The economic effects of the 1920 eight-hour working day reform in Sweden

TY - JOUR

T1 - The economic effects of the 1920 eight-hour working day reform in Sweden

AU - Bengtsson, Erik

AU - Molinder, Jakob

PY - 2017/5/4

Y1 - 2017/5/4

N2 - In 1920, the working day in Swedish manufacturing and services was cut from 10 to 8 hours without wages being cut correspondingly. Since workers demanded and got the same daily wage working 8 hours as they had with 10, real hourly wages increased dramatically; they were about 50% higher in 1921–1922 than they had been in 1919. This is the largest wage push in Swedish history, and this paper studies the consequences for profits, investments, capital intensity and unemployment. In traded manufacturing employers responded by increasing capital intensity and did not compensate for rising wages by raising prices, which led to a combination of jobless growth and low profit rates in the 1920s. Firms in non-traded manufacturing and services could raise prices and conserve profitability to a higher degree. In total, the effects of the reform were pro-labour. We discuss the implications for our understanding of interwar wages and employment, the literature on the decrease in inequality found in most industrial countries around 1920 and the rise of the ‘Swedish model’ in the 1920s and 1930s.

AB - In 1920, the working day in Swedish manufacturing and services was cut from 10 to 8 hours without wages being cut correspondingly. Since workers demanded and got the same daily wage working 8 hours as they had with 10, real hourly wages increased dramatically; they were about 50% higher in 1921–1922 than they had been in 1919. This is the largest wage push in Swedish history, and this paper studies the consequences for profits, investments, capital intensity and unemployment. In traded manufacturing employers responded by increasing capital intensity and did not compensate for rising wages by raising prices, which led to a combination of jobless growth and low profit rates in the 1920s. Firms in non-traded manufacturing and services could raise prices and conserve profitability to a higher degree. In total, the effects of the reform were pro-labour. We discuss the implications for our understanding of interwar wages and employment, the literature on the decrease in inequality found in most industrial countries around 1920 and the rise of the ‘Swedish model’ in the 1920s and 1930s.

KW - employment

KW - income distribution

KW - Sweden

KW - Wages

KW - working hours

UR - http://www.scopus.com/inward/record.url?scp=85014521603&partnerID=8YFLogxK

U2 - 10.1080/03585522.2017.1290673

DO - 10.1080/03585522.2017.1290673

M3 - Article

AN - SCOPUS:85014521603

VL - 65

SP - 149

EP - 168

JO - Scandinavian Economic History Review

JF - Scandinavian Economic History Review

SN - 1750-2837

IS - 2

ER -