How high is total Swedish unemployment?

| 17 Comments

This might not seem like a difficult question. After all, the unemployment number is readily available. It takes a few seconds to check up the American unemployment number, 5.1% in May. Sure there are speculations about discouraged workers leaving the workforce, but overall this is a reliable figure, useful for international and cross time comparison.

Not so with Sweden. Yes, there is an official number, 5.2% in May 2005. But this figure is almost compleatly worthless. The true unemployment number is in fact closer to 20%, as shown below.

Sweden has several massive government programs that contain must of the unemployed, chiefly Early Retirement, Sick Leave, Labor Market Programs and Welfare. In addition, since students get a monthly stipend and loan, many unemployed continue to study when they can�t find work.


Controversy


The right in Sweden has for some time complained about the government hiding the unemployment in �programs�. But the question only came to the public knowledge when LO, the immensely powerful blue-collar union had one of it�s own turn against them. Hans Karlsson, a leftwing heavyweight, concluded that true unemployment was more in the ballpark of 20-25%, not 5% as the government was claiming. To make things even worse this guy happened to have the name as the Minister for Labor!

A few weeks later another labor movement veteran actually become a whistle blower, resigning and exposing that LOs left wing research institute had pressured him not to include the estimated true unemployment figure in a study. Embarrassing stuff indeed.

For a century the Social Democratic Labor Party parties and their allies in the Unions had Full Employment as one of their two ideological pillars (the other being an equal distribution of income). To now admit they have failed in this would be a huge defeat.

Furthermore, the party won the last two elections on the platform that cutting taxes would jeopardize underfunded Social Services. If Swedes were to conclude much of their taxes doesn�t go to welfare, but to support working age adults, their willingness to continue paying them might be reduced.

One key to understand this figure is that we have seen in the past few years is that the already high rate of sick leave has exploded. Yes, you wouldn�t guess it if you saw us, but Sweden has the sickest population in the world. Some 14% of the adult Swedish population does not work due to reported sickens. 540 000 were early retired (officially for health reasons) December 2004, fully 10% of the adult population. In addition more than 5% of the working population is on sick leave any given day.


Estimating the true unemployment rate


I will try to calculate the figure using data from the Swedish Statistical Agency (SCB) Labor survey, first quarter 2005. The calculations and adjustments are too messy to show here, but will be given by request.

Two notes. I have adjusted their Sick Leave number. Also all figures are from SCB, except the number only on welfare which I got from Tax researcher Dane Nordlings homepage. http://danne-nordling.blogspot.com/2005/05/hur-mnga-r-egentligen-arbetslsa.html


Table 1. First quarter of 2005, adjusted.

Population 16-64 - -- - - 5755.000

Not in laborforce - - - - - - 1.365.000
Early retired - - - - - - - - - (494.000)
Seek work - - - - - - - - - - - (150.000)
Get Welfare - - - - - - - - - - (84.000)

Labor Force - - - - - - - - - 4.391.000
Unemployed(5.6%) - - - - - (245.000)
unemply programs - - - - - (130.000)

Employed in Real job - - - - 4.016.000
Absent from work - - - - - - (554.000)
Of which on Sick leave- - - (216.000)

Actually work - - - - - - - 3.469.000


4.0 million (70% of adult population) in productive activity rate, 1.2 million (20%) living of welfare and Health or unemployment insurance alone.


Range of estimate: 8.5%-26%


So what is Swedish unemployment? The question hinges on who we include, and especially Sweden�s case especially on how much of early retirement and sick leave is hidden unemployment.

Even the Swedish governments acknowledges that the 130.000 in �Labor market political programs� simply unemployed, so we start from 8.5%.

For international comparisons we probably should not include the students and other�s who want work but can�t get it, since all countries have this category. But for policy matter in Sweden we should. Also including welfare recipients we get 13.2%.

The hard question is what to do with all the absentees. If we include all of them we end up with 26%. Note that we are not including absentees for any other reasons than Sick Leave and also excluding the underemployed.

Now this last figure is clearly too high. Many people who report sick are of course really too sick to work. It does show us the range, and is probably closer to the actual number than 8.5%.

It is anybodies guess how many who could go back to work if it paid to work. There is plenty of evidence that strong economic incentives to report sick matters. (I full account on this research another day).

Sweden had some 26 days lost per worker in 2002. In Canada, hardly a much sicker or slave driving nation, the corresponding figure (2004) were 7.5 days per full time worker lost every year due to sick leave (Statcan.ca). Britain had a similar figure, 7.2 days lost per worker and year in 2003 (CBI annual absence survey)


My Best Guess


As plausible comparisons I use the rates of early retirement in 1960 and the sick leave of slightly above Canada�s. Both would seem to exaggerate the number, we are for example much healthier now than in 1960.

Not counting the forced student, the underemployed or all other absentees the Swedish unemployment rate would be 19.8% fully 962.000 out of work of a workforce of 4.848.000 (add the latent jobless to get 22.5%).

Unemployed (245.) + Programs (130.) + Welfare (84.) = 459.000

Unemployment hidden in Early retirement (373.000) and Sick Leave (131.000) = 504.000

Total 962.000 out of work, Labor force 4.848.000.

In practice I think this 19.8% figure is somwehat comparable to rates for the US and other market economies. I am not sure however we should compare it to the �raw� figures of Germany or France, since they too hide unemployment in other welfare systems (though probably no country does as much as Sweden).

Next time I hope to write more detailed on how this high unemployment and welfare dependency figure has lead to chronically underfunded Social services.

By tino.sanadaji@gmail.com

17 Comments

Tino:

Good posts. One thing that is not often noted, I believe, is that despite the muddled Swedish economy, Sweden has a very intelligent population boosting one of the highest avg. IQs and within the population there are a lot of inventive types who seem to do quality work despite the incentives to work otherwise.

Not all countries have these advantages within their populations, and I therefore think that the Swedish economic model will produce different and poorer results if adopted by other countries.

A good post that quite strikingly puts the finger on perhaps the biggest problem for swedes that do not want to see their country go down the drain.

However, as long as so few dare admit the real numbers concerning unemployment - little will happen.

Keep up the good work.

Good post. You should take another look at the SCB though. They've recently adjusted the unemployment rate to 7.1%

Wow, this totally explains it. I was in Sweden for two months and I had seen the offical unemployment rate before I left from the states, when i got there all I heard was complaining for the lack of jobs. It surprised me. Now after reading this, it all makes sense.

A very good article about the Swedish, so called, "Labour market politics".

I only miss information about the use of long-time unemployed as slave workers ("Trainee-assignments"), sometimes for as little compensation as 4.90 SEK (about 0.61 US $/per hour) and the use of unemployed as "Inflationdampers". That is by (under threat of being cut off from the social employment benefits fund) being forced by your handling officer to apply for jobs you are�nt even qualified for. This with the purpose of giving the impression of a high competition f�r jobs and as a results of this keep wages down and prevent inflation.

An out of work Swede is counted in unemployment statistics if he or she has had a job in the last five years. It's easy to be counted in Sweden, and jobless benefits are much more generous compared to Canada and the U.S. In Canada it's said that only 35-40 percent of the unemployed are able to collect EI benefits and therefore access what meagre job training is available.

In the U.S., the picture is a lot bleaker. First off the mark are over two million poor people being warehoused in superjails and what amounts to the largest gulag population in the world. They are not counted and neither are another four million Americans on probation or on parole. And about six million of them in total have had their basic human right to vote in elections revoked. Voting is a basic right in over 80 nations that matter. In fact, the U.S. incarcerates black people at six times the rate of the most openly racist nation of the last century: South Africa.

The U.S. and Canada, one-two, own the largest low-skilled, lowly paid, non-unionized workforces among developed nations. Coincidentally, the U.S. and Canada, one-two or three, own the highest rates of child poverty among richest nations behind only Mexico and perhaps Italy after a bout with corruption and right-wing conservative politics.

Lookup "flexible labour markets" and note that there are alternatives to shovelling more of the national income to an elite upper crust while millions work harder and longer and health care and standard of living for tens of millions of North Americans remains frozen in time. Income gaps between rich and poor have become a canyon in N. America - and the wealth gap is now a chasm. It's creeping fascism.

Sweden still ranks higher on Jefrrey Sachs' and Harvard Business School's top ten most competitivene economies in the world along with several other social democracies.

Question of the week:

Why do the Scandinavian countries and Denmark rank as high as they do while plowing a third of their GDP's back into social programs ?.

2005 Global Economic Competitive Growth Index
http://in.rediff.com/money/2005/sep/28wef.htm

note: more politically conservative nations like Canada, Britain and Japan didn't rate in the top ten

Good posts!

This is an old text and we have had a government shift here in Sweden but still our fantasy figures continue. I'm not sure we are going to get out of this socialistic hole we are digging for ourselves. I like the population here but am probably going to move away. Reading some governmental statistical reports really makes me wonder if there are monkeys writing them - I heard monkeys are good at writing strange coverup-like texts. Please help us.

all this wheeling and dealing around, why, it isn't for money, it's for fun. money's just the way we keep score.

Greetings, Sebastian Weil:

Note Tino's statement "In practice I think this 19.8% figure is somwehat comparable to rates for the US and other market economies." Therefore they must all be going "down the drain" too.

See also this: "Is the unemployment rate in Sweden really 17 percent?" Schmitt, J.
Center for Economic and Policy Research, Washington, DC 20009, USA. schmitt@cepr.net

"In 2006 the McKinsey Global Institute published an analysis of the Swedish economy, with the finding that the "de facto" unemployment rate in 2004 was 15 to 17 percent, about three times higher than the official unemployment rate of 5.4 percent. These estimates were cited in the media as part of critiques of recent Swedish economic performance. To arrive at the 15 to 17 percent "de facto" unemployment rate, McKinsey included "people who don't work, even though they should be able to" in the pool of the unemployed. The analysis reported here accepts the McKinsey methodology and applies it to the United States. The resulting "de facto" unemployment rate for the United States is 13.8 percent, compared with the 5.5 percent official U.S. unemployment rate, and the estimated 15.5 percent "de facto" Swedish unemployment rate. If the two countries' prison and jail populations are also included in the "de facto" unemployment rate, the U.S. rate rises to 15.2 percent, just 0.5 percentage points lower than what McKinsey's equivalent figure would be for Sweden--15.7 percent."

I've lived in both countries. Comparatively speaking, I'd say the U.S. is further down the drain in many ways.

PS

YOU ALL SUX BALLS!

One thing that is not often noted, I believe, is that despite the muddled Swedish economy, Sweden has a very intelligent population boosting one of the highest avg. IQs and within the population there are a lot of inventive types who seem to do quality work despite the incentives to work otherwise.

One thing that is not often noted, I believe, is that despite the muddled Swedish economy, Sweden has a very intelligent population boosting one of the highest avg. IQs and within the population there are

"In practice I think this 19.8% figure is somwehat comparable to rates for the US and other market economies"

Talk about burying the lede.

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