Economic Integration

Active labor market intervention

• Active labor market intervention
• programs to increase the demand for labor, programs to prepare labor to new job openings, and to match supply and demand through job information and placement services.
• Welfare system
• universal coverage
• Unemployment benefit of 90% of gross wage
• Generous retirement and disability pensions-state pension of 65% of previous income
• Income support provided to parents who stayed home to care for children;
• family allowances for children (about $135/month/child until age 16)
• National health insurance
• free public education through graduate school.
• Sweden very successful in reducing inequality
• the most even distribution of after-tax income in the West.
• Welfare state successful in 70's & 80's

Although, Swedish firms are capitalist in terms of ownership, the strength of unions, powerful labor laws and other government redistributions place constraints on Swedish managers’ ability to operate. (Ericsson, IKEA, Saab, Volvo, Electrolux)

• Although, Swedish firms are capitalist in terms of ownership, the strength of unions, powerful labor laws and other government redistributions place constraints on Swedish managers’ ability to operate. (Ericsson, IKEA, Saab, Volvo, Electrolux)
• Problems
• High cost
• social spending represented 29% of national income in 2002, compared to 21% OECD average (but down from 37% in Sweden in 1993). Total taxation was 51% of GDP in 2001, compared to 37% OECD average or 29% in USA.
• High taxes have driven a significant part of income and production underground in the form of do-it-yourself home improvements and barter activities.
• High unemployment
• 8% in 1995
• High debt (90% of GDP) & deficits (10%)
• Slow growth (1-2%) - further reform needed?
• Disincentives
• e.g. unemployed person not obliged to take job unrelated to previous occupation