Convergence towards better working and living conditions: The crucial role of industrial relations in Sweden

One of the basic elements of the Swedish model is a strong contractual tradition and the crucial role played by the social partners in mechanisms for regulating labour market, working conditions and wage formation. The bipartite and contractual nature of labour market regulations coupled with the high union density and high coverage rate of collective bargaining create a favourable institutional environment for the emergence of negotiated compromises aimed at balancing flexibility and security in the labour market. Sweden constitutes, therefore, a good illustration of a flexicurity regime based on negotiated flexibility and largely explains why Sweden remains a country with decent working conditions, low income disparities and extended social justice. A compressed wage structure with relatively high wage floors have also prevented the development of low-skilled jobs in Sweden and instead have boosted policies favouring skill upgrading. In effect, large investment in research and development, a well-developed lifelong learning as well as a more balanced bargaining power between the two sides of industry have limited the tendency towards job and class polarisation in Sweden.