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Reforming the Welfare StateRecovery and Beyond in Sweden$
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Richard B. Freeman, Birgitta Swedenborg, and Robert H. Topel

Print publication date: 2010

Print ISBN-13: 9780226261928

Published to Chicago Scholarship Online: February 2013

DOI: 10.7208/chicago/9780226261911.001.0001

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Wage Determination and Employment in Sweden Since the Early 1990s:

Wage Determination and Employment in Sweden Since the Early 1990s:

Wage Formation in a New Setting

(p.83) 3 Wage Determination and Employment in Sweden Since the Early 1990s:
Reforming the Welfare State

Peter Fredriksson

Robert Topel

University of Chicago Press

The original Center for Business and Policy Studies (SNS) in Sweden and the National Bureau of Economic Research (NBER) in the United States (SNS-NBER) study of the Swedish labor market was written in the midst of the economic crisis of the early 1990s. This chapter is a sequel to that study and focuses on the postcrisis performance of the labor market, emphasizing institutional and other changes that have affected wage determination, inequality, and employment. Since the crisis, wage formation has become more decentralized. Centralized bargaining continues to set minimum wages in different sectors, but firms and unions bargain above the minimum and decide on specifics in local bargaining. Decentralization contributed to rising wage dispersion as wage outcomes were more likely to reflect market valuations for particular skills. Some of the 1990s increase in wage dispersion in Sweden presumably reflected catching up with market forces, but the catch-up does not seem complete, given the changing economic environment. Employment outcomes are worse for low-skilled persons and non-OECD (Organization for Economic Cooperation and Development) immigrants than for other workers. However, in the 1990s, the minimum wage increased in hotels and restaurants, which disproportionately employ the less skilled, presumably contributing to the low share of these sectors in the economy.

Keywords:   wage determination, employment, Sweden, labor market, economic crisis, immigrants

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