Denmark and Sweden have some of the largest public sectors in Europe. They are also characterized by predominantly voluntaristic labor market models where collective bargaining and employee involvement play a relatively strong role in public sector employment relations (ER).

In this chapter, we analyze similarities and differences between the two countries regarding their public sectors and their public sector ER. The analysis focuses on three themes: main public services reforms and New Public Management (NPM), changes in the ER and job levels and the relationship between parliamentary politics and ER. Finally, a multiple austerity typology proposed by Lodge and Hood (2012) is applied to the two Scandinavian cases.

We argue that although employment levels remain high, and the public sector ER systems are still basically voluntaristic, changes have been seen in ER models. These changes have been more profound in Sweden than in Denmark, but they took place before the 2008 crisis. In Sweden, an economic crisis in the 1990s was a much more important driver than the post- 2008 crisis. The 1990s crisis contributed to an earlier implementation of NPM and to a higher degree of decentralization of public sector wage setting than in Denmark. It is furthermore argued that post-2008 austerity policies have been relatively mild in the two countries and cannot alone explain recent changes.