Why Socialist Sweden Has No Minimum Wage
Paradoxically, nation-wide minimum wages can be detrimental to countries where unions negotiate industry-wide salaries
Ah, Sweden. My home country. Well-known for its meatballs (that we don’t actually eat that often), its relentlessly cold and dark winters, and, of course, its diehard socialism. Yes, we probably have more vacation days than you. Yes, we have no tuition fees; on the contrary, we are paid to study. And yes, our taxes are as high as our caffeine intake. This is why you might be surprised to learn that we don’t have a minimum wage.
The minimum wage is a hot topic in the United States of America, where many people want it raised. It’s become a topic for the European Commission as well, which wants to make minimum wages mandatory for EU nations. Yet, Swedish unions are loudly protesting against minimum wages. They want nothing to do with it, much like I want nothing to do with pineapples on pizza.
To understand why the unions are against minimum wages, we must first talk about unions in Sweden. Unions are a dominating force in the Swedish job market. Nine out of ten Swedes work at a company that has a collective agreement, also called a union contract. Every year, unions in Sweden negotiate salaries across industries. Good salaries.
Minimum wages are problematic. Twenty-one of the EU’s twenty-seven member states have a legal, national minimum wage. Sounds good on paper, but most of these nations also have the specified amount of compensation explicitly stated in the law. The problem is that, while other salaries organically increase over time, legal minimum wages stay the same.
“Every year, unions in Sweden negotiate salaries across industries. Good salaries.”
The European Union wants to solve this issue by making the minimum wage more dynamic. The idea is to set the minimum wage to 60% of the median salary. Sounds smart, right? Well, the issue for Sweden is that this would reduce the influence of the unions, who themselves negotiate de facto minimum wages across industries — and the minimum wages they negotiate are usually better than 60% of the median salary.
If the EU’s law came to fruition, employers in Sweden could point to the EU law and, paradoxically, offer lower wages than what the unions negotiate.
To put it in clear terms: Swedish unions argue that employees might earn less money if an overall, government-enforced minimum wage existed.
Don’t get me wrong; there are countries where minimum wages might be crucial, where unions aren’t normalized, and workers don’t have as many rights. But in countries such as Sweden, where unions dominate the workers’ market, there is no need for governments to declare minimum wages.
In Sweden, a legal minimum wage can, paradoxically, hurt workers more than it helps them. And that’s why Sweden has no minimum wage.