Sweden: Rethinking the IKEA Syndrome; The country's new government puts forth a new mantra: it's the jobs, stupid.

Byline: Stryker McGuire (With Megan Cokely and James Savage)

At the world's largest IKEA, in Kungens Kurva outside Stockholm, what you don't see is as important as what you do. Venture inside, and you'll find wide aisles, dream-home displays, caravans of pushcarts and trolleys and stack upon stack of every conceivable item you could want for your home--not to mention armies of shopping-overdosed families heading for the self-service cafeteria.

Note that "self-service." For what you don't see is a complementary army of salespeople. Indeed, you may not see any. That's because IKEA, planted like so many blue-and-yellow Swedish flags in 35 countries, is even more Swedish than most people realize. It's so expensive to hire people in Sweden that companies from IKEA on down would much rather you helped yourself, thank you. As for the self-assembly presumed by most IKEA purchases? That's part of it, too.

Call it the IKEA syndrome. The constant battle by business to get around high labor costs is evident everywhere in Sweden. Here, the gap between high and low salaries is much narrower than in almost any other modern economy. The typical Swedish waiter, say, makes [euro]23,000 a year, or about a quarter of what a Swedish CEO takes home. In Britain, the waiter would earn much less ([euro]17,628), the CEO much more ([euro]164,788). In the United States, the gap would be wider still. Thus, in IKEA-syndrome Sweden, the restaurant world looks very different. McDonald's thrives, according to a recent McKinsey & Co. study, but its fast-food competitor Pizza Hut, with bigger tables and larger serving staff, struggles.

Until recently, most Swedes liked the idea that life in their country was more equitable than elsewhere. But global competition is now persuading many to rethink the whole issue of employment. McKinsey warned in August that the high cost of doing business in Sweden would force companies to "move 100,000 to 200,000 jobs offshore in the next 10 years." Sweden has enjoyed outstanding economic growth, but it came in part because companies shed jobs to boost productivity. In the run-up to last month's general election, the independent National Institute of Economic Research suggested that Sweden had hit a growth ceiling: unless the labor supply expanded, GDP growth would slow.

That election proved to be a turning point. Before the balloting, Finance Minister Per Nuder, a Social Democrat, told NEWSWEEK that the outcome would hinge on how well the state ...