Unions and business associations will administer new unemployment insurance

Swedish trade unions and business associations will have an even greater role than before in the administration of unemployment insurance, according to a government bill presented to Parliament on 13 March 1997. At the same time, workers' contributions to the insurance system will be increased and the qualification criteria for receiving benefits will be tightened up.

When the Social Democrat Government presented its bill on a new, general unemployment insurance (prop 1996/97:107) on 13 March 1997 it had already secured a parliamentary majority for the proposal through negotiations with the Centre Party. It had also secured the support of the two major trade union confederations,LO (Landsorganisationen) and TCO (Tjänstemännens Centralorganisation) despite the fact that the two confederations were not entirely enamoured with the proposals.

The bill deals both with the general structure and administration of unemployment insurance, including its financing, and the insurance conditions.

Unemployment insurance in Sweden

Ever since its inception about 100 years ago unemployment insurance has been a voluntary insurance, administered by private associations established by the trade unions (and in two cases by organisations for small traders). But although it is formally a form of private insurance, nowadays only only a tiny proportion (3% in 1995) is financed by contributions from individual members' contributions; the rest is a form of state subsidy where the Government in turn finances its subsidy using revenue from the payroll tax.

Most workers become automatically affiliated to the unemployment insurance by joining a trade union. Their contribution is included in the membership fee. However, It is possible to be a member of an unemployment insurance fund without joining a union. After 12 months of membership (24 months for self-employed persons) the worker is entitled to benefits, provided also that he or she has done a certain amount of work for a certain period. The compensation is related to the worker's previous income up to a certain limit. The maximum benefit is SEK 564 a day.

About 10% of the labour force are not members of any unemployment insurance fund. Some of them simply cannot be, for example because they have worked less than 17 hours a week or because their period of unemployment benefits has already expired. Others refrain from joining for reasons of principle, for example because they disapprove of the close links to the trade unions. If these people become unemployed, they can receive an allowance from the state known asKAS (kontant arbetsmarknadsstöd), which is SEK 230 a day irrespective of previous income.

The present system has been criticised by employers and non-Socialist parties. In their view it favours the trade unions. In June 1994 the non-Socialist coalition Government, including the Centre Party, introduced a new, general and compulsory insurance, which provided an opportunity for receiving income-related benefits even for workers who were not members of an unemployment insurance fund. Three months later the Social Democratic Party won the general election and repealed the new legislation, on the grounds that it acted against the interests of the unions.

The Government's proposals

The Government now proposes that the present unemployment insurance and the KAS should be replaced by a single form of general insurance, that is partly compulsory and partly voluntary. It would still be financed principally by the state, but administered entirely by the trade unions and business associations. It would give everyone a basic protection corresponding to the KAS, whether they were members or not. In addition, those who joined the unemployment insurance funds would be entitled to benefits related to their income.

To satisfy the interests of those who, for reasons of principle, refuse to join the existing unemployment insurance funds, the Government has invited national organisations that represent employees and business people respectively to establish an entirely new, independent fund.

The Government gives two reasons for strengthening the role of the private associations in the administration of the insurance: its effectiveness and the fact that it is also economical.

The Government also proposes that Parliament should abolish some provisions that were instituted last year, but have yet to come into force. One of these is the rule that no one should be in receipt of benefits from the insurance fund for more than three years. The Government still emphasises that the unemployment insurance is an "adjustment" insurance, not a life-time income guarantee, and that it will propose a three-year limit again later on. However, it wants to carry out further investigations to ascertain what kind of provision should be made as an alternative to unemployment benefit for those who have been in receipt of benefits for three years.

In addition, the qualifying period of employment will be will be changed once again. According to the Government, in order to qualify for entitlement to benefits for the first time, claimants have to have worked for more than 70 hours per month during a six-month period. The Government believe that this qualifying condition is more than adequate to meet the needs of claimants and yet it is more stringent than a decision made by Parliament in 1996, which has yet to come into force.

Finally, compensation from the insurance funds will be increased from 75% to 80% of the worker's previous income. However, the benefits are limited to SEK 580 a day, which means that those who earn more than SEK 16,000 a month will not gain from this. Indeed, a majority of the members of TCO unions and many blue-collar workers will be unaffected. To finance this increase, the unions had to accept an increase in contributions to the unemployment insurance funds.

Commentary

The unemployment insurance system has been a matter of controversy for some time and many hasty changes in legislation have taken place during the last few years. The current proposals, however, have been carefully thought out, and these proposals should dampen down any major disputes about the system. (Kerstin Ahlberg, Arbetslivsinstitutet)

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