions. And high union density helps to warrant the claim that agreements concluded meet the interests of workers as far as possible.

Counterfactual study

To gain a better understanding of the impact of trade unions, Futurion commissioned WSP, a professional services and analytics firm, to conduct a counterfactual study of what Sweden would look like if there never had been a trade union movement here. The report, Om Facket Inte Fanns (If the Trade Unions Didn’t Exist), examines this by looking into the effects on wages, income distribution, productivity and employment .

Perhaps unsurprisingly, the study shows that unions have the greatest impact on the wage share and income distribution. Our counterfactual analysis shows that the average Swedish worker would otherwise earn approximately €5,700 less a year. Compared with Sweden today, the top decile would see its income rise by around 11 per cent, while the other nine deciles would be worse off, as the average worker would see her income fall by some 13-15 per cent. Most of the income rises for the top decile would also in reality benefit the top 1 per cent, where most of the income comes from capital.

A growing number of actors are raising concerns over increasing inequality as a potential threat to democracy as well as economic development. And the unions play a central part in the fight against this. 

The effect of unions on productivity is more complex. Since strong unions contribute to a higher wage share, shareholders’ profits, in the aggregate, decrease. This could lead to lower investment and, in turn, lower productivity. At the same time, unions favour lower staff turnover and more satisfied employees, which on the other hand would boost productivity. 

An often-heard criticism of unions is that wage levels beyond the equilibrium between the supply of, and demand for, labour lead to higher unemployment. This affects those with the weakest position in the labour market, since it then doesn’t pay to hire the least productive workers.

Futurion’s study affirms these findings. The relationship is however not so clear-cut: strong unions (with high density and established dialogue with employer organisations) have proved to take greater social responsibility—initiating fewer strikes or other belligerent actions—than weaker ones. The Nordic labour market is characterised by responsible unions, which do not claim higher wages than the market and productivity growth can bear.

Countries with high union membership lack the extensive low-wage labour markets found in many contemporary countries where it is common for individuals to need a number of jobs to match their living costs. Even though our study shows that unemployment would likely be a bit lower without the unions, Sweden has the highest employment rate in the European Union, due primarily to higher female labour-force participation.


We need your support


Social Europe is an independent publisher and we believe in freely available content. For this model to be sustainable, however, we depend on the solidarity of our readers. Become a Social Europe member for less than 5 Euro per month and help us produce more articles, podcasts and videos. Thank you very much for your support!

Become a Social Europe Member

Successful model

This model for wage negotiating has led to a labour market characterised by few strikes, low inflation, relatively low unemployment and steady increases in real income for almost everyone. Before the late 1990s, when this model was adopted, Sweden had high nominal wage increases with repeated strikes, as well as high inflation and unemployment. The nominal wage gains were nullified by the inflation, meaning real incomes were stagnant. This shows that unions need to act responsibly if they want to protect the long-term interests of their members.

The historic success of the Nordic model is the main reason why the Nordic trade unions resist the proposal to introduce minimum wages throughout the EU. This is considered a step in the wrong direction, since it could be an infringement on a successful system where the social partners are independent of political decisions. Countries with a legislated minimum wage often have weaker unions, as these are transformed from strong social partners to weak lobbyists seeking favours from politicians.

Occasionally voices are raised that unions have played out their role or that they should be restricted in different ways. But many studies show unions contribute positively to the development of society. It is, therefore, no coincidence that the countries with the highest prosperity, the highest competitiveness and the most well-functioning democracy also have strong unions.

The labour market, as well as our working lives, is rapidly changing. In this, there are significant advantages to a flexible system where the social partners—the unions and employer organisations—can solve things together. It provides agility and security. At a time when security and a balance between working and social life are highly valued among young people entering the labour market, employers lacking collective agreements should reconsider this. Adhering to such agreements would not only make them more attractive for ambitious young people but would also help strengthen a well-functioning social model.

As we enter this new decade, the negative trend in union membership must turn—we urgently require a well-ordered labour market where the interests of the workforce are represented.

Carl Melin and Ann-Therése Enarsson

Ann-Therése Enarsson is chief executive officer and Carl Melin head of research and policy analyst at Futurion, launched in 2016 by TCO (The Swedish Confederation of Professional Employees) and its 14 affiliated trade unions to take a leading role in the discussion about working life in the future.

You are here: Home / Politics / Why trade unions at work do work

Most Popular Posts

Visentini,ITUC,Qatar,Fight Impunity,50,000 Visentini, ‘Fight Impunity’, the ITUC and QatarFrank Hoffer
Russian soldiers' mothers,war,Ukraine The Ukraine war and Russian soldiers’ mothersJennifer Mathers and Natasha Danilova
IGU,documents,International Gas Union,lobby,lobbying,sustainable finance taxonomy,green gas,EU,COP ‘Gaslighting’ Europe on fossil fuelsFaye Holder
Schengen,Fortress Europe,Romania,Bulgaria Romania and Bulgaria stuck in EU’s second tierMagdalena Ulceluse
income inequality,inequality,Gini,1 per cent,elephant chart,elephant Global income inequality: time to revise the elephantBranko Milanovic

Most Recent Posts

transition,deindustrialisation,degradation,environment Europe’s industry and the ecological transitionCharlotte Bez and Lorenzo Feltrin
central and eastern Europe,unions,recognition Social dialogue in central and eastern EuropeMartin Myant
women soldiers,Ukraine Ukraine war: attitudes changing to women soldiersJennifer Mathers and Anna Kvit
military secrets,World Trade Organization,WTO,NATO,intellectual-property rights Military secrets and the World Trade OrganizationUgo Pagano
energy transition,Europe,wind and solar Europe’s energy transition starts to speed upDave Jones

Other Social Europe Publications

front cover scaled Towards a social-democratic century?
Cover e1655225066994 National recovery and resilience plans
Untitled design The transatlantic relationship
Women Corona e1631700896969 500 Women and the coronavirus crisis
sere12 1 RE No. 12: Why No Economic Democracy in Sweden?

ILO advertisement

Global Wage Report 2022-23: The impact of inflation and COVID-19 on wages and purchasing power

The International Labour Organization's Global Wage Report is a key reference on wages and wage inequality for the academic community and policy-makers around the world.

This eighth edition of the report, The Impact of inflation and COVID-19 on wages and purchasing power, examines the evolution of real wages, giving a unique picture of wage trends globally and by region. The report includes evidence on how wages have evolved through the COVID-19 crisis as well as how the current inflationary context is biting into real wage growth in most regions of the world. The report shows that for the first time in the 21st century real wage growth has fallen to negative values while, at the same time, the gap between real productivity growth and real wage growth continues to widen.

The report analysis the evolution of the real total wage bill from 2019 to 2022 to show how its different components—employment, nominal wages and inflation—have changed during the COVID-19 crisis and, more recently, during the cost-of-living crisis. The decomposition of the total wage bill, and its evolution, is shown for all wage employees and distinguishes between women and men. The report also looks at changes in wage inequality and the gender pay gap to reveal how COVID-19 may have contributed to increasing income inequality in different regions of the world. Together, the empirical evidence in the report becomes the backbone of a policy discussion that could play a key role in a human-centred recovery from the different ongoing crises.


DOWNLOAD HERE

ETUI advertisement

Social policy in the European Union: state of play 2022

Since 2000, the annual Bilan social volume has been analysing the state of play of social policy in the European Union during the preceding year, the better to forecast developments in the new one. Co-produced by the European Social Observatory (OSE) and the European Trade Union Institute (ETUI), the new edition is no exception. In the context of multiple crises, the authors find that social policies gained in ambition in 2022. At the same time, the new EU economic framework, expected for 2023, should be made compatible with achieving the EU’s social and ‘green’ objectives. Finally, they raise the question whether the EU Social Imbalances Procedure and Open Strategic Autonomy paradigm could provide windows of opportunity to sustain the EU’s social ambition in the long run.


DOWNLOAD HERE

Eurofound advertisement

Eurofound webinar: Making telework work for everyone

Since 2020 more European workers and managers have enjoyed greater flexibility and autonomy in work and are reporting their preference for hybrid working. Also driven by technological developments and structural changes in employment, organisations are now integrating telework more permanently into their workplace.

To reflect on these shifts, on 6 December Eurofound researchers Oscar Vargas and John Hurley explored the challenges and opportunities of the surge in telework, as well as the overall growth of telework and teleworkable jobs in the EU and what this means for workers, managers, companies and policymakers.


WATCH THE WEBINAR HERE

Foundation for European Progressive Studies Advertisement

Discover the new FEPS Progressive Yearbook and what 2023 has in store for us!

The Progressive Yearbook focuses on transversal European issues that have left a mark on 2022, delivering insightful future-oriented analysis for the new year. It counts on renowned authors' contributions, including academics, politicians and analysts. This fourth edition is published in a time of war and, therefore, it mostly looks at the conflict itself, the actors involved and the implications for Europe.


DOWNLOAD HERE

Hans Böckler Stiftung Advertisement

The macroeconomic effects of re-applying the EU fiscal rules

Against the background of the European Commission's reform plans for the Stability and Growth Pact (SGP), this policy brief uses the macroeconometric multi-country model NiGEM to simulate the macroeconomic implications of the most relevant reform options from 2024 onwards. Next to a return to the existing and unreformed rules, the most prominent options include an expenditure rule linked to a debt anchor.

Our results for the euro area and its four biggest economies—France, Italy, Germany and Spain—indicate that returning to the rules of the SGP would lead to severe cuts in public spending, particularly if the SGP rules were interpreted as in the past. A more flexible interpretation would only somewhat ease the fiscal-adjustment burden. An expenditure rule along the lines of the European Fiscal Board would, however, not necessarily alleviate that burden in and of itself.

Our simulations show great care must be taken to specify the expenditure rule, such that fiscal consolidation is achieved in a growth-friendly way. Raising the debt ceiling to 90 per cent of gross domestic product and applying less demanding fiscal adjustments, as proposed by the IMK, would go a long way.


DOWNLOAD HERE

About Social Europe

Our Mission

Article Submission

Membership

Advertisements

Legal Disclosure

Privacy Policy

Copyright

Social Europe ISSN 2628-7641

Social Europe Archives

Search Social Europe

Themes Archive

Politics Archive

Economy Archive

Society Archive

Ecology Archive

Follow us

RSS Feed

Follow us on Facebook

Follow us on Twitter

Follow us on LinkedIn

Follow us on YouTube