SOCIAL AND LABOUR MARKET POLICY IN SWEDENDirectorate General for Research
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2.1. Employment Structure
2.2. Unemployment
2.3. Measures to Combat Unemployment
2.4. Women in the Labour Market
3.1. The Social Partners
3.2. Collective Bargaining Agreements
5.1. Old-age Pension Scheme
5.2. Other Benefits
5.3. Unemployment Benefits
Sweden is a Scandinavian country covering about 450,000 km2 with a population of 8.82 million and a low population density of only 19.4 inhabitants per km2. According to Eurostat statistics, in 1993 5.8% of the total population were foreigners, of whom more than one third are immigrants from other Nordic countries.
Sweden is a constitutional monarchy with a parliamentary form of government. Executive power rests with the Cabinet ("Regeringen"), which is responsible to Parliament ("Riksdag"), which holds the legislative power. The parliament has 349 members, who are elected by proportional representation.
The Social Democratic Party ("Socialdemokratiska Arbetareparti") has played a dominant role in Swedish politics since 1932. Except for six years of non-socialist rule in 1976-1982, the Social Democrats were in government, either alone or in coalition with other parties, from 1932 to 1991. After three years of non-socialist government, the Social Democrats returned to power in 1994.
The Swedish welfare state has traditionally been characterized by a high level of social protection based on universal coverage and solidarity, a large public sector, a low rate of unemployment, regulation of the employment market based largely on collective agreements and comparatively high growth rates.
In the early 1990s the Swedish economy fell into the deepest and longest recession since the 1930s resulting in a rate of unemployment of almost 9%, unprecedented in Sweden, and a significant increase in the public sector's overall budget deficit. The present Social-Democratic government is still fighting to overcome these problems. The measures adopted to reinvigorate the economy include severe cuts in public spending which have had a significant impact on Sweden's social policy.
The rate of labour force participation is high in Sweden compared to other European countries, although it has dropped from over 84% of the working-age population in 1990 to 79.4% in 1995. The equivalent averages in the EU are 67.9% in 1990 and 67.7% in 1995. Moreover, the Swedish employment rate is high at 72.1% in 1995, compared to an EU average of 60.4%.
25.8% of employed persons in Sweden are in part-time employment which compares with the EU average of 16%. The Netherlands has the highest proportion of part-time employees with 37.4% of employed persons, while Greece has the lowest proportion, with only 4.8% in part-time employment.
In Sweden the service sector employs a relatively large part of the working population (see the table below). Forestry is the most important component of the agricultural sector, which also includes hunting and fishing, with around 68% of Sweden's land area being covered by forest and woodland. In 1993, forestry products, such as wood, pulp and paper accounted for 16.3% of total merchandise exports.
| Sector | Sweden | EU |
| Agriculture | 3.3% | 5.3% |
| Industry | 25.8% | 30.2% |
| Services | 71.0% | 64.5% |
Source: European Commission, Employment in Europe, 1996, p. 147 and p. 161.
In 1980, when the public sector in other OECD countries employed on average around 20% of the workforce, the Swedish public sector employed around one-third of working Swedes. This reflected the fact that major services such as education, health care and, to a certain extent, housing were supplied by public sector organisations in near-monopoly positions.
Like most European countries, Sweden experiences high rates of unemployment. According to Eurostat, the unemployment rate for Sweden in April 1997 was 10.7% which placed Sweden just below the EU average of 10.8%. The highest levels of unemployment are found in Spain at 20.9%, and Finland at 16.6%, while the countries with the lowest rates of unemployment are Luxembourg at 3.7% and Austria at 4.5%. For Sweden, the present unemployment figures represent a very pronounced increase compared to the years before the economic crisis of the early 1990s, when the unemployment rate was 1.8%.
As a result of high unemployment, certain groups of people are facing increased problems in finding a job and are at risk of being excluded from the labour market. Young people especially have been hit hard with an average unemployment rate of 22.3% in April 1997 (EU average: 20.5%). The unemployment rates for immigrants and handicapped persons are also higher than average.
Until 1990 long-term unemployment was negligible. However, in 1995 the long-term unemployed amounted to 20.2% of the total number of unemployed persons. Nevertheless, by European standards this is a relatively low percentage, as the average for the EU was 49.2%.
A number of measures, including programmes to reduce unemployment, have been implemented by the government in response to the economic crisis. Swedish labour market policy is based on the activation principle; compared to most European countries, Sweden spends a substantial amount on active labour market programmes. In 1993/94, almost 50% of total government expenditure on labour market policies was devoted to such programmes, while only just under 50% was spent on cash benefits.
Emphasis is laid on helping the unemployed to find suitable vacancies. This task is carried out by the public employment service (PES) offices who must ensure that vacancies are rapidly and properly filled and that job seekers find employment quickly. Unemployed persons must register with the PES to be eligible for unemployment benefits. The PES also makes decisions about placements in almost all the labour market programmes. The establishment of private employment agencies run for profit has been allowed since 1993. Employment agencies are permitted only to charge fees to employers and not employees. It was estimated in 1995 that private employment agencies filled only 0.4% of all vacancies.
Labour market programmes have been established to provide training and work experience through temporary jobs and through subsidies for employment. It is estimated that about 5% of the labour force, amounting in 1994 to 309,000 individuals, participate in labour market programmes.
In the government's programme from June 1996 the reduction of the rate of "open" unemployment (i.e. excluding those in labour market schemes) is a very important aim; the government has set a target of halving unemployment by year 2000. A precondition for the fulfilment of this goal is, according to the programme, a balanced national budget by 1998 and stable prices. In order to promote growth and employment, the June programme proposes a number of measures, including providing 130,000 extra places in education.
At 78%, the rate of participation in the Labour force among Swedish women is high in comparison to the EU average of 57.3%. Almost half of the Swedish labour force are women. In Sweden the unemployment rate for women is lower than that for men; in April 1997 it was 10% for women and 11.4% for men. These figures are remarkable as in most European countries the unemployment rate for women is higher than for men. In April 1997, the average unemployment rate in the EU was 12.5% for women and 9.5% for men. In Sweden, 43% of women work part time; in the other EU countries, the average is 31.3%.
It is notable that over 80% of workers in Sweden are members of a trade union. Finland and Denmark also have high rates of union membership, while the rates for France, Italy and Germany are 11%, 66%, and 42% respectively. The unions have traditionally been closely associated with the Social Democratic Party.
The three main organisations for employees are the Swedish Trade Union Confederation (LO) with 2.2 million members, the Swedish Confederation of Professional Employees (TCO) with 1.3 million members, and the Swedish Confederation of Professional Associations (SACO) with 385,000 members. Roughly half of the Swedish labour force are white-collar workers.
The LO and, to a lesser extent the TCO, are based on the industrial principle, so that the unions are organised according to the economic sector in which employees are working rather than according to the employees' profession.
The employers have also formed organisations. The most important employers' organisations are the Swedish Employers' Confederation (SAF) for employers in the private sector, the Swedish Association of Local Authorities, the Federation of County Councils, and the Swedish Agency for Government Employers (AgV). The largest employers' organisation is SAF, which represents 42,000 companies in the private sector with a total of 1.3 million employees. The member companies are relatively small as more than half of them employ five persons or less.
In Sweden, collective agreements traditionally play an central role in regulating relations between employers and employees. Collective agreements can cover any aspect of the employment relationship, such as wages, working conditions, and the terms and conditions of employment. The adoption of legislation in a particular field does not exclude the conclusion of collective agreements, provided that they put the employees in a better position than the legislative provisions.
Bargaining has traditionally taken place centrally between the two sides of industry, who negotiated on behalf of their member associations. However, since 1983 negotiations in the private sector have become increasingly decentralised with bargaining taking place more frequently at sector level. The Employers' Confederation (SAF) in particular is strongly opposed to central pay negotiations.
Central pay negotiations have enabled Swedish trade unions to pursue a policy of preventing large inequalities in wages. The success of the unions' policy of wage equalisation can be seen in the very low pay differentials in Sweden compared to other OECD countries. Whereas the difference between the wages in the highest and lowest deciles for industrial workers in the early 1980s was 34% for Sweden, it was 210% for the United Kingdom and 490% for the United States.
Swedish legislation does not provide for a minimum wage. Minimum pay rates are instead laid down in collective agreements. In order to compare accurately the cost of labour in Sweden with that in other member states, it is necessary to include not only wages, but also other costs, such as social contributions paid by the employer. Such a comparison shows that the costs per hour for Swedish workers are relatively high at ECU 19.02. This is surpassed only by Germany at ECU 23.14, the Netherlands at ECU 19.20 and Austria at ECU 19.19. When labour costs are related to hourly productivity, however, the figures are more favourable to Sweden, with net wage costs around the European mean.
The Saltsjöbaden agreement of 1938 established the so-called "peace obligation" between employers' organisations and trade unions. Consequently, Sweden experiences relatively few strikes and only a small number of days are lost each year; between 1988 and 1992, on average 100 days per 1000 employees each year were lost through strikes, compared to an annual average in the EEA of 153 days.
The bulk of the labour market legislation in force in Sweden today dates back to the early 1970's, when, for example, statutes on workers' participation in decision-making in working life, job security and the status of trade union representatives at the work place were adopted.
According to the Working Hours Act, normal working hours are limited to a maximum of 40 hours per week. This Act also contain provisions concerning inter alia overtime, night work, Sunday work and time off. Collective agreements stipulate weekly working hours ranging from 35 to 40 hours. The EC Directive on working-time was implemented in Sweden from 23 November 1996 but resulted only in minor amendments to Swedish legislation.
Under the Annual Leave Act, all employees are entitled to a minimum of 25 working days, that is five weeks, of annual vacation.
The Security of Employment Act protects employees against unfair dismissal. An employer can only dismiss an employee if he can demonstrate objective grounds for the dismissal. An objective ground for dismissal exists, for example, if there is lack of work so that one or more persons are redundant. However, if it is reasonable to transfer the employee to a different position in the same company, he should not be dismissed. Moreover, dismissals must generally respect the principle of "last in, first out".
Sweden has a relatively developed system of employee participation in the workplace, based on the appointment of trade union representatives who exercise rights on behalf of the employees. Trade union representatives are given specific rights to enable them to carry out their activities; they enjoy, for example, special protection against dismissal.
Employers must inform employees about the development of the company's activities, profitability and its personnel policies. Where an employer envisages major changes in the company's activities or to the employment conditions for one or more members of the trade union, he is obliged to consult the employees before taking any decision.
In private enterprises with at least 25 employees, employees have a right of representation on the Board. It has not yet been decided how to implement the Directive on European Works Councils, but some Swedish multinational enterprises such as Scansped, Electrolux, SKF, Volvo, and Ericsson have already concluded voluntary agreements.
The Swedish system of social protection is characterized by the payment of comparatively generous benefits - although the benefit levels have been reduced in recent years - and by the fact that the payment of benefits is not in general means-tested. The Swedish system of social protection is rather costly with spending amounting to about 40% of GDP in 1992, while the EU average was 27.1% of GDP. It is important to note, however, that two factors in particular make the Swedish system appear expensive: many services, such as health care, are provided directly by the public authorities, while most income transfers and benefits are subject to income tax.
Employers' contributions provide 55% of the funds for social insurance schemes. In this respect, Sweden differs from the other Scandinavian countries, most notably Denmark, where employers' contributions finance a much lower proportion of social expenses.
Sweden has a relatively high percentage of pensioners compared to the other Nordic countries; 18.1% of the population are old age pensioners, while in Denmark, Finland, Iceland and Norway the figures are 13.9%, 15.3%, 9.8%, and 14.5% respectively. At the same time Swedish pension benefits are comparatively generous; on average the old-age pension replaces around 65% of previous income, a replacement rate surpassed only by Germany with a rate of 73%. In comparison the income replacement rate for old-age pensions was 59% in Denmark, 50% in the Netherlands, and 47% in the United Kingdom.
In order to counter the growing costs of the old-age pension scheme, a pension reform plan was approved by Parliament in June 1994, which will replace the present system over a period of 20 years. The pension reform plan is very complex, but one of the most significant changes is the introduction of employee contributions to the scheme, with the employee and employer paying 50% of the contributions each. The Swedish pension system can be described as a three-tier system. The social insurance system guarantees a basic pension to all pensioners over 65 irrespective of their previous earnings. The social insurance system also includes an earnings- related supplementary pension - the ATP system. These two systems guarantee, as already mentioned, that on average pensions replace around 65% of previous income. The exceptions are the low earners who receive ad hoc supplements, and the high earners whose replacement rate is lower because of an earnings ceiling in the ATP-system. The third tier of pension provision, which is less well-known, consists of schemes arranged by collective bargaining.
The National Basic Pension covers all persons who have either resided in Sweden for at least three years or who have had three years of employment. A full basic pension is payable to persons who have lived in Sweden for 40 years; the pension is reduced proportionally for each year lacking. The pension is not based on previous income and therefore has a re-distributional effect. In 1996 a full basic pension amounted to SEK 34,057 (ECU 4,075), while for a married person the basic pension was SEK 27,849 (ECU 3,332).
The National Supplementary Pension (ATP) was introduced in 1960 and has become the more important of the two pension plans. The size of the ATP depends on years worked and income earned. For a person who has worked for at least 30 years, the pension will amount to 60% of the average pensionable income, calculated as income earned in the 15 years with highest income. The maximum annual pension in 1996 was SEK 138,356 (ECU 16,553). The ATP plan is financed through contributions paid by employers and self-employed persons of 13% of earned income without any upper limit.
A pension supplement is payable to persons who either do not receive any ATP or who are only entitled to a low pension. This pension, which amounts to SEK 19,689 per year (ECU 2,356) ensures that everyone receives a guaranteed minimum pension, composed of the basic pension and pension supplement, amounting to SEK 53,746 (ECU 6,431) per year for a single person with a full earning period, drawing pension from the age of 65.
There are four main schemes arranged by collective bargaining. One is for persons employed by the central government, one for employees of the local government (counties, municipalities and parishes), one for blue-collar workers in the private sector, and one for white-collar workers in the private sector. The purpose of the schemes is to increase the income replacement rate for most workers to 75% of final salary. Earnings above the ATP-ceiling are covered, except in the pension system for blue-collar workers. However, a decision was taken in 1996 to switch to a defined contribution system without a ceiling.
The sickness and work injury insurance schemes have been substantially reformed in recent years to curb expenditure. Until a few years ago, the insurance schemes were very generous with compensation rates at 100% of lost income, but since 1990 the income replacement level has been reduced significantly. From 1 January 1997 compensation is set at 80% of lost income. This level applies not only to sickness benefits, but also to work injury benefits received for the first 180 days of illness due to work injury, after which the compensation rate increases to 100%. In addition, since 1993 sickness benefits have been payable only after one day of sickness, and the definition of occupational sickness has been tightened, making it more difficult to become entitled to work injury benefits.
The replacement rates have also been lowered for pregnancy and parental benefits, as these benefits are generally payable at the same rate as sickness benefits and the child allowance supplement has been abolished. Pregnancy benefits are provided for expectant mothers who are unable to continue normal work; the allowance may be paid for up to 50 days during the last two months of pregnancy. The parental benefit allowance gives protection against the loss of income mainly in connection with the birth of a child. The parents are entitled to parental leave for a total of up to 450 days per child until the age of 8 years and the mother may begin to draw parental allowance 6 weeks before the estimated date of birth. Out of the 450 days of leave, 30 days are reserved for the mother and 30 for the father, while the rest of the days can be split as they wish. A general child allowance of SEK 640 a month is paid for children under the age of 16 residing in Sweden.
In Sweden there are two types of unemployment benefits: income-related unemployment insurance benefit and flat-rate unemployment benefit. In 1995, 68% of registered unemployed people received the income-related unemployment insurance and 7% received the flat-rate unemployment benefit. Payment of these benefits is conditional on registration with the PES and the recipients must be available for work or for participation in a labour market programme.
Unemployment insurance benefits are payable only to persons who have been members of an insurance society for 12 months and worked for at least 80 days before claiming benefits. These benefits have also been reduced, in order to cut public spending. Until 1993 unemployment benefit could amount to 90% of the insured person's previous income, but it has gradually been reduced to 75% from 1 January 1996. In addition, benefits can only be received after a waiting period of 5 days and the maximum benefit to be paid has been set at SEK 564 per day. The duration of the benefits is, formally, relatively short as a worker under the age of 55 can receive benefits for a maximum of 300 days, while for those over 55 the maximum duration of the benefits is 450 days. In practice, however, the system allows the payment of benefits for much longer periods of time as participation in labour market programmes gives the person a right to receive a new round of benefits.
The Swedish educational system is based on the principle that everybody should have equal opportunities regardless of ethnic background or area of residence and is based on a system of lifelong learning, emphasizing adult and further education, where training is an important part of the general education system. A recent OECD survey shows that a relatively high percentage of the Swedish population has a higher educational degree.
Swedish education is mainly financed from public funds and in 1993 total public expenditure for the whole of the educational system accounted for around 7.5% of GDP which makes Sweden one of the countries with the highest spending on education, the OECD average being around 5.8%.
Schooling is compulsory and comprehensive for nine years, from the age of 6 or 7. Around 98% of pupils attend public schools run by the municipalities, even though it is possible to choose between public and private schools. The school year is relatively short, covering 40 weeks with a minimum of 178 and a maximum of 190 school days.
The upper secondary education ("gymnasieskolan") consists of 16 nationally determined programmes, of which 14 are vocational programmes and 2 are programmes preparing for university studies. All programmes last for three years and all programmes cover certain core subjects, such as Swedish, English, Civic Education, Mathematics, and Sports and health studies. The vocational programmes include experience work at a work place for at least 15% of the time. Secondary education has become an education for everyone, as 98% of the pupils which attended compulsory school now enter 'gymnasieskolan', and only 8% of pupils drop out.
Sweden has 37 higher education institutions, including 7 universities and a number of small and medium-sized university colleges. Three different general degrees are awarded: The diploma or certificate after 2 years of full-time study ("högskoleexamen"), the Bachelor's degree ("kandidatexamen") after at least 3 years study and the Master's degree ("magisterexamen") after at least 4 years study. Distance learning has a long tradition in Sweden and a number of higher education studies are offered on this basis. In 1993, the capacity of higher education institutions was increased by about 30%. In 1994, just over 30% of young people in Sweden continued to higher education, which is offered free of charge. Students who attend higher education are entitled to receive financial assistance from the government, in the form of student grants and loans.
In accordance with the principle of lifelong learning, the Swedish system of adult education provides adults with good opportunities for improving their educational qualifications. The government has recently allocated more funds to ensure an increase in the general educational level and to strengthen professional training.
In order to encourage more adults to improve their educational qualifications, a special educational assistance system takes effect from 1 July 1997, allowing principally unemployed persons to follow basic education or upper secondary education for a maximum of one year while receiving an amount equivalent to either the unemployment insurance benefit or to the cash labour market assistance (unemployment benefit not linked to previous income).
As part of the Swedish government's active labour market programmes, vocational training is offered to unemployed persons or persons in danger of losing their jobs. Training and retraining activities are organised by the national employment training agency AMU, which co-ordinates about 100 training centres.
Sweden formally lodged an application for membership of the European Community in July 1991. A first step towards accession was the agreement on the European Economic Area (EEA), which extended the internal market of the Community to most of the EFTA countries. In a referendum on Sweden's accession to the European Union held in November 1994, 52.3% of votes were cast for, and 46.8% against, accession.
Sweden's accession to the European Union has no direct effect on the Swedish provisions on social protection (see Chapter 5), as Articles 117-122 of the Treaty of Rome on social policy, as well as Protocol (No. 14) on Social Policy to the Maastricht Treaty, do not provide the Community with any competence to adopt legislative acts harmonising the Member States' social legislation. The same applies to education and vocational training (see Chapter 6), because even though the EC Treaty contains a Chapter on Education, Vocational Training and Youth (Articles 126-127), it is expressly stated in Article 126 that the Member States maintain full responsibility "for the content of teaching and the organisation of education systems".
However, the general principle of non-discrimination as well as the detailed provisions contained in Regulation No. 1408/71 on social security benefits have required amendment of some of the Swedish provisions reserving certain rights and benefits to Swedish nationals or to individuals domiciled in Sweden.
The EC Treaty and the Social Protocol annexed to the Maastricht Treaty provide the Community with competence to adopt legislative provisions concerning labour market issues, but in view of the high level of protection generally afforded to workers in Sweden, and the relatively advanced provisions on equality, it has been necessary for Sweden to adopt only minor changes to labour market legislation.
It seems that Sweden will be able to maintain its tradition of regulating the labour market by way of collective agreements as Sweden was assured by the Commission during the accession negotiations that the Social Protocol to the Treaty on European Union would not require any change to the existing Swedish practice of regulating the labour market by means of collective agreements between the social partners.
European Parliament: 07/1997