The Swedish labor market is now slowly recovering from the deep recession of the early 1990s. Employment is rising. Meanwhile
more people are joining the labor market. Unemployment is therefore falling at a slow pace, and it will probably be a long time
before Sweden achieves the low jobless levels it previously maintained during almost the whole period since World War II.
Since then, the country has begun a lengthy process of recovery from mass unemployment. Employment has risen and currently stands at around 3,994,000 individuals. Registered unemployment has not shown an equally favorable trend, however: it fell to 7.5% of the labor force in May 1995. Another 4.8% were participating in labor market policy programs. One reason why the figures did not show a more positive change was that more people have joined the labor market as the economy has improved.
To combat unemployment, the government sharply expanded its labor market policy efforts during the 1990s. The programs undergo constant changes, but the main thrust of the governments policy is to use various active measures to prevent high, chronic unemployment and thereby help the labor market function more smoothly in a long-term perspective.
Mass unemployment was previously an almost unknown phenomenon in postwar Sweden. During much of the period since 1945, the Swedish labor market was characterized by low jobless levels, rising employment and increasing labor force participation. In the two decades to 1990 alone, labor force participation climbed more than 11 percentage points, from 73% to over 84% of the working- age population. This was mainly due to the growing number of women with paid jobs. Women rose gradually from 37% to 48% of the labor force.
Over the same period, the number of gainfully employed individuals climbed nearly 20%. Their share of the working-age population rose from about 72% to 83%. The main focus of growth in employment was the public sector, but private services also showed significant expansion.
At no time between 1970 and 1990 did unemployment exceed 4%, but it varied from 1.2% to 3.5%. Nor was there any long-term unemployment worth mentioning.
The recession of the early 1990s reversed these favorable trends. By 1994 labor force participation had declined to 77.6% and employment had dropped to 71.4% of the working -age population.
Labor market policy was regarded as a key instrument in promoting efficient allocation of labor, for example by providing incentives for occupational and geographic mobility. Since then, labor market policy has undergone occasional major shifts of emphasis. During the 1970s, it was largely viewed as a technique for smoothing out business cycles in order to keep registered unemployment down. In the 1980s it again assumed some of its earlier role as an instrument for easing structural adjustments in the economy.
The role of labor market policy in economic restructuring became even more pronounced during the early 1990s, due to the sharp rise in unemployment.
The primary task of labor market policy today is to prevent the emergence of harmful chronic unemployment, thereby improving the ability of the labor market to function smoothly in the long term. Its purpose is to improve the match between labor supply and demand, create a pro-work ethic throughout Swedish society, encourage active job seeking and equip the individual for employment when demand rebounds.
To make this possible, the dominant working method of Swedish labor market policy is the activation principle. This strategy implies that placement of individuals in the regular labor market should always be the top priority. As a second alternative, unemployed people should be enrolled in active labor market programs. Various forms of cash benefits should only be available as a last resort.
The Administration includes the National Labor Market Board (Arbetsmarknadsstyrelsen, AMS) and one county labor board (länsarbetsnämnd) located in each of Sweden's counties. These county labor boards operate the offices of the public Employment Service (Arbetsförmedlingen) and the employability institutes (arbetsmarknadsinstitut).
AMS is the central administrative agency in charge of general labor market matters, and it oversees the county labor boards. AMS is responsible for coordinating and reshaping labor market policy measures to comply with the guidelines set by the Cabinet and Parliament. The agency also establishes goals and guidelines for the work of the county labor boards and allocates financial and other resources.
The 24 county labor boards, in turn, have overall responsibility for labor market policy in each respective county.
The offices of the Employment Service are responsible for providing hands-on assistance to job seekers and employers. Aside from job placement services, these offices also provide counseling related to choosing a suitable occupation. They also arrange assistance for the occupationally handicapped.
There are about 390 publicly run employment offices in all, including about 50 specialized offices (for example, offices with expertise in handling placements in the fields of technology, accounting and finance, computers, cultural occupations and employment abroad).
The Employment Service used to have a monopoly on job placement, but since July 1, 1993 private employment offices have also been permitted in Sweden. However, with certain exceptions, employers are still legally required to register job vacancies with the public Employment Service.
The employability institutes have specialized resources for the occupationally handicapped and other people who need in-depth counseling and job-preparation measures to break into the labor market. There are 110 employability institutes today.
Employer organizations and labor unions were previously represented on the governing boards of AMS and the county labor boards. Nowadays these boards have a different structure, and their members are appointed by the Cabinet on the basis of other criteria. However, the governing boards are supplemented by advisory boards which include labor and employer representatives.
Sizable investments are being made in fields other than labor market policy to counteract the negative effects of joblessness. One important way of combating higher unemployment, while raising the skills level in the labor force, is to operate various skill- enhancement programs as part of government educational policy. The government is expanding the number of openings in the higher education system and upper secondary schools, as well as in other alternatives such as the municipal adult education system and the folk high schools (which are mainly small and residential). Overall, at least 90,000 new openings are being added in these educational programs during 1995/96.
A range of instruments developed within the Employment Service are intended to improve the matching process. These include job clubs and similar activation programs, designed to give job seekers the requisite knowledge and self-confidence to track down job vacancies themselves.
There have also been efforts aimed at expanding and raising the quality of the Service's contacts with companies.
The work of the Employment Service has been computerized, among other things to improve information services related to job vacancies. The Employment Service has moved increasingly toward management by objectives and decentralization. It has shifted many employees from administration to job placement work.
The Employment Service has a large share of the job placement market and handles sizable volumes of vacancies and job seekers. During 1994 about 40% of all job vacancies in Sweden were reported to the Employment Service.
Programs to encourage demand for labor and generate employment were previously of minor importance in Sweden, but today they dominate labor market policy programs. They can be targeted to individuals or companies.
ALU projects may not compete with tasks normally performed in the regular labor market. The government covers the entire cost, and participants receive benefits equivalent to those they would otherwise receive while unemployed. Maximum enrollment is six months.
Start-up grants have become an increasingly important program in recent years. They are available to people who are unemployed or at risk of losing their jobs, so that they can support themselves initially while establishing their own new business. Applicants must present a viable business plan.
The grant is equivalent to the benefit that would otherwise have been paid from an unemployment insurance fund, but it can also be provided to people who are not entitled to such benefits. It is normally payable for six months but can be extended for a longer period.
Workplace introduction is a new program that began on July 1, 1995. It replaces a number of older programs that provided traineeships: among them youth training, immigrant training and graduate training.
Unemployed people who are found to need a period of workplace training, and who cannot be given an ordinary job or be accommodated in another suitable program, may train for up to six months in business or the public sector. For occupationally handicapped youth, this period may be extended. During this traineeship, participants receive workplace introduction, counseling services and practical vocational training.
The workplace introduction program is targeted to unemployed people aged 20 and up. However, those under 25 may participate in the program only if the employer pledges to give them a regular job for at least another six months after the traineeship. Municipal governments and nonprofit organizations are exempt from this requirement.
Participants in the workplace introduction program receive a training grant equivalent to the unemployment compensation they would otherwise be entitled to. Those who are not eligible for unemployment insurance receive SEK 245 per work day.
Employers pay SEK 1,000 per month for each trainee, but no fee is required if a trainee is over age 60, an immigrant or occupationally handicapped.
Relief jobs have traditionally dominated programs to stimulate the demand for labor. Their purpose is to generate temporary work for unemployed people who have been unable to find work or other suitable programs. During the 1990s, however, relief jobs have diminished in importance. They are primarily used for people who risk exhausting their unemployment benefits.
Relief jobs previously consisted largely of investments such as road, building and civil engineering projects. As the nature of unemployment has changed, however, such relief jobs have become less common. A growing proportion of relief jobs are now in the service sector, especially public services.
The maximum government grant is 65% of wage costs for six months. The grant for relief jobs in the service sector may not exceed 50%.
Recruitment subsidies, which have existed since 1984, are primarily intended to facilitate employment in the private sector. This program can be used to accelerate the hiring process and influence an employer's choice of job seekers.
The subsidies cover a maximum of 50% of wage costs for six months. For refugees, immigrants and older people who have been unemployed for long periods, government grants may cover up to 75% of wage costs during a 12-month period.
Hands-on computer centers are currently being established throughout Sweden by municipal governments and Employment Service offices. Their purpose is to give unemployed youth aged 20-24 an opportunity to familiarize themselves with modern information technology. These young people are also encouraged to apply for jobs or obtain information on training programs.
Contracted workplace introduction jobs in the business sector are a program offered to unemployed youth aged 18-19, but it has diminished in importance during recent years. These jobs are based on agreements between employer and employee organizations, and their purpose is to give unemployed youngsters work experience. Employers receive public grants covering a portion of their wage costs for six months.
The primary purpose of employment training is to help those who are jobless or at risk of unemployment to find work, while making it easier for employers to find employees with the requisite training.
Employment training mainly takes place in courses that county labor boards or local employment offices have purchased from various providers. The latter include the Employment Training Group (AmuGruppen AB) which was spun off from AMS in 1986, municipal educational agencies that put together training packages, private companies, the higher education system and special-interest organizations. The county labor boards and employment offices buy training courses on the basis of what the labor market needs and their own knowledge of what categories of people are having a hard time finding work.
The programs primarily consist of vocational training, but they may also include orientation courses or general academic studies that are prerequisites to vocational training. In some cases, training grants are also payable to individuals who utilize openings in the regular educational system.
Employment training is provided to people over age 20. The average training period is 15-20 weeks.
Annual follow-up studies of vocationally oriented employment training programs used to show that between 60% and 75% of participants had landed jobs within six months after completing their courses. During the deep recession of the early 1990s, the figure dropped below 30%. The latest study shows that as of 1994 it had rebounded to 40%.
Course participants receive training allowances. Those who are entitled to benefits from an unemployment insurance fund receive an allowance equivalent to their unemployment benefits. Others receive a lower sum, SEK 245 per day.
In-house employment training at companies is a labor market policy instrument of diminishing importance. Its purpose is to encourage employers to take advantage of periods of low capacity utilization to improve the skills of their employees. In this way, both individuals and the company will be better equipped for an economic upswing. The courses are relatively short and generally designed to give employees advanced training.
At present, a grant of SEK 60 per employee training hour is payable. Grants can be provided for a maximum of 920 hours per person.
The employability institutes are an important instrument for helping job seekers who need occupationally oriented rehabilitation or in-depth counseling. The institutes have specialized resources and expertise in the evaluation of working capacity, practical job orientation, workplace adaptation etc. Somewhat more than half of the institutes also have specialists in particular disabilities. Participants receive training grants.
Relocation grants, designed as an incentive to geographic mobility, used to be an important component of labor market policy. Today these subsidies have diminished in importance and consist mainly of grants to cover household moving costs, job interview and relocation trips, as well as starting grants for key employees.
A new commuting grant was created during 1995. Those who accept a job at least 90 minutes commuting time away from home are eligible for the grant. They may receive SEK 1,200 per month for a maximum of six months. People who work too far away from home to be able to commute during the working week may instead receive grants covering the costs of two trips home per month.
Employment with wage subsidies is one of the most important programs. Its purpose is to encourage employers in all economic sectors to employ occupationally handicapped who cannot be accommodated in other programs.
The wage subsidy varies, depending on the degree of disability. In some cases it may amount to 100% of wage costs. Wage subsidies should normally be reviewed every four years.
Occupationally handicapped people who cannot find jobs in the regular labor market can be offered sheltered employment at Samhall AB, a government-owned company which is represented in every county and has about 800 units in 320 locations. Its operations consist mainly of the production of goods and services.
The government subsidizes about 110% of the wage costs of Samhall AB. The Employment Service has access to positions at the Samhall Group and refers job-seekers there.
People with socio-medical disabilities, severe and/or chronic mental illnesses or functional impairments can also be offered public sheltered employment. Government subsidies cover all or part of their wage costs.
The government also subsidizes working aids for the occupationally handicapped. This may consist of equipment needed at the workplace to enable them to perform their job, or grants to cover the wages of personal assistants.
In addition, business grants are available to enable an occupationally handicapped person to start a company.
The larger of these two systems is the voluntary unemployment insurance which is based on membership in one of the 40 societies that administer unemployment insurance funds. Each fund is ordinarily affiliated with a trade union. Total membership is about 3.7 million, or 80-85% of the Swedish labor force. To receive unemployment benefits from a fund, a person must have been a member for 12 months and worked for five months. In addition, the unemployed person must meet various requirements. The most fundamental is that he or she must register with the Employment Service and accept suitable work offers.
Benefits are payable in the amount of 75% of previous income, not to exceed SEK 564 per working day. Unemployment benefits are normally payable for 300 working days, or about 14 months. For members aged 55-64, the period is 450 days. Before a person may receive benefits, there is a five-day waiting period.
This unemployment insurance system is financed by employer payroll fees, mandatory employee fees deducted directly from wages and salaries, and employee membership dues.
An unemployed person who does not qualify for voluntary unemployment insurance can receive cash labor market assistance. This government benefit amounts to SEK 230 per day after a five-day waiting period. It is payable for a maximum of 150 days (300 days for those aged at least 55, and 450 days for those aged at least 60 years).
An unemployed person must fulfill certain work- and training-related requirements to receive such assistance. The cost of the system is partly covered by the fees paid into the voluntary unemployment insurance system.
Definitions:
The term labor force refers to all people with jobs as well as those who are unemployed but looking for jobs.
People with jobs or the gainfully employed are defined as those with paid work for at least one hour during the survey week, plus those who are temporarily absent from work.
1 SEK (Swedish krona) = 0.14 USD or 0.09 GBP
This fact sheet is published by the SI and may be used in preparing articles, speeches, broadcasts, etc. on condition that the source is acknowledged.
ISSN 1101-6124
Published by the Swedish Institute,
November 1995
Classification: FS 6 u Oha
Fact Sheets on Sweden