This could eventually increase the flexibility of wage formation and increase productivity. This development is particularly in evidence in the expanding services sector. According to the National Institute of Economic Research, the proportion of time-limited employment has increased from 10 to approximately 16% of the total number of employees between 1990 and 1998. This development may have been reinforced by the difficult situation in the labour market during these years but many believe that the trend will continue. New methods of compensation are also spreading. Bonus wages, profit sharing and a 13th monthly wage are examples of components in wage formation that increase flexibility in the labour market. Increased cost consciousness due to stiffer competition can be a factor driving on this development. Although short-term employment in various forms may reduce the inflationary pressure and make the labour market more flexible, this does not mean that this development is always positive for wage-earners and households. Uncertainty about future income makes long-term planning more difficult such as having children and buying a house. In order to reduce the risk of various groups in the labour market competing against one another to drive up pay increases in a way that in the end creates a poorer outcome for all, various changes in the forms of wage formation have been carried out and are planned. The most important is the so-called Industry Agreement between some 20 organisations in the labour market.
However, we must carefully follow and analyse the development in the area where monetary policy is formulated. The risk of incorrect assessments having more serious consequences should, however, be small as changes in this area do not take place overnight. Another component of the risk scenario is how wage formation and the labour market will function in coming years. Negotiations are taking place in an economy undergoing strong growth at the same time, as there are occupations with a shortage of labour where pay has fallen behind. However, changes have taken place in the Swedish labour market that permit some optimism about developments. Above all, this concerns the support for and understanding of the inflation target and the low inflation expectations that have been established. Changes in the forms of wage formation, which have been carried out or are planned work in a positive direction. Finally, globalisation and competition can have increased businesses’ cost consciousness. This may lead to a greater opposition to wage increases and also that businesses in their drive to keep costs down endeavour to introduce forms of employment that increase flexibility in the labour market. In conclusion, it is important for the Riksbank as always to carefully monitor what is taking place in the economy when conducting monetary policy.