If the incentives are low for workers to quickly change jobs and move to a new sector, at the same time as the incentives for firms to employ labour from a different sector are reduced by high initial wages, costs of sick leave and job security, there is a risk that more people will get stuck in the transition. This would entail a rise in frictional unemployment. In addition, the risk of long-term unemployment rises if more people become discouraged and stop looking actively for work. The Swedish labour market has previously functioned efficiently in these respects. Think of the closing down of almost the entire textile industry and of the shutdown of the Swedish shipyards at the same time as the paper and pulp industry and the iron and steel industry were rationalised considerably during the 1970s. Not least the trade union movement, more specifically the Swedish Trade Union Confederation, helped facilitate structural change. Read the official reports from 1941, 1951 and 1961 for the Confederation’s conferences in those years. The findings of these reports are something we need to take in today. The trade union movement realised that structural change was the prerequisite for increasing real wages and for generally higher prosperity. Conclusions I believe that it’s fully possible with the right methods to achieve both an employment rate that is sharply higher and an unemployment rate that is considerably lower than today’s level.
Consequently, the capacity utilisation rate of the industrial sector remained at 56 % on average for the year. Capacity utilisation rate did not expand significantly was due to the fact that many manufacturing industries for domestic market were affected by the deceleration in domestic expenditure which led a number of industries to operate at less than half of total capacity namely beverages, automobiles, and iron & steel products. Another reasons being that those export-manufacturing industries which have performed well have been expanding their capacities. For example, the electronics industry, where the capacity in the integrated-circuit sector has increased by 65 % since 1997. With excess capacity prevailing, demand for new investment has been low, thus reducing the role of investment in propelling economic recovery. Moreover, some firms halted operations temporarily as the result of debt problems, adding to excess capacity in the system. This year, the recovery has been propelled mainly by export. Industries geared to export markets expanded by 22 % on average, while industries selling to domestic markets contracted by 7.5 %. Exports which saw high growth rates were in the hi-tech manufacturing products group, the export value of which rose by 30 %. This group comprises such products as integrated circuits, electrical appliances, automobiles and computers. In addition, firms that have upgraded product quality and competitiveness in labour intensive industries such as garments have also recorded buoyant exports. Such development pointed to an adjustment in the right direction.