Wage formation and business dynamics

The project will shed light on the Swedish labor market models´ functioning and effects. The focus of the project is on the local wage formation and its impact on the economy and on the negotiating system as a whole. How does wage formation function today - local and centralized - in different industries and companies, and what impact does it have on profitability, employment and business development?

Main research problems:

1.       How does the system of wage formation look like today in different sectors and companies?

2.      What consequences does it have on companies' growth potential, for instance; its productivity, growth and profitability?

3.      What type or what types of wage formation and bargaining system is most constructive in this regard?

4.      Are there any good examples from other countries, such as Germany, Denmark and Finland, from which Sweden can learn?

5.      In which ways do laws and legislation, the bargaining system itself and other conditions need to change?

Furthermore, the ambition of this project is to contribute to a broader discussion and spread of knowledge regarding the wage formation conditions and consequences.

 

Main hypothesis

The main hypothesis, based on up-to-date research, is that wage setting close to the companies - firm-level bargaining or individualized pay - has a positive effect for growth and business dynamics.

Those effects on companies' productivity, growth and profitability are expected to be obtained through greater flexibility, better experiment possibilities and greater incentives for employees to do a better job. Employees are also expected to benefit through higher salaries.

 

Still, we know too little about how these connections really look like. The research on local wage bargaining on Swedish conditions is still very limited. Is the hypothesis correct for all types of companies and employees despite company size, industry or sector? And, under which conditions will local wage bargaining give those positive effects?

Through existing research in the field some major circumstances can be identified:

• There must be a large enough wage sum on the local level to negotiate about.
• A clear connection between the wage setting and the company's business goals.
• That there is sufficient wage spread, this enables wage differences reflecting the employee's contribution to the results and goals.
• That the local managers have the interest, competence and mandate to set wages.
• That there exists a good local climate of cooperation between the labor market organizations.

The project is scheduled between 2010 and 2013 and the results will be reported with articles in scientific journals, books and newspapers for the general public during the process.

For more information, contact Henrik Lindberg or Nils Karlson.