What If Getting Laid Off Wasn't Something to Be Afraid Of?

In Sweden, employers pay into private funds that retrain workers who lose their jobs. The model makes the whole economy more dynamic.

Workers at Swedish car company Saab after learning their factory will shut down (Bjorn Larsson Rosval / Reuters)

NORRKÖPING, Sweden—When Beate Autrum first heard that she and hundreds of other employees were getting laid off from the Whirlpool factory where she worked, she was terrified. Autrum, a single mother, had uprooted her whole life to move to Sweden from Germany to work for Whirlpool, and she worried about her immigration status, how she would support her daughter, and whether she’d find a new job again. It was 2014, a tough time to lose a job in this industrial Swedish town, as other companies such as Vitamix and Seco Tools were also laying people off. But minutes after she heard the news about the layoffs, Autrum began hearing something else from colleagues and bosses: Don’t worry, TRR will help you.

TRR, which stands for Trygghetsrådet, is what’s known as a job-security council—a private organization unique to Sweden that helps laid-off workers. Employers pay into these job-security councils, and if they lay employees off, those workers receive financial support and job counseling from the council to help get them back into the workforce as soon as possible. Autrum, for instance, was immediately given a personal counselor, who administered a Myers-Briggs personality test, edited her resume, and helped her figure out what types of jobs she could move onto next. She was offered funds to take classes in her field or other fields, if she thought they would help her find a new job. Whenever she felt down, or doubted her ability to find a new job at age 45, her counselor would reassure her. “I’m so glad that TRR existed,” she told me. “You get this feeling, of aha, this is not the end of the world. There will be a chance for me.” Autrum soon found a job at a company that makes turbines.

The effectiveness of job-security councils could provide a lesson for the U.S., which has long struggled to get people back into the workforce after they lose their jobs, especially in places where jobs have been displaced by automation or trade. Sweden leads the OECD in helping displaced workers find new jobs—over 85 percent of such workers find new jobs within a year, primarily because of these arrangements between employers and social partners, according to a recent OECD report. The job-security councils are more effective than government-administered programs, according to the report, because they intervene immediately after a layoff, and because they have financial resources that public re-employment offices, which also exist in Sweden, can’t provide. They also encourage laid-off workers to have frequent contact with counselors, who encourage them as they seek a new job. They are available only for workers who are members of a union, which is about 70 percent of the Swedish workforce.

No studies provide hard, experimental data as to the effect of job-security councils, but many experts say that they are invaluable, though Sweden’s strong economy also undoubtedly plays a role in workers’ re-employment prospects. And, beyond the question of whether people do find a new job more easily, many people who have received a council’s assistance say that the psychological comfort mattered greatly, and helped them through a hard time.

Job-security councils also help make the economy more dynamic because they make it easier for companies to shed unproductive divisions without union resistance, while helping the workers who lose their jobs as a result of these layoffs to find new work, according to Lars Walter, a professor at the University of Gothenburg who has written a book about job-security councils. In other countries, unions would resist job cuts because they would want to protect their members, he said, in Sweden, unions agree to job cuts because they know workers will be retrained and made more productive. “The idea is that we shouldn’t defend jobs, we should support the worker,” Walter told me.

Historically, other countries in Europe have tried to find ways to prevent layoffs at big companies, Caroline Soder, the CEO of Trygghetsfonden, the job-security council for blue collar workers, told me. But economic theory suggests that just as some companies are born under changing business conditions, some companies die or must reorganize. The job-security councils make this transition easier. “It is the idea of not trying to hinder restructuring, its enabling restructuring,” she said.

Job-security councils arose out of conflict, according to Walter. In the early days of the 20th century, unions in Sweden were very militant, and there were frequent strike and labor disturbances. To try to stop the frequent disruptions to factories, the government encouraged companies to enter into collective bargaining agreements with unions. This collective relationship proved useful when employers started to lay off workers and outsource jobs in the 1970s. Unions were in a position to demand that employers do something in exchange for laying off workers. Unions and employers decided that the way to help laid-off employees was through job-security councils. “For unions to accept the idea that people get laid off from work, they need to know that people who are laid off get good support,” Walter said.  The first job-security council was founded in 1972, the most recent one was established in 2012.

Today, companies that have a collective bargaining agreements with their workers pay 0.3 percent of their payroll annually into the job-security council that works with people in their sector. There’s a job-security council for white-collar workers, for instance, one for government workers, one for blue-collar workers, one for people in the arts. When a company is going to lay off workers, it alerts the job-security council, which comes to the company and tells the workers about the services it offers. Workers are matched with a counselor, and depending on their age and the amount of time they’ve worked with the company, they also receive a stipend from the job-security council that helps defray costs. For those older than 40, the stipends can be quite generous.

The services provided by TRR and other job-security councils are much more robust than those provided by the government through the unemployment office. “The difference is that the unemployment center doesn’t have the same muscles as us, they don't have the resources,” Ulrika Wiklund, the region chief of TRR in Norrkoping, told me. Counselors meet with clients weekly if necessary, Elisabeth Ramel, a counselor with TRR, told me. They also have a large pool of money that they can use to pay for retraining courses, which they can dispense if they think a certain resource will help someone. Ramel once helped a laid-off Ericsson worker who was sick of tech find coursework that helped him move into the music industry. Counselors don’t push people towards professions that are in demand, like health care, for instance, if the person isn’t interested, Ramel said. They instead try to find what the person wants to do and would enjoy. “You kind of help them to find their own strengths,” Ramel told me. The personal attention makes a huge difference to people’s outcomes, she said. Ramel will ask clients questions about themselves—what they’re good at, and what they like to do, for example—that they often haven’t thought about for a long time

Helene Ljungqvist has used TRR twice in her career, once when she got laid off from Ericsson in 2006, and then again when she got laid off from an electrical company in 2013. The most recent time she used TRR, a close friend had just died and Ljungqvist was struggling emotionally, and wasn't sure she’d find a new job. But her counselor served as a therapist of sorts, introducing her to meditation as she took courses to get retrained for a new job. “You can be upset, if you lose your work and you are sad, and they are calm and they understand,” she said. “You can talk to them, even if you are sad or angry.” Ljungqvist now asks potential employers if they are covered by TRR when she is considering taking a new job, to be sure she’ll be provided for if layoffs come.

The existence of firms such as TRR may seem odd to people in other countries, where it might be a challenge to get employers to pay into a fund to help the workers they’ve laid off. But job-security councils are good for employers, too, because they make unions more willing to accede to layoffs, said Carina Lindfelt, the chief of the department of labor markets at the Confederation of Swedish Employers, which is the employers’ association. “It’s easy to have those negotiations, since you know on both sides that these people that will be laid off will get such professional support,” she said. Employers also feel less personally guilty about doing layoffs because of the existence of job-security councils, she said.

Some companies, especially those in tech, have pushed back against having to pay into the funds, since they haven’t laid people off in years, which means the job-security councils are holding onto a lot of their money. But Lindfelt reminds them that it’s good to have an insurance plan, in case the economy turns sour. Paying into the job-security councils earns employers a lot of goodwill, she said. Besides, she said, Sweden has a culture of collectivity in which people are willing to support policies that might not benefit them personally, but that may help the country as a whole.

This is a marked contrast to the United States, where unions and companies often have a combative relationship, and where it can be challenging to get companies to pay anything extra to help their employees. Indeed, the trend in the United States has been for companies to offer fewer perks for employees as they hire more contractors, and for them to cut back even on benefits offered to full-timers. That means the unemployed usually have no choice but to turn to the public sector unemployment offices, which are often ineffective. One study showed no marked difference in employment rates of dislocated workers who had turned to government retraining programs, and those that hadn’t. Another study found that only 37 percent of recipients of Trade Adjustment Assistance, the government retraining program that helps workers displaced by trade, were employed in the occupations for which they had trained.  Public unemployment offices are also ineffective in Sweden, Lindfelt told me. Only the job-security councils have proven effective at helping people get retrained and back into the workforce.

The difference between helping workers find the right new job, and failing at that task may have implications for the health of the overall economy. There are a growing number of people who have dropped out of the workforce and stopped looking for work in the United States, which depresses consumer spending. If people don't find jobs that are a good fit for their skills, the economy isn’t being as productive as it could be, which decreases the overall size of the economic pie. Sweden, on the other hand, has one of the highest labor force participation rates in the OECD, despite generous welfare programs that support people who aren’t working. Its economy is one of the strongest in the European union. Between 1993 and 2010, its economy grew at an annual rate of 2.7 percent, compared with the 1.9 percent growth rate of the EU-15, which are the original countries in the European Union. Sweden’s economy was barely affected by the 2008 financial crisis. That’s not to say that the job-security councils are entirely responsible for Sweden’s economic strength—people in the U.S. might still be out of the labor force, even with the presence of job-security councils. But economists agree that the job security councils do contribute to the overall health of Sweden’s labor market. “One of the better parts of the Swedish model is that we encourage adjustments by allowing people to enter into training programs, or move to other areas if that is what is needed to find a job,” Andreas Bergh, a professor at the Research Institute for Industrial Economics, told me.

It’s unlikely that U.S. companies would be able to create anything similar to job-security councils today, even if doing so would make the economy healthier. That’s because they don’t have pressure from workers’ organizations that companies in Sweden have. Indeed, Sweden speaks to the effect unions can have when they are powerful—and when they work with companies, rather than against them. It may be a lesson too late for the United States to learn – just 11.6 percent of U.S. workers are members of unions today. But companies may be able to learn something from Sweden about how to treat workers. Now that the economy is booming, and many companies have extra cash, it could be a good time to convince employers to put some money towards a fund that can help employees that get laid off when that day eventually comes. Economies are cyclical, and have downturns and booms, and countries that are best prepared to weather both come out ahead.