Unemployment rate set to increase following new statistical definition
In October 2007, Statistics Sweden will amend its official statistics on unemployment according to international standards. As a result, people aged 15–74 years and full-time students will be included in the unemployment figures. Previous statistics only included those aged 16–64 years. Hence, the unemployment rate in Sweden will increase by about 2.1%; at the same time, employment will decrease by about 8.7%.
New standards require new figures
The government decided as part of the budget in the spring of 2007 to change the definition according to which unemployment is measured. As a result, Statistics Sweden (Statistiska Centralbyrån, SCB) will adjust its labour force figures based on official statistics from the EU, the International Labour Organization (ILO) and the Organisation for Economic Cooperation and Development (OECD). SCB’s monthly Labour Force Survey (Arbetskraftsundersökningar, AKU) will be modified from October this year.
The most important change in the AKU is that the proportion of the population aged 15–74 years and full-time students seeking jobs will be included in the official unemployment statistics. In May 2007, these students represented a total of 102,000 persons. Consequently, the unemployment rate will increase as students applying for jobs will be perceived as unemployed. In addition, employment will decrease as young people aged 15 years and older people aged 65–74 years generally have a low employment rate; this is due to the fact that young people of this age are still in school, while the older group are most likely retired.
Thus, according to the new definition, unemployment will increase from 3.9% to 6%, according to the data from May 2007 (Figure 1). Based on the same data, the employment rate will decrease from 75.5% to 66.8%, as the majority of people in the newly included age groups are not employed (see Figure 2).
Figure 1: Unemployment rate according to ILO and AKU figures, April 2005–May 2007, % of workforce
Note: The ILO data include people in the 15–74 age group, while the AKU data include those in the 16–64 age group.
Source: SCB, 2007
Based on May 2007 figures, unemployment increases from 3.9% to 6%
Figure 2: Employment rate according to ILO and AKU figures, April 2005–May 2007, % of workforce
Note: The ILO data include people in the 15–74 age group, while the AKU data include those in the 16–64 age group.
Source: SCB, 2007
Based on May 2007 figures, employment decreases from 75.5% to 66.8%
However, these figures are misleading in terms of illustrating the actual labour market situation in Sweden. According to the new definition, from May 2006 to May 2007 unemployment decreased from 7.4% to 6%, which corresponds to 181,000 unemployed people; the previous AKU method showed a decline from 4.8% to 3.9%. The actual employment rate – according to the ILO standard – thus increased by 1.9% to 66.8%.
Carrying out the AKU is a complicated process and the reform measures will take some time to implement. To adjust to the new standards, parallel statistics will be available during 2007.
Reaction to the new statistics
The Confederation of Swedish Enterprise (Svenskt Näringsliv) supports the new adjustment. Since Sweden is part of a globalised world, the revised definition of unemployment will simplify international benchmarking. The confederation also believes that the new definition is more coherent and can create a better understanding between interest organisations and political parties on unemployment issues.
The Swedish Confederation of Trade Unions (Landsorganisationen, LO) considers that the new statistics could create a problem when studying unemployment over a longer period of time, due to a shift in the base reference. However, LO is also optimistic that international benchmarking will be made easier.
Interestingly, the extent to which the new statistics will be used nationally in Sweden remains to be seen. As mentioned above, the newly added age groups in the labour force statistics usually have a low employment rate. In this regard, the new definition of unemployment will probably be more useful in the future since discussions are ongoing on increasing the retirement age.
Commentary
Before the parliament election last year, an intense discussion took place on how to measure unemployment. Depending on the source being used, unemployment figures ranged from 5% to 25%. Different political parties and interest organisations applied varying definitions of unemployment and how to perceive open and hidden unemployment that best suited their purpose. It is hoped that, with the new internationally recognised definition, future political discussions will focus on ways of combating unemployment, rather than arguing about its definition.
Thomas Brunk, Oxford Research
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