Wage earner funds in Sweden, 1960s & 70s

The term wage earner fund refers to different models of redistributing profit amongst workers of individual employers or sectors. It is often characterised by the 1975 Meidner’s model which set out that new stocks issued could be paid to funds, which would be administered by a group of directors with advice from trade unions.

2019.02.21 | John Logue

Rudolf Meidner (1914-2005), the Swedish economist. Photo: The Internet archive taken from his 1978 book Employee Investment Funds An Approach To Collective Capital Formation.

The wage earner funds were a subject of political polarisation in Sweden in the 1970s and 1980s, and seemed, briefly, to promise a transformation of the Swedish economy. The fund debate marked the high water mark of the trade unions’ effort to restructure Swedish industrial relations by means of increasing worker influence. Although discussed broadly in the Nordic countries, only the Swedish Social Democrats tried to implement them.

The original motivation for the wage earner funds was the so-called ‘unutilised wage margin’ created by the solidaristic wage policy. This created a windfall profit through workers’ wage restraint amongst the most profitable companies, which resulted in raising their rate of profit and benefitting their shareholders. This contentious subject was raised conceptually at the Swedish trade union congress in 1951 and repeatedly, and with more vigour, in the 1960s and early 1970s as the solidaristic wage policy became increasingly effective. In Sweden trade union economist Rudolf Meidner was delegated the task of proposing a solution; the funds were consequently often referred to as ‘Meidner funds’.

Meidner’s 1975 proposal called for recapturing 20% of the company profits for workers through companies issuing new stock, which they would contribute to industrial branch funds. The boards of the funds were to be selected by the unions in the different industrial branches, and the funds would appoint directors to company boards commensurate with their stock holdings and with the advice and consent of the local union. This promised growing union influence in the boardroom, starting with the most profitable Swedish companies first, and it was unsurprisingly decried as ‘fund socialism’ by the right and centre of the Swedish political spectrum. Unlike the Danish Social Democrats’ 1973 proposal, which called for individual payouts after seven years, the Swedish funds were designed to continue to grow, and they provided no individual financial benefits. Instead, dividends were earmarked for training, improving health and safety and other collective benefits. The funds became a major topic of the 1976 election and contributed to the Social Democrats Sweden (Sveriges socialdemokratiska arbetarparti, SAP) losing control of the government for the first time since 1936.

When the Swedish Social Democrats returned to power in 1982, they sought to involve one or another of the non-socialist parties in passing fund legislation without success. Ultimately, the Social Democrats enacted a watered-down version of the Meidner plan in 1983 by themselves. The bill established five regional funds financed by a tax on profits and on the wage sum. The total capitalisation of the funds was limited to 17.5 billion Swedish Crowns, and no fund could own more than 8% of any company’s stock. A 3% return on the funds’ capital was allocated annually to the Swedish supplemental pension fund, providing eventual individual benefits at the time of retirement. This more modest fund system was the subject of acrimonious debate in the 1985 election, which the Social Democrats won. The system was dismantled by the Conservative-led, non-socialist coalition government under Carl Bildt after it came to power in 1991.

Further reading:

  • Bengt Furåker, 'The Swedish wage-earner funds and economic democracy: is there anything to be learned from them?', Transfer: the European Review of Labour and Research, 22, 1 (2016), pp. 121-132. 
  • Eric S. Einhorn and John Logue, Modern Welfare States. Scandinavian politics and policy in the global age
  • (Westport, Connecticut: Praeger, 2003)
  • M. Donald Hancock and John Logue, 'Sweden: The Quest for Economic Democracy', Polity, 17, 2 (1984), pp. 248–270.

Links:

Rudolf Meidner-prize for research in history of trade union movement