Swedish riddle: how to lure civil servants back to industry

Sweden's labor market puzzle is to how make capitalism socially attractive. It's not so much a problem of political philosophy as of work types: Sweden needs a richer mix of machinists and managing directors, and fewer civil servants.

The Swedish work force has slid steadily from private to public payrolls during the past five years as the country's international payments deficit has grown.

Industry can't get workers where it needs them.

"It has to do with attitudes -- people don't want to move, to change jobs, to start new businesses," says Gunnar Ribrant, a Ministry of Industry official. He cites tax disincentives and lack of risk capital.

A debate under the surface here is how a society that doesn't allow unemployment can remain competitive in world markets. Does worker security have to mean an inflexible industry?

The problem has two parts:

* Private industry can't support the government payroll. Yet as a state official laments: "People don't want to work for industry." This may be true at the salaried level, as well as on the shop floor.

Many economists feel that wages aren't high enough to draw labor out of the public sector. If they were, says one, "it would go a long way toward wiping out the government deficit."

* Industry can't rationalize and adapt to world markets when government sustains workers in ailing industries. "There's no dynamism in the labor market ," a businessman says. Labor is tied up in declining businesses while growing enterprises are forced to look abroad.

More generally, the problem is one of a well-off working population.

"[Worker affluence] may be the reason why the trees never reach the sky," Swedish Trade Minister Staffan Burenstam Linder comments, "and why developing countries are growing faster than we are. They want higher incomes. We want higher incomes and something else -- comfort, ease -- that can't be measured by GNP."

Getting people to move is now the central challenge of labor market policymakers. In the Swedish manner, the approach is generally to pay people $ 500 or $1,000, on top of moving expenses, for going to where jobs are.

This is less expensive to the state than bringing jobs to where workers are, either through subsidies or public employment.

Social attitudes and economics are intertwined in the matter.

It shows even at the management level. Bright young people with potential to reach senior management positions, says a Scandinavian business analyst, often say they simply don't want to work as hard all their life as the ascent demands.

Their chances of making any money at it, he adds, aren't good.He blames the tax structure for this. "You have to be an . . . idealist to work very hard anymore."

Those who are willing to work, he says, find it more profitable to do "something less important" in a small business, where they can accumulate personal capital, than help direct a large corporation.

There is another point of view, broadly based. Many in the labor unions, now in the opposition politically, hold that unemployment will never be acceptable as an economic tool.

"Employment is a value in itself," says Aake Burstedt, an economist with the central trade union confederation. Unemployment may well drag down inflation in Britain, he notes as an example, but the long-unemployed "will never be a part of normal society again."

Sweden's economic problems became more serious as a result of a boom in 1974. Brimming with confidence, and undercounting inflation, industrial employers allowed wage costs to rise 45 percent in the following year.

The recession hit, demand dropped, and Swedish industry was left overpriced and uncompetitive in world markets.

But Swedish policy -- deeply embedded in the basic tenets of social democracy -- is full employment. Unemployment approaching 3 percent is politically dangerous here.

So the Swedes, who could afford it then, built a bridge of government spending over the lean years 1976, '77, and '78. Public money supported factory stockpiling by 20 percent to keep factory hands working.

Other victims of the recession were given jobs in the public sector. Factories lost 100,000 workers in three years to the state payroll.

The hardest hit were the shipyards. One by one, the state has bought them to keep them from closing down.

In 1976 and '77 costs gradually came down, and by 1979 business was expanding again. But then, ironically, it faced a shortage of skilled labor.

That year Swedish industry imported 12,000 workers to help staff new growth --mostly skilled workers from Finland -- while Swedish workers remained in subsidized jobs.

Those who had gone to work for the public sector weren't leaving.

"Once they have breathed the soft air of public service, they don't want to go back again," a prominent Swedish businessman complains.

Something else had become clear, too. The shipyards' problems weren't short-run. The market had shifted.They needed to adapt, to cut capacity drastically.

Svenska Varv (Swedyards) is the state company created to manage the decline and restructuring of the now-nationalized shipyards in a socially acceptable way; Svensk Staal is the steel industry's counterpart. By 1985, both companies are supposed to be pruned of their lossmaking facilities.

This kind of state welfare for workers makes their lives easier, but it has also meant a cramped ability to adapt to the marketplace, according to Swedes in the business community.

This year Rudolf Jalakas, chief economist of Svenska Handelsbanken, expects another 3.5 percent drop in factory workers and a 3 percent rise in the number of municipal employees.

Swedish joblessness is on the way up, as the nation's output is expected to fall slightly this year. Sweden will take up the slack as best it can afford with emergency work and training programs.

But as one economist says, "If you get a job in the public sector, you can be quite sure you'll never be unemployed."