Denmark, with a GDP of almost $ 62.50 per hour worked, has one of the highest labor productivity in the OECD. Sweden, with a GDP per hour worked of $ 59 after a decline in productivity growth, is still well ahead of the UK at $ 46.
So what is the Nordic recipe for a high wage economy with high productivity?
For Sweden’s Social Democrats, high wages and high productivity should go hand in hand.
In the policy document published in May by a party committee led by Andersson, she boldly restored the economic doctrine developed by two union economists, Gösta Rehn and Rudolf Meidner, in 1951.
“A fundamental part of the model is that profits should be generated through efficient production and not low wages, leading to a conscious structural change and increased productivity in the economy,” she said.
That is why Swedish governments from both the left and the right have historically preferred to let entire industries shut down rather than engage in what they dismiss as “wage competition”, and happily say goodbye to the textile industry in the 1960s, shipbuilding in the 1970s and 1980s, Volvo and Saab sold at the turn of the millennium and sold Ericsson’s mobile phone business to Sony in 2011.
The industries on which the Swedish economy was built have either been replaced by new ones or moved steadily up the value chain to avoid direct competition with low-cost countries.
Technology giants such as Spotify, Klarna and Truecaller say that Stockholm is only behind Silicon Valley in terms of the number of billions of startups per capita, Sweden is one of the world’s best countries for computer game production, with studios such as King, EA Digital Illusions, and the now Microsoft-owned Mojang, and Swedish producers write and mix hits for some of the world’s biggest pop stars.
In the case of heavy industry, the steel producer SSAB has avoided the turmoil suffered by the British steel industry by anticipating the need to move into special steels in order to remain competitive. It is currently pioneering the development of green steel made with hydrogen instead of carbon, in the hope of being able to deliver the low-emission vehicles of the future.
Vehicle and aircraft manufacturing that remains in Sweden is similarly specialized, with Atlas Copco manufacturing equipment for civil works, road construction, gas and oil and drilling projects, Volvo Construction Equipment manufacturing manufacturing bulldozers and excavators and Saab manufacturing manufacturing fighter aircraft, missiles and anti tank and air defense systems.
“One of the pillars of this model is that wages should be determined by the rate of productivity in the most productive part of the economy,” explains Jakob Molinder, researcher at Uppsala University with a focus on the development of Sweden’s economic model. “To maintain the welfare system, you can not have these low-wage sectors.”
Even the country’s powerful unions understand the need for structural changes, says Molinder.