Temporary Work in Turbulent Times: The Swedish Experience



1. Introduction

In the early 1990s, Sweden experienced a macroeconomic downturn unparalleled in the post-war
period. GDP fell by six percent from the cyclical peak in the first quarter of 1990 to the trough in
the first quarter of 1993. The unemployment rate stood at around 1.5 percent in 1989-1990 and
had risen to 8.2 percent by 1993. The employment-to-population ratio fell over the same period
by 10 percentage points. Signs of a sustained labour market recovery did not appear until the end
of the century. The period from 1997 and onwards has seen a large decline in unemployment as
well as rising employment, a rebound triggered by a marked increase in GDP growth. By the end
of the year 2000, unemployment had fallen to 4 percent of the labour force.

An intriguing aspect of the Swedish experience is that the entire decline in employment
during the downturn was the result of job losses among workers with “standard” open-ended
contracts, i.e., those covered by fairly stringent employment protection provisions. In contrast,
employment in fixed-term contracts (temporary work)
increased substantially over most of the
1990s. By the end of the century, fixed-term contracts accounted for 16 percent of total wage and
salary employment, to be compared with 10 percent in the early 1990s.

Among the other Nordic countries, only Finland has exhibited a similar growth in fixed-term
contracts. Indeed, the Finnish experience during the 1990s has been even more dramatic than the
Swedish one, with both a greater increase in unemployment and in fixed-term contracts. The
macroeconomic conditions in Denmark and Norway were much less turbulent, with only modest
changes in unemployment. Interestingly, neither of those two countries experienced any
significant rise in fixed-term contracts.

The purpose of this paper is to describe and discuss the evolution of fixed-term employment
in Sweden over the 1990s.1 Our analysis is in part descriptive: we wish to document the broad
stylised facts about temporary work in Sweden. We also want to shed some light on possible

1 We do not discuss temporary work agencies, a sector that accounts for less than one percent of total employment.



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