A historic villa in Bromma, Sweden, once home to the architects of the nation’s social democratic welfare state, Alva and Gunnar Myrdal, is now housing Polish construction workers-a stark symbol of growing concerns over labor exploitation in the Swedish building industry. The property’s current use, revealed as a lease to a construction company providing lodging for its workforce, highlights a trend of increasing precarity for migrant workers and a resurgence of “social dumping” practices. As a 2022 report detailed, complex subcontracting layers contribute to tax evasion, unsafe conditions, and potential criminal involvement, a situation recently underscored by a fatal accident in Ursvik that claimed the lives of five workers.
A historic villa in Bromma, Sweden, once home to prominent social democrats Alva and Gunnar Myrdal in the 1930s, is now being used as housing for construction workers, highlighting growing concerns about labor practices within the Swedish building industry.
The property, a symbol of the Swedish welfare state, has seen a series of commercial uses since the Myrdal family moved out, including stints as the headquarters of a margarine company and an import firm. Currently, it’s leased to a construction company that rents rooms to its workforce. Reports indicate that 19 Polish construction workers are residing in the villa, paying approximately 2,500 Swedish krona (roughly $230 USD) per month to their employer.
This arrangement raises questions about the evolving landscape of employer-provided housing in the construction sector, where offering lodging for workers from outside the local area is becoming less common. The situation is particularly ironic given the building’s history as the former residence of architects of the Swedish social model.
Complex Subcontracting Increases Risk of Exploitation
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The construction industry isn’t alone in facing challenges related to poor working conditions, low wages, tax evasion, and even criminal activity. These issues are prevalent in the restaurant and transportation sectors and are increasingly appearing in construction.
A 2022 report by the Swedish Construction Market Commission, titled “From Black to White. Turn the Unhealthy Development in the Construction Industry,” identified several measures to address unfair competition, tax avoidance, illegal employment, and criminal involvement. The commission acknowledged that there’s no single solution to these complex problems.
However, the report emphasized that lengthy subcontracting chains – where a main contractor hires a subcontractor who then hires another – significantly increase the risk of wage suppression, tax evasion, and the infiltration of criminal enterprises. These layered arrangements also create opportunities for illicit profit. A company winning a contract at a certain price can reduce costs by engaging firms offering lower bids, potentially leading to unfair wages and tax violations.
This dynamic effectively disadvantages companies that adhere to collective bargaining agreements and pay taxes. Both domestic and foreign-registered companies frequently utilize foreign labor within these chains, often paying lower wages, taxes, and insurance contributions.
Documenting these practices, however, remains difficult.
The original contractor often lacks visibility into the companies involved further down the chain, or chooses to ignore the situation. This represents a systemic pattern of social dumping and worker exploitation, creating a shadow economy within the construction sector.
Safety Concerns Following Tragic Accident
The issues within the Swedish construction industry gained renewed attention following a fatal accident in Ursvik two years ago, where five construction workers died when an elevator collapsed. The company that held the contract did not have personnel on site at the time of the accident, despite the main contractor’s responsibility for workplace safety. A CEO and two elevator technicians have been indicted on charges of gross negligence related to workplace safety. Four of the deceased workers were foreign nationals – from Afghanistan, Russia, and Ukraine – and several lacked formal employment contracts or the necessary ID-06 identification required to access construction sites.
Sweden relies on foreign labor in numerous sectors, but not at the expense of low wages and unsafe working conditions.
Hopes that the Ursvik tragedy would prompt industry-wide improvements have largely gone unrealized, with little substantial progress made in the two years since the incident.
A reasonable first step, according to industry observers, would be for main contractors to limit subcontracting to a maximum of two tiers, fostering more direct oversight of all companies involved and ensuring adherence to safety standards and fair wages. This approach is already in place in Norway.
In Sweden, Veidekke and Peab have already adopted this two-tier system. While not a complete solution, it represents a crucial and decisive step forward.
Disagreement Over Proposed Reforms
Previously, there was optimism that the Swedish employer organization, Byggföretagen, would support this approach. However, that did not materialize. Recently, Svenskt Näringsliv, of which Byggföretagen is a member, released a report criticizing the idea of limiting subcontracting tiers. The report claimed it wouldn’t solve any problems and would lead to massive cost increases, estimated at 25 billion Swedish krona.
The methodology behind this substantial cost estimate was unclear, particularly as the study was based on interviews with “approximately” ten companies, none of which were named in the report and none of which had implemented a two-tier subcontracting system.
Byggföretagen’s endorsement of the report signals a shift in the position of the employer side. Building union Byggnads supports the proposed reforms, as do Veidekke and Peab.
Veidekke CEO Jimmy Bengtsson strongly criticized the report, stating, “Limiting the length of chains is not a threat to small businesses. It is a threat to criminals and unscrupulous actors.” He added, “The same number of suppliers can be used, large and small. The difference is that they should be directly under the main contractor in tier 1 or 2. This makes the chain transparent, responsibility clear, and significantly more difficult for unscrupulous actors to hide.”
Bengtsson even threatened to leave Byggföretagen, a rare display of conflict within the employer organization, underscoring the high stakes of the debate.
Ideological Considerations at Play?
Are construction companies acting against their better judgment? Or are other factors at play? Some suggest that many companies profit significantly from subcontracting arrangements by taking a cut between tiers. Others point to ideological considerations, with market-liberal theories favoring decentralization and smaller entities as a means of increasing economic efficiency. The concept of “specialization” is a central theme in the Svenskt Näringsliv report. It’s also plausible that the employer side is attempting to exert pressure on Byggnads and shift the balance of power in the broader Swedish labor market.
Failure to address these issues could ultimately undermine the Swedish labor market model. The situation is already critical in the construction sector, where companies with fair practices are being undercut by those with exploitative business models. This could eventually impact collective bargaining agreements and wage standards across the entire Swedish workforce.
The proposal to limit subcontracting to two tiers has now been brought before the European Parliament, recognizing that this is not solely a Swedish problem but a widespread issue across the EU.
Whether the proposal will be approved remains to be seen. A negotiated agreement between parties in Sweden, similar to the one in Norway, would be the most desirable outcome, allowing stakeholders to jointly ensure compliance with regulations and agreements.
However, given the signals from Byggföretagen, this appears unlikely. Instead, employers are preparing for a confrontation, a development that could prove costly for the industry and the Swedish economy.
Håkan A Bengtsson
