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6. Shortage of work

6.2 The first wave of layoffs

Initially, the post-war depression affected the demand for smoking tobacco and cigarettes, two branches that employed relatively few workers.1 The management responded by implementing hours-reductions at a couple of locations, but personnel reductions were not on the agenda of the company board in this phase. When cigar consumption began to fall, a development with the potential to affect a much greater number of workers, the board became more involved.2 On 14 March 1921, Wallenberg announced that personnel reductions were necessary and that they were due not only to falling demand,

1 ARAB, STF, Cirkulär, B03: 3, 5 March 1920, B03: 3; ARAB, STF, Cirkulär, B03: 3, 6 May 1920;

ARAB, STF, Cirkulär, B03: 3, 29 May 1920.

2 SM, STM, Styrelsens protokoll, 13 December 1920; SM, STM, Styrelsens protokoll, 14 March 1921;

ARAB, STF, Inkomna skrivelser från Tobaksmonopolet, E03: 1, 15 July 1921.

but also the coming mechanization.3 Being the sole employer in the industry, the company would make efforts to reduce the inconveniences associated with layoffs. He identified two ways of accomplishing this: (1) to arrange proper retirement of older workers and (2) to offer retraining courses for younger workers. How many individuals were to be affected by the proposed measures was not mentioned. This episode shows that the decision to downsize was made by the management, or in other terms, the agents. The management also decided on the magnitude of the reduction and came up with a proposal to the company board, the principals, about how to treat redundant workers. This division of labour between agents and principals was reasonable as the former was better informed about the position of the company than the latter. But the episode also shows that at least some of the principals wanted to control the costs associated with downsizing.

An objection was raised regarding the pension issue by a board member who feared that a provisional solution could become precedential and have implications for the future. This objection was accepted by the board and it was decided to defer the matter. Eventually, the pension issue turned out to be more complicated than first thought and it required a decision of the annual meeting of shareholders. Consequently, the first wave of layoffs affected young workers exclusively.

Another principal, Gustaf Nilsson, was more concerned for the workers.4 The proposed pension was too low and though retraining was a good initiative, it was not enough to compensate for the inconveniences, Nilsson argued. He concluded his plea by demanding that no actions be taken before negotiating with the union. This wish from the Social Democratic board member was fulfilled.

In the first of two meetings, the union suggested that a shortening of the working week, preferably by cancelling work on Saturdays, was the best way to meet the recession.5 This move was not successful, at least not initially. Soon after the meeting, the management reported that layoffs could not be avoided and that more than 300 workers were affected.6 Later that figure was revised to 400. A new meeting with representatives of the management and union was held

3 SM, STM, Styrelsens protokoll, 14 March 1921.

4 SM, STM, Styrelsens protokoll, 13 December 1920; SM, STM, Styrelsens protokoll, 14 March 1921;

ARAB, STF, Inkomna skrivelser från Tobaksmonopolet, E03: 1, 15 July 1921.

5 The union strategy at this meeting was not discussed in advance by the executive committee. Thus, it seems like the union representatives simply followed established routines and norms for reductions.

6 ARAB, STF, Cirkulär, B03: 3, 17 March 1921.

where it was agreed that layoffs should affect the female workers in the age group 19 to 21 hired most recently.7 Furthermore, the parties agreed that the redundant workers would get pay for 12 weeks after the layoff. About half of the affected workers were offered places at retraining courses arranged by the company.

The layoffs, which affected about 8 percent of the company’s total workforce, were implemented on 5 April 1921. At the same time, a considerable number of workers were transferred from one brand of cigars to another and from cigar production to cigar-cigarette production. According to Wallenberg, the measures disturbed neither production nor the calm atmosphere at the workplaces.8 Whether this was a correct description of reality is of course hard to tell, but it can be established that the reduction did not cause a lot of protests from the union. By inviting the union to participate in decision-making the company avoided troublesome disputes.

Parallel to the talks concerning reductions, and against the backdrop of a general depression, negotiations for a new collective agreement were held. Apart from wage rates, the major issue of dispute was the duration of the new agreement; the management wanted the agreement to be valid until the end of 1922 whereas the union wanted to limit the duration to one year. With regard to wages, the outcome of a first round of negotiations was basically status quo but the management did not relinquish its claim regarding the period of validity.9 A first agreement proposal was turned down by a considerable majority of the union members in a ballot held in early April.10 In a second round of negotiations, the company agreed to shorten the period of validity. Worrying that another rejection eventually would end up in a strike, the union leadership strongly warned its members that a conflict would give the company an opportunity to fire even more workers.11 This is one of many examples, in line with Ross’ view, of top-level union leaders trying to moderate indignation among the rank-and-file. The appeal had effect and a second agreement proposal was accepted by the union in May.12 With some exceptions, the tobacco workers managed to avoid cuts of nominal wages but it should be remembered that the wages in the tobacco industry were connected to the price level. While

7 SM, STM, Styrelsens protokoll, 18 April 1921.

8 SM, STM, Styrelsens protokoll, 18 April 1921.

9 ARAB, STF, Cirkulär, B03: 3, 28 March 1921.

10 ARAB, STF, Cirkulär, B03: 3, 13 April 1921.

11 ARAB, STF, Cirkulär, B03: 3, 26 April 1921.

12 ARAB, STF, Cirkulär, B03: 3, 10 May 1921.

maintaining nominal hourly and piece-rates, the tobacco workers therefore experienced decreased incomes. As was pointed out in section 4.8, the annual earnings actually fell more in the tobacco industry than in the manufacturing sector as a whole during the post-war depression.