The Nordic Model - Embracing globalization and sharing risks

Decentralization of
pay bargaining is appropriate
if shocks
and risks are increasingly
specific, if there
are ample options
for outsourcing, and
if individual incentives
matter more for
productive efficiency
than Taylorist control
and monitoring
worked reasonably well for a long time. The large increase in both
output and productivity in the electronics industry from the mid-
1990s onwards was enhanced by a Rehn–Meidner type of incomes
policy, which supported investment and expansion in high tech
firms with good profitability.
We suspect that the need for industry-wide adjustment
mechanisms is far weaker today than it was in the early post-WWII
decades. The system of uniform and moderate pay increases may
well have suited volatile export industries in small countries in
the era of a Taylorist organization of production (into many rather
similar tasks). In the global economy of today, by contrast, shocks
and structural transformations are increasingly firm-specific or
even task-specific – not national or sectoral. Firms can outsource
many parts of their production, and outsourcing of tasks is increasingly
a vital competitive instrument. A general pay agreement for
an entire industry is too blunt a tool for controlling costs in such
circumstances. If a particular operation is threatened by outsourcing,
it does not make sense to cut all the wages in the entire firm or
industry – in the way it once made sense to moderate all costs of
paper mills if the price of paper declined. Successful Nordic firms
must be able to seek productivity increases via outsourcing and
reorganization of production. 5 Inevitably, global firms will need to
operate their own pay and personnel policies with due regard to
the increasingly global market.
Moreover, production techniques have evolved in ways that
increase the importance of individual incentives as compared to
direct control and monitoring. In Taylorist industrial production it
made sense to tie pay to particular tasks and to do that in collective
agreements. In the Taylorist era, there were many similar tasks
within firms and it was easier than it is now to monitor and measure
the performance of employees. In modern production conditions,
the performance of individuals and groups is often harder to assess.
Remuneration should be based on a variety of performance indicators,
and remuneration schemes should be tailored with regard
to the tasks and the personnel at hand. It makes far less sense to
regulate final wage outcomes in collective agreements.
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