Unemployment benefits in Sweden

In Sweden unemployment benefits are divided into a voluntary scheme with income related compensation up to a certain level and a comprehensive scheme that provides a lower level of basic support.

History

“Help-funds”, the first form of unemployment insurance in Sweden, were created in the 1870s, already closely linked to trade unions. Since the institution of local employment offices in 1930s, in the climate of Keynesian policies, the State has begun to finance the unemployment benefits; since the 1940s, the insurances’ aim was to «provide economic support during a "transitional period" when the individual who lost his/her employment or left school actively seeks a new employment».Lundgren, Bo (2006), [http://www.issa.int/pdf/workshop/bruxelles06/2lundgren.pdf Recent development in unemployment insurance in Sweden] , Brussel: International Experts Workshop of the ISSA Technical Commission on Unemployment Insurance and Employment Maintenance, p.3] In 1948 the employment offices were nationalized and the National Labour Market Board ("Arbetsmarknadstyrelsen" - AMS) was established as the central authority, charged also with the task of supervising the voluntary employment relief funds, subsidized and controlled by the unions. Since 2004 this last task has been taken over by the Unemployment Insurance Board (IAF).

In fact, the labour market policies in the after-war were built upon two concepts: the “active labour market policy” and the task of the unemployment insurance to support the readjustments of individuals to the labour market . In order to have this effect, the unemployment insurances had to have some features:

Main features

Today, the Swedish unemployment insurance system is made up of basic insurance and voluntary income-related insurance. The basic insurance is granted to everyone under the requirement of residence: 320 SEK per day are granted to anyone over 20 years who is enrolled at the employment office and is carrying out a job-seeking plan. The voluntary income-related insurance requires the workers to join one of the 36 independent unemployment funds. To become one of the 3.7 million members of unemployment funds a worker must have been employed for at least a month. After one year of uninterrupted membership of an unemployment fund and six months of half-time work, the worker is entitled to receive an earning-related daily allowance up to 80 % of his or her "normal income" (with a maximum of 680 SEK per day). The normal income is the average income during the last 12 months, including days of unemployment. This goes for the first 200 days, after which the rate decreases to 70 % until the 300 day, and 65 % from day 301-450 (only available for parents to children under the age of 18). After 300 benefit days anyone who is still unemployed can obtain a place in the "Jobb- och utvecklingsgarantin" ("Job and development guarantee") labour market programme.

As declared by IAF [The Swedish Unemployment Insurance Board (IAF), [http://www.iaf.se/iaftemplates/Page.aspx?id=202 Facts about unemployment insurance] ] in 2006 approximately the 90% of the workers were members of an unemployment fund. 553 000 workers received benefits in some moments of the year, and the unemployment funds paid them 29,9 billion SEK, which means 54 069 SEK each as average. In facts, also a form of intra-fund solidarity can be traced up: funds usually do not compete for members, as like the trade unions they usually refer to a “fund organizational area”, and costs are covered in solidarity by all the funds, so that membership fees are quite the same for every sector. Moreover, the funds’ costs are mainly paid by governmental grants: in 2006 only 9.4 % of the unemployment benefits where financed by membership fees.

Some unions also promote Collective complementary insurances, in order to better cover the growing quota of unemployed who receive less than the 80% of their previous wages, because the maximum compensation level has not been raised as the wages, and because unemployment between average- and high-earners in growing. In fact, in 2005 45% received in average the 60% of previous wages, excluding the 13% granted only of basic benefits. The collective complementary insurances are fully financed by individual insurance fees, by each organization in its segment; that might brought to have very costly insurances in sectors with high unemployment rates.

Future challenges and developments

The Swedish welfare state and its “active labour market policies”, even if they came out quite intact from the deep recession of the 1990s, have to face a demand for labour still under the level of the 1980s. In such a context, Bo Lundgren Lundgren, Bo (2006), [http://www.issa.int/pdf/workshop/bruxelles06/2lundgren.pdf Recent development in unemployment insurance in Sweden] , Brussel: International Experts Workshop of the ISSA Technical Commission on Unemployment Insurance and Employment Maintenance, p.4] claims that the request for a very intense job-seeking of unemployed does not necessarily improve the functioning of the system. In a situation in which there are often many job-seekers for each vacancy, the job-seeking activity should be limited to jobs with a fair possibility to be gotten by the applicant. How to do this is still a matter of discussion.
The problem of the effects of joining a Swedish labour market programme has been inquired by Barbara Sianesi [Sianesi Barbara (2003), [http://www.ifs.org.uk/wps/wp0201.pdf An Evaluation of the Swedish System of Active Labour Market Programmes in the 1990s] , London: Institute for Fiscal Studies, , Abstract] who found it having mixed effects: if it had increased employment rates in its participants, these had also been found to remain «significantly longer» on benefits and into the unemployment programme, especially for those entering a programme just after having been entitled to unemployment grants.
The potential “locking-in effects” have to be inquired and solved as well: nowadays, some working categories (women with part-time jobs, manpower-employed, seasonal workers, students, own-businessmen, …) misuse the unemployment benefits; some administrative courts cases are expected to clarify these categories’ position about unemployment insurances.

At the same time, also other aspects of the systems are likely to be revised. The Alliance for Sweden electoral coalition who won the 2006 elections endorsed the idea that each section of the labour market should carry its own costs of unemployment benefits paid out, in order to put pressure on the wage level and make the demand for labour to rise again and unemployment diminish. They claimed that a substantially larger part of the costs for the insurance should be financed by individual fees of the involved workers, conceiving to stop the intra-fund solidarity mechanisms.

References

See also

* Social Security (Sweden)
* Scandinavian welfare model
* Social Model
* Unemployment funds in Sweden

Further reading

* Olson, Sven (1986), “Sweden”, in Peter Flora (ed.), "Growth to Limits: The Western European Welfare States since World War II", Volume 1 : Sweden, Norway, Finland, Denmark, Berlin - New York: Walter de Gruyter, pp. 1-84