When the social partners were given their mandate to negotiate wages in 1965, the pay scales were in focus. The employer side still had to pass all agreements by the Government for approval. During the 1970s and 1980s, the problems with central government wage formation grew. Trust in the system eroded since the Government of the time did not come through on its promises to regulate wages for central government employees, and to stop affect municipalities’ and the private sector’s wage formation. Industrial action increased, partly due to lack of structure for handling disagreements at the local level. Political decisions caused a double income imbalance to grow, meaning that higher officials had lower pay than in the private sector while lower officials had higher pay. This deteriorated competence supply. The pay scales were eroding from agreed market-based pay supplements, etc. During the late 1980s, with unstable finances, high inflation and considerable unrest in the labour market, especially across the central government, it became obvious that something had to be done.
In 1992, the Government appointed a committee chaired by a former director of the main private sector employers’ association. In 1994, following the proposals of the committee, the Swedish Agency for Government Employers (SAGE) was formed as a bottom-up employers’ organisation for the central government agencies. The introduction of framed appropriations made it impossible to raise wages much without laying off staff. National agreements on wages and working conditions for central government employees no longer had to be approved by the Government. At the same time, the central government as an employer was obliged not to exceed the wage increase level set in the industrial sector.