The iron-clad wage law is strong. Citizens lowered social security during the Alliance governments 2006–2014. In the 2022 election, the Moderates wanted to cut the social security fund and worsen health insurance again. At first it didn't happen that way, but in the spring of 2024, the Sweden Democrats backed down. From the autumn of 2025, the minimum final level in the social security fund will be around 5600 after tax per month. The decision was taken by the Riksdag on 18 June. The citizens want to motivate the workers to work harder for lower pay. For this reason, the citizens want to lower the reservation wage. Therefore, in 2006-2014, they tightened the social insurance and benefit systems out of faith in the iron-clad wage law.
The alliance wanted to lower reservation wages
The reservation wage may be below the collective agreement level. It is the lowest salary you are willing to accept when looking for a new job. This is in accordance with the principle of the iron-clad wage law. According to it, a lack of protection of labor law, social insurance and benefits leads to job seekers having to take jobs on any terms. Competition always pressures employers to keep prices as low as possible. Then they must lower the employees' conditions as much as the law allows. Thus labor law, working conditions and welfare in society regulate how the workers at the bottom, but also how we all fare.
The worst possible job for more people was the goal
Under the surface, it felt as if the Alliance government's job policy aimed to strengthen the iron-clad wage law so that everyone, including graduates and people with special skills such as e.g. plumbers, would solve their unemployment by taking the first job with the worst conditions they could find. In the long run, such competition leads to workers becoming unemployed instead of graduates. Then the unemployed workers must become academics in order to get jobs that normally only require high school qualifications. We need to have a society where people can to a large extent try to do what they are suited for. New research shows that jobseekers with good financial security looking for jobs more efficiently.
Hidden tax increases
At the same time as the citizens lowered the employees' visible tax, they greatly increased the wage tax, which is a hidden tax among the social contributions. The sharp increase in this enabled greater tax cuts for high earners, reductions in corporation tax and interest deductions for home owners, etc.
Sneaky reduced sickness benefit
In addition, the Alliance government escaped a moral outcry for lowering the sick pay which officially still stands at 80% of the salary. They did this by changing the calculation rules for the level of income qualifying for sickness benefit (SGI). The calculation changes reduced the sickness benefit level by 15%. ( https://www.vf.se/asikter/ledare/alliansregeringen-lurade-alla-pa-lontagarnas-bekostnad/ )
Protect society's economy by investing in green technology and the public sector
One option is to bet on better conditions for the public sector and the workforce to increase competitiveness, i.a. through green technology.
If someone only has high school qualifications, they can apply very broadly. But after an academic degree, it is a waste of society's resources for them to solve their unemployment by looking for jobs that require a high school diploma. The iron-clad wage law must not break society.
Looking for work a full-time job
Looking for work is a full-time job. But even unemployed people with at least a high school diploma such as a plumber, carpenter or other sought-after professional skills should be allowed to look for a job within their specialization for a sufficiently long period of time. Another would be to throw away the money and the years society and the student invested in the job seeker's education. For most people, it is impossible to work full-time and look for work full-time. We need to guide people to the work they are best suited for. That's where they will do the most good.
Unregulated competition slaughters wages
The employer is in a competitive situation. According to the iron-clad wage law, she must always push wages and working conditions and maximize the productivity of the workers under prevailing conditions. Only the capitalist with the cheapest product of a certain quality survives in the long run. That, as the Alliance did, worsen the conditions, such as social security for the jobseekers, and at the same time maximizing the requirements on how much and how widely the jobseeker needs to look for work, pressures the employer to double down the working conditions for their employees.
What happened during the Alliance 2006–2014?
- productivity (which is important for the rate of wage growth and for the economy to function) stopped increasing in 2007
- The Sweden Democrats became big, probably because labor immigration, even for low-wage occupations, was deregulated
- conscription was removed and we had a record weak defence
- places in police training decreased enormously
- the kidnappings of the millionaires increased
- the housing bubble burst
- unemployment increased
- the areas of exclusion became more problematic
- it became more difficult to study at Komvux
- 70-somethings and earlier generations had worse opportunities compared to the younger ones to study at university
- suicides increased drastically as people panicked about being evacuated
- Phase 3, where employers received grants to force the unemployed to do pretend jobs on social security only, became one of Sweden's largest workplaces
- it became more difficult to combine involuntary part-time unemployment with social security
- the principle of non-publicity was restricted in Sweden
- market rents were introduced for subletting residential rights
- The alliance removed the right to deduct union dues in the declaration to reduce the union's strength. This led to a mass exodus from the union
- the government made it so difficult to get unemployment benefits that only around a third of the unemployed could get it and at the same time lowered the allowance and doubled the difficulty of earning a higher unemployment benefit
- most labor market training was removed, which contributed to the job matching shortage that exists today in many sectors of the labor market
- The alliance removed the last housing subsidies for the construction of affordable rental units, fueling the housing bubble
Difference between right and left
In the future, bourgeois dream society, enormous differences in wealth prevail. There is no free school, care or care to speak of. Everyone gets to work extremely hard thanks to a deregulated labor law. It is easy to lose one's job and there is high unemployment with low compensation levels in the social security fund, if any. The iron-fisted wage law strikes fear in the people. The rents are maximized and the standard often deficient. It is difficult for many, but especially for those on low incomes, to afford entertainment. Many jobs are dangerous and the working environment is bad. The bourgeois utopia means unlimited freedom for the owners of capital and gives everyone else the freedom to choose between working themselves to death or starving. (See e.g. Klein, Naomi, «Shockdoctrinen Katastrophe kapitalismens penrombrot», Ordfront förlag (Stockholm, 2008) S. 13)
This anti-society does not arise immediately, but it is where the citizens want to be in the long run.
Worsened conditions for the public sector
The main thing the Alliance's job policy led to was less resources for public employees (such as nurses and teachers), the unemployed, those on sick leave, disability pensioners and less resources for public activities that railways. Neither can the job policy have been considered to create more jobs. But public sector is extremely important for a functioning society.
Many of the jobs that were created through tax cuts cost about 1 million per year and job. That is, for the same money as one job created through tax cuts, you could have created at least two good jobs by expanding the public sector.
The right's demand for reduced wages for immigrants and refugees also threatens domestic workers' wage growth.
The researchers strongly question that there would be a connection between high wages and generous welfare and high inflation. Inflation instead depends on when productivity is too low in relation to the money supply. Reduced wages, reduced taxes, reduced social security and too low government deficits can reduce productivity. Read more here.
The rigid wage law is not a good model to build a democracy on.