In this episode, we'll learn about the fascinating story of Sweden's unique economic model.
What makes Sweden unique, how has it developed from an agrarian society to an industrial powerhouse, all while maintaining a strong social security net for all, and what are some of threats to the Swedish Model in the 21st century?
[00:00:04] Hello, hello hello, and welcome to English Learning for Curious Minds, by Leonardo English.
[00:00:11] The show where you can listen to fascinating stories, and learn weird and wonderful things about the world at the same time as improving your English.
[00:00:20] I'm Alastair Budge, and today we are going to be talking about something called The Swedish Model.
[00:00:26] This isn’t the story about a beautiful person, but rather how a country has managed to go from an agrarian, forestry-based economy to a highly industrialised nation, held up by many as an example of how to unleash the power of capitalism while looking after those who might in other countries be left behind.
[00:00:47] It is a fascinating story, it’s also a personal one, for reasons I will reveal at the end of the episode.
[00:00:54] So, let’s get right into it, and learn about the Swedish model.
[00:01:01] In schools in Britain, we are taught a lot about British history, about how “Britannia” came to rule the waves, how a small, rainy country came to colonise much of the globe and get filthy rich in the process.
[00:01:17] It made sense, or at least it was logical: an industrial revolution, great productivity increases, a strong navy, easy access to the Atlantic, and then a smorgasbord of colonies from which value could be extracted.
[00:01:33] Sure, this is a great simplification, but it follows a traditional capitalist path: productivity improvements, deregulation, acquiring assets, then extracting as much value from them as you can.
[00:01:48] In British schools, perhaps unsurprisingly, we never learned much about Scandinavia, apart from the fact that this was where the Vikings came from.
[00:01:59] The only thing most people tended to know about modern Scandinavia at least was that everything seemed to be very expensive.
[00:02:08] I can remember stories of people who had gone to Oslo or Stockholm and returned nursing their wallets after having to fork out €10 for a beer.
[00:02:18] These countries had economies that seemed to be doing extremely well, where the streets seemed to be paved with gold.
[00:02:27] In the case of Norway, the answer as to why was obvious: it has huge oil reserves, currently sitting at 1.4 trillion dollars. When these were discovered and the oil started to flow, it turned a country dominated by fishing into one where the return on its sovereign wealth fund alone makes the country over $200 billion a year.
[00:02:54] In other words, Norway could stop drilling oil tomorrow and the money it had accumulated would still mean it produced hundreds of billions of dollars per year in income for its citizens.
[00:03:07] Sweden, on the other hand, was more of an enigma.
[00:03:12] It did not have the Norwegian advantage of huge oil reserves.
[00:03:17] It does not have the sun, sea and climate to attract tourists in their masses, unlike much of southern Europe.
[00:03:24] It is one huge mass of forest and lakes, bordering by land only Norway to the west and Finland to the east.
[00:03:35] And before industrialisation in the 19th century, the economy was based mainly on agriculture, forestry and mining.
[00:03:45] But fast forward to today, it is a highly developed country with a GDP per capita of over 60,000 dollars, more than double Spain and almost double Italy.
[00:03:58] And it has done this in unconventional ways.
[00:04:02] Conventional capitalism and market economics preach to slash taxation to unleash the economy. Sweden has one of the highest rates of tax in the world.
[00:04:15] Conventional capitalism and market economics look down on trade unions as a tool to increase wages and lower labour productivity. Sweden has one of the highest participation rates in trade unions in the world.
[00:04:31] Conventional capitalism advocates for limited government intervention, but the Swedish state, as a percentage of the total economy, is one of the largest in the world.
[00:04:44] As a former Swedish Prime Minister, Göran Persson said, the Swedish economy is like a bumblebee. “With its overly heavy body and little wings, supposedly it should not be able to fly – but it does.”
[00:05:02] So, how does it work, what can we learn from this, and what are some of the forces that are threatening the flight of this Swedish bumblebee?
[00:05:13] Let’s start with some brief history, and also a disclaimer that we are trying to talk about an entire country’s economic history in almost 100 years, so clearly this will be somewhat of a superficial overview.
[00:05:27] As you may know, Sweden has a long history of neutrality, and the country remained neutral during both world wars. Whatever your thoughts on the rights and wrongs of that, economically it was a smart move.
[00:05:43] Wars are expensive, and by remaining neutral not only do you not have to pay for an expensive war but you can also make money through selling goods to both sides.
[00:05:56] And that’s exactly what Sweden did, selling iron ore to the Nazis and machine parts to the British.
[00:06:05] By the time the war was over, Sweden was in an excellent position, with no debt while most of Europe had to embark on a huge spending spree to rebuild its destroyed towns and cities.
[00:06:19] This allowed Sweden to invest heavily in its welfare state, schools, hospitals, social care, and so on.
[00:06:28] But as the Swedish economy grew, Sweden faced a problem.
[00:06:33] It was, and still is, a small country. The population in 1950 was around 7 million, and it’s only just over 10 million today.
[00:06:46] As the economy grew, and with a finite population, there were more jobs and fewer people to do them.
[00:06:54] And as any economist knows, when demand outstrips supply, the price of a product increases.
[00:07:03] In this case, the “product” was workers’ salaries.
[00:07:09] Swedish economists feared that workers would have more power to negotiate their salaries, leading to wage rises and inflation.
[00:07:18] Now, this doesn’t sound like such a bad thing on the face of it, at least workers being able to command higher salaries, but it was the secondary effects that the economists were afraid of.
[00:07:31] Highly skilled workers in high-demand jobs would be able to command very high wages and the lesser skilled workers would be forced to accept lower wages. Therefore there would be great wage inequality, with those at the top earning many multiples of those at the bottom.
[00:07:51] As you will know, this is the current situation in many Western countries, the UK for example, where it would not be unusual even in a small company for the boss to earn 5 or 10 times what their lowest paid worker would. And when we’re talking about larger companies, the multiples are even higher, with some CEOs being paid many hundreds of times what their lowest-paid workers are.
[00:08:20] This is market economics at work, some say, high skills should command high wages, and if a company is prepared to pay a worker hundreds of thousands of dollars a year, millions even, it is because that person, in theory at least, generates more value for the company than they are paid.
[00:08:42] But the Swedes looked at this and thought, “Uh huh, nope, we’re going to do things differently”.
[00:08:50] What they did was implement something called the “solidaristic wage policy”.
[00:08:56] Now, I don’t want to get bogged down in economic jargon here, but the simple way of explaining it is as follows:
[00:09:05] Imagine a system where the gap between the highest and lowest wages within companies is deliberately kept small.
[00:09:14] Instead of letting the market alone decide salaries, which can lead to huge income disparities, Sweden encouraged companies and unions to agree on wages that are fair and balanced. This policy aimed to ensure that everyone, from the CEO to the factory floor worker, receives a wage that reflects the value of their work but also maintains a sense of equality and solidarity among employees.
[00:09:45] This doesn’t mean that everyone gets paid the same, but rather that the differences in pay are reasonable.
[00:09:52] High-skilled workers still earn more than those in less skilled positions, but the gap is not as vast as you might see elsewhere.
[00:10:02] Now, you might be listening to this and thinking “brilliant”, or perhaps the red-blooded capitalists among you are listening to this and thinking “what madness”.
[00:10:14] For those in the latter category, let me tell you that there was also some sound economic logic behind it.
[00:10:22] The economic theory behind it was that this would mean that companies in the least productive sectors, in lower-value industries, would be forced to become more productive or go out of business.
[00:10:37] And in more productive, higher-value sectors, wages would actually go down, or at least companies wouldn’t be forced to increase wages, meaning that the companies would be more profitable and would reinvest their profits into growth, as well as pay an increasing amount in tax.
[00:10:56] It would also control inflation, because wages would be predetermined by collective bargaining agreements between trade unions and businesses, and wage increases would be negotiated centrally.
[00:11:11] In essence, the solidaristic wage policy was Sweden’s way of saying, 'We believe in capitalism, it can lead to great prosperity for our citizens, but it needs to be tempered with a strong sense of social responsibility.'
[00:11:26] Now, this came into place in the mid 20th century, so there are some valid question marks over whether exactly the same thing could be done today, in the global age of hypermobility, but back then, it worked.
[00:11:42] Unproductive companies, as they were forced to pay higher wages, had to improve their productivity or were forced to switch to higher-value activities, or else they went out of business.
[00:11:54] Now, I appreciate that this might seem theoretical, but let me give you one example that should help clear it up.
[00:12:03] For example, farming potatoes.
[00:12:06] Potatoes are a cheap vegetable, potato farming might be hard, backbreaking work for those involved in it, but in economic terms, it is a low-value industry.
[00:12:19] If an owner of a potato farm is allowed to pay workers low wages to pick potatoes, they don’t have much of an incentive to modernise and automate the process.
[00:12:30] But if suddenly the wages they need to pay their workers increase by two or three times, they need to find ways to become more productive. This might be by investing in technology to harvest potatoes more efficiently, perhaps it’s by investing in a different type of fertiliser that allows a potato to grow bigger or in a more efficient way, or investing in their workers so that their productivity increases.
[00:12:59] Some farm workers might remain, as the potato farm needs some human involvement, but others lose their jobs and are retrained, for free, to work in more productive industries.
[00:13:12] Making cars, producing medicines, developing software, and so on.
[00:13:18] Key to all of this was an effective system that helped people transition from one job to another.
[00:13:26] And it’s here that we need to start talking about trade unions.
[00:13:31] Today, 70% of all Swedish employees belong to a trade union; it is the world’s second-highest country in terms of union membership, after Iceland, that is.
[00:13:43] This is down from around 85% in the mid-1990s, but it is still incredibly high compared to most developed countries.
[00:13:53] In Italy it’s around 32%, in the UK it’s 22%, and in the United States, it is a mere 10%.
[00:14:03] Now, the role of the Swedish trade union is slightly different to in other countries.
[00:14:11] While in many countries, for example in the UK, the role of the trade union is to protect the job at all costs, to reject any job cuts and push for salary increases, in Sweden the role of the union is more to protect the individual doing the job, rather than the job itself.
[00:14:32] The job might change, it might be removed due to a changing business environment or because of automation, but as long as the individual worker is protected, it almost doesn’t matter.
[00:14:46] This is one of the reasons that the trade unions generally enjoy very strong support in Sweden, both from workers and businesses.
[00:14:56] Workers pay a fee to be part of a union, but they are treated very well, and afforded all sorts of protections while they have their job, and help if they lose it.
[00:15:09] Now, as well as the unions, Sweden also has a very generous welfare state, with the idea that the basic needs of citizens in Sweden should be provided at a high quality by the state.
[00:15:23] From healthcare to childcare, education to pensions, the Swedish state provides this either free of charge or at a significantly reduced rate to its citizens.
[00:15:35] Clearly, this is expensive, and to do this, Swedes have paid and still pay some of the highest tax rates in the world. In the 1980s, the marginal tax rate for the highest earners got to 85%.
[00:15:53] Now the amount is lower, but when you consider the 31% contribution that an employer makes to social security, the top rate that a Swede pays is a marginal tax of around 63%, and if that person is a business owner also charging VAT to Swedish consumers, it can reach 71%.
[00:16:15] It is a lot, and what might be surprising is that even Swedish earners on the lower end of the scale pay relatively high taxes, with the average person in Sweden paying 42.5% of their income in taxes.
[00:16:34] And studies show that Swedes, obviously with some exceptions, are pretty happy to pay high taxes. They receive a lot in return, free childcare, school, university, healthcare, a good pension, and there are very low levels of corruption.
[00:16:52] The implicit contract in The Swedish Model is that the state provides for you until you are of working age, caring for you at every step of the way, so that you are a highly skilled worker and able to find a high-skilled job, you pay a lot of taxes for the duration of your working life, and when you retire, the state will also look after you.
[00:17:15] Of course, this in itself is not unique to Sweden, it’s how tax in practically every country works, but the level of taxation in Sweden, as well as the perceived value that derives from it, makes it somewhat unique.
[00:17:32] And to date, the system seems to have worked.
[00:17:36] But it is a delicate balance, and in the 21st century, the Swedish Model has been facing some major challenges coming from both external and internal forces.
[00:17:49] Firstly, as a response to the refugee crisis, Sweden decided to open its doors, and in 2015 the country welcomed 162,000 migrants, mainly from Syria, Afghanistan and Iraq.
[00:18:06] Sweden was a rich and developed country, and the government decided to pull its weight and accept refugees from war-torn countries.
[00:18:17] It was in many ways a commendable decision, but the small country now had the challenge not only of how to integrate these refugees into society, but how to do so in a way that was consistent with the Swedish model.
[00:18:34] Now, we are going to keep the discussion here to the economic side of things rather than the social and cultural. The two elements are of course closely linked, but the former is black and white and the latter less so.
[00:18:49] Remember, the Swedish Model, its welfare system and high taxes, is based on high-skilled labour, normally two working parents.
[00:19:00] Refugees fleeing from war-torn countries, of course with many exceptions, had lower levels of education and skills than the average Swede.
[00:19:10] To be precise, half of the recent refugee intake in Sweden had no secondary education, so they simply didn’t have the skills to slot nicely into the kind of jobs encouraged by the Swedish model.”.
[00:19:25] What this has meant is that there are very high levels of unemployment among the Swedish refugee population.
[00:19:33] For recent migrants, the unemployment rate is 44% for men and 70% for women.
[00:19:41] And given that there is no minimum wage, low-skilled workers often find themselves pushed towards temporary or unstable employment in companies that are not part of a union, meaning that they don’t enjoy the same rights and protections as the majority of workers.
[00:20:00] What's more, with recent migrants often concentrated in areas of the cities with other migrants, and limited opportunities to speak Swedish and integrate into Swedish society, many understandably feel ostracised, shut out by regular Swedes, leading to discontent and resentment, both from the refugee population towards the indigenous Swedish population, and vice versa.
[00:20:28] Now, there are all sorts of programmes to upskill recent immigrants and help them develop the capabilities required to get high-skilled, well-paid jobs, as well as to help them learn Swedish, but there is a long way to go, and hundreds of thousands of people to upskill.
[00:20:47] As you may know, after it became clear that other EU countries were not prepared to share the burden and accept as many refugees as Sweden, the country seriously tightened its immigration laws.
[00:21:00] The number of refugee arrivals has plummeted, but there is still the question of how to integrate the remaining almost 300,000 refugees into Swedish society, and in economic terms, how to make the Swedish model work under the pressure.
[00:21:18] These are people who need access to the same public services and welfare as any normal Swede but are not able to find a job that allows them to pay back into the system through taxes.
[00:21:31] On a political level, this has led to changes in Sweden, with the right-wing anti-immigration Swedish Democrats winning 20% of the vote in the 2022 election, up from 5.7% in 2010.
[00:21:47] Now, moving onto some external threats to the Swedish model, the first to mention comes from Brussels.
[00:21:56] As you may know, there are plans to create an EU-wide minimum wage.
[00:22:02] Now, why would this be a threat to the Swedish Model?
[00:22:06] Well, because wages are currently set between the trade unions and businesses.
[00:22:13] If these become set on a government level, a major role of the unions would be removed, and it could lead to businesses saying, "well, for low-skilled work we are going to pay the government-mandated minimum wage, rather than a higher wage that had been fought for tooth and nail by the unions."
[00:22:33] In other words, an EU directive on minimum wage could lead to lower-skilled Swedish workers earning less, not more.
[00:22:42] And on the other end of the scale, the increasingly globalised nature of work means that offering a relatively low wage for high-skilled work often no longer cuts the mustard, it isn’t good enough.
[00:22:56] To give you an example, a highly-skilled software developer at the top of their game might earn €100,000 working for a Swedish company, but that person could easily double or triple that salary by working for an American company.
[00:23:14] In the 20th century, the model worked fine, but in a globalised world of remote work and global possibilities, hanging on to the most in demand workers is a challenge.
[00:23:27] What’s more, union membership is high but it is reducing, and many high profile companies are either rejecting unions outright or pushing back against them.
[00:23:39] You might have heard about Elon Musk’s battle with the Swedish unions, which as of the time of recording this episode, has been going on for almost four months.
[00:23:50] And it’s not just Elon Musk and Tesla. Both Spotify and the payments giant Klarna have also been in the news because of their battles with unions, and their preference to deal directly with their employees rather than via a trade union.
[00:24:06] But perhaps the greatest threat to the Swedish model is from within, from Swedish politicians and policymakers.
[00:24:15] There has been an increasing privatisation of state services, increased union fees, a removal of tax credits for union membership, and the implementation of measures that removed the conditions under which workers could strike.
[00:24:29] So what comes next for the Swedish model?
[00:24:33] Will the bumblebee keep on flying, or will it need some structural changes to stay in the air in a globalised world?
[00:24:41] Who knows, but one thing is for sure, Sweden has defied gravity for the past 50 years, and it would take a brave person to bet against it today.
[00:24:54] OK then, that is it for today's episode on The Swedish Model.
[00:24:58] I know it was quite a long one, but I hope it was interesting, and that you've learnt something new.
[00:25:03] Now, I told you at the start of this episode that there was a personal element to this story, and I’ll tell you what that is now.
[00:25:11] My wife was offered a job in Sweden, and we are actually moving to Sweden imminently.
[00:25:18] This episode is going to be released on March 5th, so in fact we will have got to Sweden approximately 45 minutes before this episode is publicly available.
[00:25:29] I’ll be sure to keep you updated with my thoughts on Sweden and The Swedish Model as we all get settled in.
[00:25:35] You've been listening to English Learning for Curious Minds, by Leonardo English.
[00:25:41] I'm Alastair Budge, you stay safe, and I'll catch you in the next episode.
[END OF EPISODE]
[00:00:04] Hello, hello hello, and welcome to English Learning for Curious Minds, by Leonardo English.
[00:00:11] The show where you can listen to fascinating stories, and learn weird and wonderful things about the world at the same time as improving your English.
[00:00:20] I'm Alastair Budge, and today we are going to be talking about something called The Swedish Model.
[00:00:26] This isn’t the story about a beautiful person, but rather how a country has managed to go from an agrarian, forestry-based economy to a highly industrialised nation, held up by many as an example of how to unleash the power of capitalism while looking after those who might in other countries be left behind.
[00:00:47] It is a fascinating story, it’s also a personal one, for reasons I will reveal at the end of the episode.
[00:00:54] So, let’s get right into it, and learn about the Swedish model.
[00:01:01] In schools in Britain, we are taught a lot about British history, about how “Britannia” came to rule the waves, how a small, rainy country came to colonise much of the globe and get filthy rich in the process.
[00:01:17] It made sense, or at least it was logical: an industrial revolution, great productivity increases, a strong navy, easy access to the Atlantic, and then a smorgasbord of colonies from which value could be extracted.
[00:01:33] Sure, this is a great simplification, but it follows a traditional capitalist path: productivity improvements, deregulation, acquiring assets, then extracting as much value from them as you can.
[00:01:48] In British schools, perhaps unsurprisingly, we never learned much about Scandinavia, apart from the fact that this was where the Vikings came from.
[00:01:59] The only thing most people tended to know about modern Scandinavia at least was that everything seemed to be very expensive.
[00:02:08] I can remember stories of people who had gone to Oslo or Stockholm and returned nursing their wallets after having to fork out €10 for a beer.
[00:02:18] These countries had economies that seemed to be doing extremely well, where the streets seemed to be paved with gold.
[00:02:27] In the case of Norway, the answer as to why was obvious: it has huge oil reserves, currently sitting at 1.4 trillion dollars. When these were discovered and the oil started to flow, it turned a country dominated by fishing into one where the return on its sovereign wealth fund alone makes the country over $200 billion a year.
[00:02:54] In other words, Norway could stop drilling oil tomorrow and the money it had accumulated would still mean it produced hundreds of billions of dollars per year in income for its citizens.
[00:03:07] Sweden, on the other hand, was more of an enigma.
[00:03:12] It did not have the Norwegian advantage of huge oil reserves.
[00:03:17] It does not have the sun, sea and climate to attract tourists in their masses, unlike much of southern Europe.
[00:03:24] It is one huge mass of forest and lakes, bordering by land only Norway to the west and Finland to the east.
[00:03:35] And before industrialisation in the 19th century, the economy was based mainly on agriculture, forestry and mining.
[00:03:45] But fast forward to today, it is a highly developed country with a GDP per capita of over 60,000 dollars, more than double Spain and almost double Italy.
[00:03:58] And it has done this in unconventional ways.
[00:04:02] Conventional capitalism and market economics preach to slash taxation to unleash the economy. Sweden has one of the highest rates of tax in the world.
[00:04:15] Conventional capitalism and market economics look down on trade unions as a tool to increase wages and lower labour productivity. Sweden has one of the highest participation rates in trade unions in the world.
[00:04:31] Conventional capitalism advocates for limited government intervention, but the Swedish state, as a percentage of the total economy, is one of the largest in the world.
[00:04:44] As a former Swedish Prime Minister, Göran Persson said, the Swedish economy is like a bumblebee. “With its overly heavy body and little wings, supposedly it should not be able to fly – but it does.”
[00:05:02] So, how does it work, what can we learn from this, and what are some of the forces that are threatening the flight of this Swedish bumblebee?
[00:05:13] Let’s start with some brief history, and also a disclaimer that we are trying to talk about an entire country’s economic history in almost 100 years, so clearly this will be somewhat of a superficial overview.
[00:05:27] As you may know, Sweden has a long history of neutrality, and the country remained neutral during both world wars. Whatever your thoughts on the rights and wrongs of that, economically it was a smart move.
[00:05:43] Wars are expensive, and by remaining neutral not only do you not have to pay for an expensive war but you can also make money through selling goods to both sides.
[00:05:56] And that’s exactly what Sweden did, selling iron ore to the Nazis and machine parts to the British.
[00:06:05] By the time the war was over, Sweden was in an excellent position, with no debt while most of Europe had to embark on a huge spending spree to rebuild its destroyed towns and cities.
[00:06:19] This allowed Sweden to invest heavily in its welfare state, schools, hospitals, social care, and so on.
[00:06:28] But as the Swedish economy grew, Sweden faced a problem.
[00:06:33] It was, and still is, a small country. The population in 1950 was around 7 million, and it’s only just over 10 million today.
[00:06:46] As the economy grew, and with a finite population, there were more jobs and fewer people to do them.
[00:06:54] And as any economist knows, when demand outstrips supply, the price of a product increases.
[00:07:03] In this case, the “product” was workers’ salaries.
[00:07:09] Swedish economists feared that workers would have more power to negotiate their salaries, leading to wage rises and inflation.
[00:07:18] Now, this doesn’t sound like such a bad thing on the face of it, at least workers being able to command higher salaries, but it was the secondary effects that the economists were afraid of.
[00:07:31] Highly skilled workers in high-demand jobs would be able to command very high wages and the lesser skilled workers would be forced to accept lower wages. Therefore there would be great wage inequality, with those at the top earning many multiples of those at the bottom.
[00:07:51] As you will know, this is the current situation in many Western countries, the UK for example, where it would not be unusual even in a small company for the boss to earn 5 or 10 times what their lowest paid worker would. And when we’re talking about larger companies, the multiples are even higher, with some CEOs being paid many hundreds of times what their lowest-paid workers are.
[00:08:20] This is market economics at work, some say, high skills should command high wages, and if a company is prepared to pay a worker hundreds of thousands of dollars a year, millions even, it is because that person, in theory at least, generates more value for the company than they are paid.
[00:08:42] But the Swedes looked at this and thought, “Uh huh, nope, we’re going to do things differently”.
[00:08:50] What they did was implement something called the “solidaristic wage policy”.
[00:08:56] Now, I don’t want to get bogged down in economic jargon here, but the simple way of explaining it is as follows:
[00:09:05] Imagine a system where the gap between the highest and lowest wages within companies is deliberately kept small.
[00:09:14] Instead of letting the market alone decide salaries, which can lead to huge income disparities, Sweden encouraged companies and unions to agree on wages that are fair and balanced. This policy aimed to ensure that everyone, from the CEO to the factory floor worker, receives a wage that reflects the value of their work but also maintains a sense of equality and solidarity among employees.
[00:09:45] This doesn’t mean that everyone gets paid the same, but rather that the differences in pay are reasonable.
[00:09:52] High-skilled workers still earn more than those in less skilled positions, but the gap is not as vast as you might see elsewhere.
[00:10:02] Now, you might be listening to this and thinking “brilliant”, or perhaps the red-blooded capitalists among you are listening to this and thinking “what madness”.
[00:10:14] For those in the latter category, let me tell you that there was also some sound economic logic behind it.
[00:10:22] The economic theory behind it was that this would mean that companies in the least productive sectors, in lower-value industries, would be forced to become more productive or go out of business.
[00:10:37] And in more productive, higher-value sectors, wages would actually go down, or at least companies wouldn’t be forced to increase wages, meaning that the companies would be more profitable and would reinvest their profits into growth, as well as pay an increasing amount in tax.
[00:10:56] It would also control inflation, because wages would be predetermined by collective bargaining agreements between trade unions and businesses, and wage increases would be negotiated centrally.
[00:11:11] In essence, the solidaristic wage policy was Sweden’s way of saying, 'We believe in capitalism, it can lead to great prosperity for our citizens, but it needs to be tempered with a strong sense of social responsibility.'
[00:11:26] Now, this came into place in the mid 20th century, so there are some valid question marks over whether exactly the same thing could be done today, in the global age of hypermobility, but back then, it worked.
[00:11:42] Unproductive companies, as they were forced to pay higher wages, had to improve their productivity or were forced to switch to higher-value activities, or else they went out of business.
[00:11:54] Now, I appreciate that this might seem theoretical, but let me give you one example that should help clear it up.
[00:12:03] For example, farming potatoes.
[00:12:06] Potatoes are a cheap vegetable, potato farming might be hard, backbreaking work for those involved in it, but in economic terms, it is a low-value industry.
[00:12:19] If an owner of a potato farm is allowed to pay workers low wages to pick potatoes, they don’t have much of an incentive to modernise and automate the process.
[00:12:30] But if suddenly the wages they need to pay their workers increase by two or three times, they need to find ways to become more productive. This might be by investing in technology to harvest potatoes more efficiently, perhaps it’s by investing in a different type of fertiliser that allows a potato to grow bigger or in a more efficient way, or investing in their workers so that their productivity increases.
[00:12:59] Some farm workers might remain, as the potato farm needs some human involvement, but others lose their jobs and are retrained, for free, to work in more productive industries.
[00:13:12] Making cars, producing medicines, developing software, and so on.
[00:13:18] Key to all of this was an effective system that helped people transition from one job to another.
[00:13:26] And it’s here that we need to start talking about trade unions.
[00:13:31] Today, 70% of all Swedish employees belong to a trade union; it is the world’s second-highest country in terms of union membership, after Iceland, that is.
[00:13:43] This is down from around 85% in the mid-1990s, but it is still incredibly high compared to most developed countries.
[00:13:53] In Italy it’s around 32%, in the UK it’s 22%, and in the United States, it is a mere 10%.
[00:14:03] Now, the role of the Swedish trade union is slightly different to in other countries.
[00:14:11] While in many countries, for example in the UK, the role of the trade union is to protect the job at all costs, to reject any job cuts and push for salary increases, in Sweden the role of the union is more to protect the individual doing the job, rather than the job itself.
[00:14:32] The job might change, it might be removed due to a changing business environment or because of automation, but as long as the individual worker is protected, it almost doesn’t matter.
[00:14:46] This is one of the reasons that the trade unions generally enjoy very strong support in Sweden, both from workers and businesses.
[00:14:56] Workers pay a fee to be part of a union, but they are treated very well, and afforded all sorts of protections while they have their job, and help if they lose it.
[00:15:09] Now, as well as the unions, Sweden also has a very generous welfare state, with the idea that the basic needs of citizens in Sweden should be provided at a high quality by the state.
[00:15:23] From healthcare to childcare, education to pensions, the Swedish state provides this either free of charge or at a significantly reduced rate to its citizens.
[00:15:35] Clearly, this is expensive, and to do this, Swedes have paid and still pay some of the highest tax rates in the world. In the 1980s, the marginal tax rate for the highest earners got to 85%.
[00:15:53] Now the amount is lower, but when you consider the 31% contribution that an employer makes to social security, the top rate that a Swede pays is a marginal tax of around 63%, and if that person is a business owner also charging VAT to Swedish consumers, it can reach 71%.
[00:16:15] It is a lot, and what might be surprising is that even Swedish earners on the lower end of the scale pay relatively high taxes, with the average person in Sweden paying 42.5% of their income in taxes.
[00:16:34] And studies show that Swedes, obviously with some exceptions, are pretty happy to pay high taxes. They receive a lot in return, free childcare, school, university, healthcare, a good pension, and there are very low levels of corruption.
[00:16:52] The implicit contract in The Swedish Model is that the state provides for you until you are of working age, caring for you at every step of the way, so that you are a highly skilled worker and able to find a high-skilled job, you pay a lot of taxes for the duration of your working life, and when you retire, the state will also look after you.
[00:17:15] Of course, this in itself is not unique to Sweden, it’s how tax in practically every country works, but the level of taxation in Sweden, as well as the perceived value that derives from it, makes it somewhat unique.
[00:17:32] And to date, the system seems to have worked.
[00:17:36] But it is a delicate balance, and in the 21st century, the Swedish Model has been facing some major challenges coming from both external and internal forces.
[00:17:49] Firstly, as a response to the refugee crisis, Sweden decided to open its doors, and in 2015 the country welcomed 162,000 migrants, mainly from Syria, Afghanistan and Iraq.
[00:18:06] Sweden was a rich and developed country, and the government decided to pull its weight and accept refugees from war-torn countries.
[00:18:17] It was in many ways a commendable decision, but the small country now had the challenge not only of how to integrate these refugees into society, but how to do so in a way that was consistent with the Swedish model.
[00:18:34] Now, we are going to keep the discussion here to the economic side of things rather than the social and cultural. The two elements are of course closely linked, but the former is black and white and the latter less so.
[00:18:49] Remember, the Swedish Model, its welfare system and high taxes, is based on high-skilled labour, normally two working parents.
[00:19:00] Refugees fleeing from war-torn countries, of course with many exceptions, had lower levels of education and skills than the average Swede.
[00:19:10] To be precise, half of the recent refugee intake in Sweden had no secondary education, so they simply didn’t have the skills to slot nicely into the kind of jobs encouraged by the Swedish model.”.
[00:19:25] What this has meant is that there are very high levels of unemployment among the Swedish refugee population.
[00:19:33] For recent migrants, the unemployment rate is 44% for men and 70% for women.
[00:19:41] And given that there is no minimum wage, low-skilled workers often find themselves pushed towards temporary or unstable employment in companies that are not part of a union, meaning that they don’t enjoy the same rights and protections as the majority of workers.
[00:20:00] What's more, with recent migrants often concentrated in areas of the cities with other migrants, and limited opportunities to speak Swedish and integrate into Swedish society, many understandably feel ostracised, shut out by regular Swedes, leading to discontent and resentment, both from the refugee population towards the indigenous Swedish population, and vice versa.
[00:20:28] Now, there are all sorts of programmes to upskill recent immigrants and help them develop the capabilities required to get high-skilled, well-paid jobs, as well as to help them learn Swedish, but there is a long way to go, and hundreds of thousands of people to upskill.
[00:20:47] As you may know, after it became clear that other EU countries were not prepared to share the burden and accept as many refugees as Sweden, the country seriously tightened its immigration laws.
[00:21:00] The number of refugee arrivals has plummeted, but there is still the question of how to integrate the remaining almost 300,000 refugees into Swedish society, and in economic terms, how to make the Swedish model work under the pressure.
[00:21:18] These are people who need access to the same public services and welfare as any normal Swede but are not able to find a job that allows them to pay back into the system through taxes.
[00:21:31] On a political level, this has led to changes in Sweden, with the right-wing anti-immigration Swedish Democrats winning 20% of the vote in the 2022 election, up from 5.7% in 2010.
[00:21:47] Now, moving onto some external threats to the Swedish model, the first to mention comes from Brussels.
[00:21:56] As you may know, there are plans to create an EU-wide minimum wage.
[00:22:02] Now, why would this be a threat to the Swedish Model?
[00:22:06] Well, because wages are currently set between the trade unions and businesses.
[00:22:13] If these become set on a government level, a major role of the unions would be removed, and it could lead to businesses saying, "well, for low-skilled work we are going to pay the government-mandated minimum wage, rather than a higher wage that had been fought for tooth and nail by the unions."
[00:22:33] In other words, an EU directive on minimum wage could lead to lower-skilled Swedish workers earning less, not more.
[00:22:42] And on the other end of the scale, the increasingly globalised nature of work means that offering a relatively low wage for high-skilled work often no longer cuts the mustard, it isn’t good enough.
[00:22:56] To give you an example, a highly-skilled software developer at the top of their game might earn €100,000 working for a Swedish company, but that person could easily double or triple that salary by working for an American company.
[00:23:14] In the 20th century, the model worked fine, but in a globalised world of remote work and global possibilities, hanging on to the most in demand workers is a challenge.
[00:23:27] What’s more, union membership is high but it is reducing, and many high profile companies are either rejecting unions outright or pushing back against them.
[00:23:39] You might have heard about Elon Musk’s battle with the Swedish unions, which as of the time of recording this episode, has been going on for almost four months.
[00:23:50] And it’s not just Elon Musk and Tesla. Both Spotify and the payments giant Klarna have also been in the news because of their battles with unions, and their preference to deal directly with their employees rather than via a trade union.
[00:24:06] But perhaps the greatest threat to the Swedish model is from within, from Swedish politicians and policymakers.
[00:24:15] There has been an increasing privatisation of state services, increased union fees, a removal of tax credits for union membership, and the implementation of measures that removed the conditions under which workers could strike.
[00:24:29] So what comes next for the Swedish model?
[00:24:33] Will the bumblebee keep on flying, or will it need some structural changes to stay in the air in a globalised world?
[00:24:41] Who knows, but one thing is for sure, Sweden has defied gravity for the past 50 years, and it would take a brave person to bet against it today.
[00:24:54] OK then, that is it for today's episode on The Swedish Model.
[00:24:58] I know it was quite a long one, but I hope it was interesting, and that you've learnt something new.
[00:25:03] Now, I told you at the start of this episode that there was a personal element to this story, and I’ll tell you what that is now.
[00:25:11] My wife was offered a job in Sweden, and we are actually moving to Sweden imminently.
[00:25:18] This episode is going to be released on March 5th, so in fact we will have got to Sweden approximately 45 minutes before this episode is publicly available.
[00:25:29] I’ll be sure to keep you updated with my thoughts on Sweden and The Swedish Model as we all get settled in.
[00:25:35] You've been listening to English Learning for Curious Minds, by Leonardo English.
[00:25:41] I'm Alastair Budge, you stay safe, and I'll catch you in the next episode.
[END OF EPISODE]
[00:00:04] Hello, hello hello, and welcome to English Learning for Curious Minds, by Leonardo English.
[00:00:11] The show where you can listen to fascinating stories, and learn weird and wonderful things about the world at the same time as improving your English.
[00:00:20] I'm Alastair Budge, and today we are going to be talking about something called The Swedish Model.
[00:00:26] This isn’t the story about a beautiful person, but rather how a country has managed to go from an agrarian, forestry-based economy to a highly industrialised nation, held up by many as an example of how to unleash the power of capitalism while looking after those who might in other countries be left behind.
[00:00:47] It is a fascinating story, it’s also a personal one, for reasons I will reveal at the end of the episode.
[00:00:54] So, let’s get right into it, and learn about the Swedish model.
[00:01:01] In schools in Britain, we are taught a lot about British history, about how “Britannia” came to rule the waves, how a small, rainy country came to colonise much of the globe and get filthy rich in the process.
[00:01:17] It made sense, or at least it was logical: an industrial revolution, great productivity increases, a strong navy, easy access to the Atlantic, and then a smorgasbord of colonies from which value could be extracted.
[00:01:33] Sure, this is a great simplification, but it follows a traditional capitalist path: productivity improvements, deregulation, acquiring assets, then extracting as much value from them as you can.
[00:01:48] In British schools, perhaps unsurprisingly, we never learned much about Scandinavia, apart from the fact that this was where the Vikings came from.
[00:01:59] The only thing most people tended to know about modern Scandinavia at least was that everything seemed to be very expensive.
[00:02:08] I can remember stories of people who had gone to Oslo or Stockholm and returned nursing their wallets after having to fork out €10 for a beer.
[00:02:18] These countries had economies that seemed to be doing extremely well, where the streets seemed to be paved with gold.
[00:02:27] In the case of Norway, the answer as to why was obvious: it has huge oil reserves, currently sitting at 1.4 trillion dollars. When these were discovered and the oil started to flow, it turned a country dominated by fishing into one where the return on its sovereign wealth fund alone makes the country over $200 billion a year.
[00:02:54] In other words, Norway could stop drilling oil tomorrow and the money it had accumulated would still mean it produced hundreds of billions of dollars per year in income for its citizens.
[00:03:07] Sweden, on the other hand, was more of an enigma.
[00:03:12] It did not have the Norwegian advantage of huge oil reserves.
[00:03:17] It does not have the sun, sea and climate to attract tourists in their masses, unlike much of southern Europe.
[00:03:24] It is one huge mass of forest and lakes, bordering by land only Norway to the west and Finland to the east.
[00:03:35] And before industrialisation in the 19th century, the economy was based mainly on agriculture, forestry and mining.
[00:03:45] But fast forward to today, it is a highly developed country with a GDP per capita of over 60,000 dollars, more than double Spain and almost double Italy.
[00:03:58] And it has done this in unconventional ways.
[00:04:02] Conventional capitalism and market economics preach to slash taxation to unleash the economy. Sweden has one of the highest rates of tax in the world.
[00:04:15] Conventional capitalism and market economics look down on trade unions as a tool to increase wages and lower labour productivity. Sweden has one of the highest participation rates in trade unions in the world.
[00:04:31] Conventional capitalism advocates for limited government intervention, but the Swedish state, as a percentage of the total economy, is one of the largest in the world.
[00:04:44] As a former Swedish Prime Minister, Göran Persson said, the Swedish economy is like a bumblebee. “With its overly heavy body and little wings, supposedly it should not be able to fly – but it does.”
[00:05:02] So, how does it work, what can we learn from this, and what are some of the forces that are threatening the flight of this Swedish bumblebee?
[00:05:13] Let’s start with some brief history, and also a disclaimer that we are trying to talk about an entire country’s economic history in almost 100 years, so clearly this will be somewhat of a superficial overview.
[00:05:27] As you may know, Sweden has a long history of neutrality, and the country remained neutral during both world wars. Whatever your thoughts on the rights and wrongs of that, economically it was a smart move.
[00:05:43] Wars are expensive, and by remaining neutral not only do you not have to pay for an expensive war but you can also make money through selling goods to both sides.
[00:05:56] And that’s exactly what Sweden did, selling iron ore to the Nazis and machine parts to the British.
[00:06:05] By the time the war was over, Sweden was in an excellent position, with no debt while most of Europe had to embark on a huge spending spree to rebuild its destroyed towns and cities.
[00:06:19] This allowed Sweden to invest heavily in its welfare state, schools, hospitals, social care, and so on.
[00:06:28] But as the Swedish economy grew, Sweden faced a problem.
[00:06:33] It was, and still is, a small country. The population in 1950 was around 7 million, and it’s only just over 10 million today.
[00:06:46] As the economy grew, and with a finite population, there were more jobs and fewer people to do them.
[00:06:54] And as any economist knows, when demand outstrips supply, the price of a product increases.
[00:07:03] In this case, the “product” was workers’ salaries.
[00:07:09] Swedish economists feared that workers would have more power to negotiate their salaries, leading to wage rises and inflation.
[00:07:18] Now, this doesn’t sound like such a bad thing on the face of it, at least workers being able to command higher salaries, but it was the secondary effects that the economists were afraid of.
[00:07:31] Highly skilled workers in high-demand jobs would be able to command very high wages and the lesser skilled workers would be forced to accept lower wages. Therefore there would be great wage inequality, with those at the top earning many multiples of those at the bottom.
[00:07:51] As you will know, this is the current situation in many Western countries, the UK for example, where it would not be unusual even in a small company for the boss to earn 5 or 10 times what their lowest paid worker would. And when we’re talking about larger companies, the multiples are even higher, with some CEOs being paid many hundreds of times what their lowest-paid workers are.
[00:08:20] This is market economics at work, some say, high skills should command high wages, and if a company is prepared to pay a worker hundreds of thousands of dollars a year, millions even, it is because that person, in theory at least, generates more value for the company than they are paid.
[00:08:42] But the Swedes looked at this and thought, “Uh huh, nope, we’re going to do things differently”.
[00:08:50] What they did was implement something called the “solidaristic wage policy”.
[00:08:56] Now, I don’t want to get bogged down in economic jargon here, but the simple way of explaining it is as follows:
[00:09:05] Imagine a system where the gap between the highest and lowest wages within companies is deliberately kept small.
[00:09:14] Instead of letting the market alone decide salaries, which can lead to huge income disparities, Sweden encouraged companies and unions to agree on wages that are fair and balanced. This policy aimed to ensure that everyone, from the CEO to the factory floor worker, receives a wage that reflects the value of their work but also maintains a sense of equality and solidarity among employees.
[00:09:45] This doesn’t mean that everyone gets paid the same, but rather that the differences in pay are reasonable.
[00:09:52] High-skilled workers still earn more than those in less skilled positions, but the gap is not as vast as you might see elsewhere.
[00:10:02] Now, you might be listening to this and thinking “brilliant”, or perhaps the red-blooded capitalists among you are listening to this and thinking “what madness”.
[00:10:14] For those in the latter category, let me tell you that there was also some sound economic logic behind it.
[00:10:22] The economic theory behind it was that this would mean that companies in the least productive sectors, in lower-value industries, would be forced to become more productive or go out of business.
[00:10:37] And in more productive, higher-value sectors, wages would actually go down, or at least companies wouldn’t be forced to increase wages, meaning that the companies would be more profitable and would reinvest their profits into growth, as well as pay an increasing amount in tax.
[00:10:56] It would also control inflation, because wages would be predetermined by collective bargaining agreements between trade unions and businesses, and wage increases would be negotiated centrally.
[00:11:11] In essence, the solidaristic wage policy was Sweden’s way of saying, 'We believe in capitalism, it can lead to great prosperity for our citizens, but it needs to be tempered with a strong sense of social responsibility.'
[00:11:26] Now, this came into place in the mid 20th century, so there are some valid question marks over whether exactly the same thing could be done today, in the global age of hypermobility, but back then, it worked.
[00:11:42] Unproductive companies, as they were forced to pay higher wages, had to improve their productivity or were forced to switch to higher-value activities, or else they went out of business.
[00:11:54] Now, I appreciate that this might seem theoretical, but let me give you one example that should help clear it up.
[00:12:03] For example, farming potatoes.
[00:12:06] Potatoes are a cheap vegetable, potato farming might be hard, backbreaking work for those involved in it, but in economic terms, it is a low-value industry.
[00:12:19] If an owner of a potato farm is allowed to pay workers low wages to pick potatoes, they don’t have much of an incentive to modernise and automate the process.
[00:12:30] But if suddenly the wages they need to pay their workers increase by two or three times, they need to find ways to become more productive. This might be by investing in technology to harvest potatoes more efficiently, perhaps it’s by investing in a different type of fertiliser that allows a potato to grow bigger or in a more efficient way, or investing in their workers so that their productivity increases.
[00:12:59] Some farm workers might remain, as the potato farm needs some human involvement, but others lose their jobs and are retrained, for free, to work in more productive industries.
[00:13:12] Making cars, producing medicines, developing software, and so on.
[00:13:18] Key to all of this was an effective system that helped people transition from one job to another.
[00:13:26] And it’s here that we need to start talking about trade unions.
[00:13:31] Today, 70% of all Swedish employees belong to a trade union; it is the world’s second-highest country in terms of union membership, after Iceland, that is.
[00:13:43] This is down from around 85% in the mid-1990s, but it is still incredibly high compared to most developed countries.
[00:13:53] In Italy it’s around 32%, in the UK it’s 22%, and in the United States, it is a mere 10%.
[00:14:03] Now, the role of the Swedish trade union is slightly different to in other countries.
[00:14:11] While in many countries, for example in the UK, the role of the trade union is to protect the job at all costs, to reject any job cuts and push for salary increases, in Sweden the role of the union is more to protect the individual doing the job, rather than the job itself.
[00:14:32] The job might change, it might be removed due to a changing business environment or because of automation, but as long as the individual worker is protected, it almost doesn’t matter.
[00:14:46] This is one of the reasons that the trade unions generally enjoy very strong support in Sweden, both from workers and businesses.
[00:14:56] Workers pay a fee to be part of a union, but they are treated very well, and afforded all sorts of protections while they have their job, and help if they lose it.
[00:15:09] Now, as well as the unions, Sweden also has a very generous welfare state, with the idea that the basic needs of citizens in Sweden should be provided at a high quality by the state.
[00:15:23] From healthcare to childcare, education to pensions, the Swedish state provides this either free of charge or at a significantly reduced rate to its citizens.
[00:15:35] Clearly, this is expensive, and to do this, Swedes have paid and still pay some of the highest tax rates in the world. In the 1980s, the marginal tax rate for the highest earners got to 85%.
[00:15:53] Now the amount is lower, but when you consider the 31% contribution that an employer makes to social security, the top rate that a Swede pays is a marginal tax of around 63%, and if that person is a business owner also charging VAT to Swedish consumers, it can reach 71%.
[00:16:15] It is a lot, and what might be surprising is that even Swedish earners on the lower end of the scale pay relatively high taxes, with the average person in Sweden paying 42.5% of their income in taxes.
[00:16:34] And studies show that Swedes, obviously with some exceptions, are pretty happy to pay high taxes. They receive a lot in return, free childcare, school, university, healthcare, a good pension, and there are very low levels of corruption.
[00:16:52] The implicit contract in The Swedish Model is that the state provides for you until you are of working age, caring for you at every step of the way, so that you are a highly skilled worker and able to find a high-skilled job, you pay a lot of taxes for the duration of your working life, and when you retire, the state will also look after you.
[00:17:15] Of course, this in itself is not unique to Sweden, it’s how tax in practically every country works, but the level of taxation in Sweden, as well as the perceived value that derives from it, makes it somewhat unique.
[00:17:32] And to date, the system seems to have worked.
[00:17:36] But it is a delicate balance, and in the 21st century, the Swedish Model has been facing some major challenges coming from both external and internal forces.
[00:17:49] Firstly, as a response to the refugee crisis, Sweden decided to open its doors, and in 2015 the country welcomed 162,000 migrants, mainly from Syria, Afghanistan and Iraq.
[00:18:06] Sweden was a rich and developed country, and the government decided to pull its weight and accept refugees from war-torn countries.
[00:18:17] It was in many ways a commendable decision, but the small country now had the challenge not only of how to integrate these refugees into society, but how to do so in a way that was consistent with the Swedish model.
[00:18:34] Now, we are going to keep the discussion here to the economic side of things rather than the social and cultural. The two elements are of course closely linked, but the former is black and white and the latter less so.
[00:18:49] Remember, the Swedish Model, its welfare system and high taxes, is based on high-skilled labour, normally two working parents.
[00:19:00] Refugees fleeing from war-torn countries, of course with many exceptions, had lower levels of education and skills than the average Swede.
[00:19:10] To be precise, half of the recent refugee intake in Sweden had no secondary education, so they simply didn’t have the skills to slot nicely into the kind of jobs encouraged by the Swedish model.”.
[00:19:25] What this has meant is that there are very high levels of unemployment among the Swedish refugee population.
[00:19:33] For recent migrants, the unemployment rate is 44% for men and 70% for women.
[00:19:41] And given that there is no minimum wage, low-skilled workers often find themselves pushed towards temporary or unstable employment in companies that are not part of a union, meaning that they don’t enjoy the same rights and protections as the majority of workers.
[00:20:00] What's more, with recent migrants often concentrated in areas of the cities with other migrants, and limited opportunities to speak Swedish and integrate into Swedish society, many understandably feel ostracised, shut out by regular Swedes, leading to discontent and resentment, both from the refugee population towards the indigenous Swedish population, and vice versa.
[00:20:28] Now, there are all sorts of programmes to upskill recent immigrants and help them develop the capabilities required to get high-skilled, well-paid jobs, as well as to help them learn Swedish, but there is a long way to go, and hundreds of thousands of people to upskill.
[00:20:47] As you may know, after it became clear that other EU countries were not prepared to share the burden and accept as many refugees as Sweden, the country seriously tightened its immigration laws.
[00:21:00] The number of refugee arrivals has plummeted, but there is still the question of how to integrate the remaining almost 300,000 refugees into Swedish society, and in economic terms, how to make the Swedish model work under the pressure.
[00:21:18] These are people who need access to the same public services and welfare as any normal Swede but are not able to find a job that allows them to pay back into the system through taxes.
[00:21:31] On a political level, this has led to changes in Sweden, with the right-wing anti-immigration Swedish Democrats winning 20% of the vote in the 2022 election, up from 5.7% in 2010.
[00:21:47] Now, moving onto some external threats to the Swedish model, the first to mention comes from Brussels.
[00:21:56] As you may know, there are plans to create an EU-wide minimum wage.
[00:22:02] Now, why would this be a threat to the Swedish Model?
[00:22:06] Well, because wages are currently set between the trade unions and businesses.
[00:22:13] If these become set on a government level, a major role of the unions would be removed, and it could lead to businesses saying, "well, for low-skilled work we are going to pay the government-mandated minimum wage, rather than a higher wage that had been fought for tooth and nail by the unions."
[00:22:33] In other words, an EU directive on minimum wage could lead to lower-skilled Swedish workers earning less, not more.
[00:22:42] And on the other end of the scale, the increasingly globalised nature of work means that offering a relatively low wage for high-skilled work often no longer cuts the mustard, it isn’t good enough.
[00:22:56] To give you an example, a highly-skilled software developer at the top of their game might earn €100,000 working for a Swedish company, but that person could easily double or triple that salary by working for an American company.
[00:23:14] In the 20th century, the model worked fine, but in a globalised world of remote work and global possibilities, hanging on to the most in demand workers is a challenge.
[00:23:27] What’s more, union membership is high but it is reducing, and many high profile companies are either rejecting unions outright or pushing back against them.
[00:23:39] You might have heard about Elon Musk’s battle with the Swedish unions, which as of the time of recording this episode, has been going on for almost four months.
[00:23:50] And it’s not just Elon Musk and Tesla. Both Spotify and the payments giant Klarna have also been in the news because of their battles with unions, and their preference to deal directly with their employees rather than via a trade union.
[00:24:06] But perhaps the greatest threat to the Swedish model is from within, from Swedish politicians and policymakers.
[00:24:15] There has been an increasing privatisation of state services, increased union fees, a removal of tax credits for union membership, and the implementation of measures that removed the conditions under which workers could strike.
[00:24:29] So what comes next for the Swedish model?
[00:24:33] Will the bumblebee keep on flying, or will it need some structural changes to stay in the air in a globalised world?
[00:24:41] Who knows, but one thing is for sure, Sweden has defied gravity for the past 50 years, and it would take a brave person to bet against it today.
[00:24:54] OK then, that is it for today's episode on The Swedish Model.
[00:24:58] I know it was quite a long one, but I hope it was interesting, and that you've learnt something new.
[00:25:03] Now, I told you at the start of this episode that there was a personal element to this story, and I’ll tell you what that is now.
[00:25:11] My wife was offered a job in Sweden, and we are actually moving to Sweden imminently.
[00:25:18] This episode is going to be released on March 5th, so in fact we will have got to Sweden approximately 45 minutes before this episode is publicly available.
[00:25:29] I’ll be sure to keep you updated with my thoughts on Sweden and The Swedish Model as we all get settled in.
[00:25:35] You've been listening to English Learning for Curious Minds, by Leonardo English.
[00:25:41] I'm Alastair Budge, you stay safe, and I'll catch you in the next episode.
[END OF EPISODE]
