Wage Drift : An empirical study that investigates the determinants of the Swedish wage drift

Sammanfattning: Wage increases received outside of central agreements in Sweden have been declining since the turn of the millennia and are now at an almost non existing level. These wage increases are called wage drift and this study focuses on explaining the variables that determine the wage drift. Through time and sectoral analyses this study contributes with new perspectives regarding the wage setting process in Sweden looked past in earlier research. Our findings suggest an existing robust relationship between wage drift and inflation as well as unemployment. Additionally, central agreements were shown to have a significant effect on the wage drift. Finally, the foreign direct investments also had a somewhat weaker but still impactful effect on the wage drift. Our time period of 2001-2019 includes a financial crisis that heavily affected many of our explanatory variables. Our study concludes that the unemployment as well as the foreign direct investment have had a relatively larger impact after the crisis compared to before. On the contrary the central agreements seem to have had a relatively smaller impact on the wage drift after the crisis compared to before. When considering potential differences within our sectors and their impact on wage drift we found significant differences, especially regarding the central agreements.