Independent organisations (such as the OECD) and research institutes (such as the Institute of Labour market Policy Evaluation) who has investigated and evaluated the reforms undertaken, has concluded that the policy pursued will indeed increase potential employment and decrease unemployment, other things equal. - This does, however, not mean that all difficulties are conquered; we still have a long way to go and the crisis that hit the world economy 18 months ago shows clearly how vulnerable our labour markets are to events beyond our control. I will return to the crisis and our crisis-management in a little while. However, before I do that, I’d like to look briefly at a slightly broader question:
The effects – in terms of decreasing production & employment and – consequently – increasing budget deficits – are already obvious, but these are really only the short run effects of the crises…
and… The largest threat at present is not unemployment per see but the risk that those presently becoming unemployed will give up, quit looking for job and leave the labour force Not a theoretical possibility, but a likely scenario; this is what happened in Sweden as a consequence of the crises in the 1990s Even though we’ve seen this happening in Sweden, this is not a Swedish phenomenon – on the contrary: it happens everywhere as u increases and persist a while. - This scenario is deeply worrying. Not only does it threaten our possibility to protect – or extend – our current welfare-systems, and, consequently, provide for those not able to care for themselves. - It has also far reaching consequences for those of our citizens who are – or will become – stuck in joblessness. - Experience show that the adverse impact of long-run unemployment extends far beyond the negative income effect: Long-run unemployment and labour market exclusion affects health and quality of life; it has also severe and long-run effects on the young generation who are brought up in environments marked by unemployment and exclusion.
- In order to counteract this outcome we’ve worked simultaneously on two different frontiers; - one concerned with keeping those now becoming unemployed active and; - the other concerned with increasing labour market access for those already outside or at the margin of the labour market. - A first question does, consequently, concern those recently hit by unemployment: What needs to be done in order to avoid a scenario where they drift into inactivity and labour market exclusion? The answer is simple: Keep them active! - This can be achieved in various ways – through, for example, education, labour market programs, work time arrangements and/or active job search in return for benefits, just to mention a few examples. The important thing here is THAT – not HOW – this is achieved. - The second question refers to those already excluded from - or at the margin of - the labour market. In this case other measures are needed. Exactly what depends, however, on the point of departure. - Some countries may need to look at the access to education, others at wage costs and/or poverty traps, in yet other cases coaching, training and activation strategies are needed. - I repeat: the important thing is THAT barriers are lowered, not exactly HOW this is achieved.
Vill du ha med denna?
We need to take the crises seriously, but we need also realize that there is no quick fix/no magic bullet. We do need to act – but not in a way that decreases our possibilities to face our long-run challenges. We need to take responsibility also for the long-run sustainability of public finances and social protections systems – or else, we will not be able to take care of our old and/or weak ones 10-15 years from now. There is also a tomorrow – and the best way to prepare for this is to: - uphold labour force participation; - increase access to employment and - make the reforms necessary in order to make our labour markets structurally stronger.
Eva Uddén Sonnegård
The Government’s Economic Policy Eva Uddén Sonnegård State Secretary Ministry of Employment
Individuals supported by social transfers Thousands of full-time equivalents, forecast 2009-2011 Source: The Ministry of Finance. Disability pension Sickness allowance Social assistance Labour market program Unemployment
Swedish population growth up to 2050 Change compared to 2009 Source: Statistics Sweden.
Three legs: Increase supply Increase demand Improve matching Improved mobility, more flexibility => focus on excluded groups ” Make it more worthwhile to work ” ” Make it easier and less costly to take on new employees ” ” Matching people to jobs”
The Government’s economic policy affects Labour Supply <ul><li>through: </li></ul><ul><li>Earned income tax credit </li></ul><ul><li>Lower unemployment benefits </li></ul><ul><li>Limited possibility for part-time unemployment benefits </li></ul><ul><li>Longer waiting period for unemployment benefits </li></ul><ul><li>Changes in finance of unemployment benefits </li></ul><ul><li>Changes in sick-leave benefits (lower ceiling, increased control) </li></ul><ul><li>More and better ways back for people on sick leave </li></ul><ul><li>Effective labour market programmes </li></ul>
The Government’s economic policy affects Labour Demand <ul><li>through: </li></ul><ul><li>“ New start jobs” – compensation by twice the employers’ social security contribution when hiring long term absent (unemployed, sick, social aid recipients and newly arrived refugees) </li></ul><ul><li>Decreased employers’ contributions for youth and from 65 years of age </li></ul><ul><li>Increased possibilities for temporary contracts of 24 months </li></ul><ul><li>“ Step-in jobs” for newly arrived refugees in combination with Swedish language studies </li></ul><ul><li>Tax reductions on RMI (repairs, maintenance and improvement of housing) and household-related services </li></ul>
The Government’s economic policy affects Matching <ul><li>through: </li></ul><ul><li>Modernisation of the labour market institutions – a nationally integrated authority for Public Employment Service </li></ul><ul><li>Individual action plans and intensified coaching </li></ul><ul><li>Job and development guarantee </li></ul><ul><li>Job guarantee for youth </li></ul><ul><li>Practical work experience </li></ul><ul><li>Supplementing private actors </li></ul>
Recent changes in labour market policy affect potential employment OECD Economic outlook: Will increase potential employment Institute of Labour Market Evaluation: Will probably decrease equilibrium unemployment by 1-2 percentages
Number of employed Seasonally adjusted data, 3-month moving average Source: Statistics Sweden.
Swedish unemployment 1980-2009, forecast 2010-2014
Short run effects of the crisis <ul><li>Decreased production & increased unemployment </li></ul><ul><li>and, consequently; </li></ul><ul><li>Decreased tax revenues & increased budget deficits </li></ul>
However… <ul><li>The largest threat ≠ unemployment per see </li></ul><ul><li>but instead </li></ul><ul><li>that the unemployed will give up & leave the labour force </li></ul>
HOW? By protecting the employability of individuals <ul><li>By keeping the unemployed active , through - education - labour market programs - work time arrangements - active job search etc </li></ul><ul><li>By lowering the barriers to employment , throug - incentives (ie making work & transitions pay), - coaching/training/activation strategies, - lowering wage costs </li></ul>
Crisis management The Swedish example 1. Accept structural change as the root of growth Increase labour demand through, for example: Investments in infrastructure, tax credits for RMI*measures, decreased social security contributions, support to local authorities Provide extra resources to: 2. Active labour market policy-measures in particular coaching & matching 3. Regular education & training * RMI = repairs, maintenance & improvement
Expansionary economic policy in Sweden Automatic stabilizers and spending. Source: OECD Economic Outlook nr 85 Procent av BNP
Budget deficits Financial savings 2010 Source : OECD Economic Outlook nr 86 Procent av BNP
Policies continue to: <ul><li>Uphold labour force participation </li></ul><ul><li>Increase access to employment </li></ul><ul><li>Make our labour markets structurally stronger </li></ul>
Social exclusion January 2010 Source: Statistics Sweden, Swedish Social Insurance Administration, Swedish Public Employment Service.