Decline in membership of unemployment insurance fund due to changes in system

Trade unions are already beginning to witness the effects of the recent amendments to the country’s unemployment insurance system, introduced by the new government on 1 January 2007. The amendments have resulted in increased membership fees and stricter qualification requirements for receipt of benefits, along with lower compensation levels. As a result, trade unions have started to notice a fall-off in members of the unemployment insurance fund.

On 1 January 2007, changes in the unemployment insurance system came into effect. The government’s main motive for introducing the changes is to increase employment among unemployed people, by making unemployment benefits more of a short-term measure between jobs rather than an end in itself.

Unemployment insurance

The Swedish unemployment insurance system is made up of some 36 unemployment funds in total. Unemployment insurance is financed by two sources: through grants received from the government, derived from employers’ labour market contributions, and through finances received from unemployment insurance funds, which are derived from membership fees. In 2005, unemployment insurance funds were used to finance 13.5% of overall unemployment insurance costs, according to the Swedish Unemployment Insurance Board (Inspektionen för arbetslöshetsföräkringen, IAF). Since its introduction in 1935, the government grant used to subsidise unemployment insurance costs has steadily increased from approximately one third to around 87% of the total cost of unemployment benefits.

Amendments to unemployment insurance system

The amendments made to Sweden’s unemployment insurance system relate to the financing of insurance, eligibility requirements for receipt of compensation and levels of compensation. Accordingly:

  • membership fees for unemployment insurance are to be increased by up to SEK 300 (around €32 as at 22 March 2007) a month for employed people;
  • stricter qualification requirements have been introduced for eligibility to receive unemployment benefits. The number of hours worked to qualify for unemployment benefit has been increased from 70 to 80 hours per calendar month over six months within the previous 12 months; moreover, studying at university no longer constitutes a qualifying factor for eligibility to receive unemployment benefits;
  • from 5 March 2007, compensation levels for unemployment have been reduced to 80% of a person’s last salary in the first 200 days of unemployment, based on a salary ceiling that has been decreased from SEK 20,700 (about €2,225) to SEK 18,700 (approximately €2,010) as of 1 January 2007; after 200 days of unemployment, the level of compensation is calculated on the basis of 70% of an individual’s salary. Following 300 days of unemployment, it is possible to participate in a job and development guarantee (jobb- och utvecklingsgaranti) scheme, which provides for compensation amounting to 65% of a person’s salary or a maximum of SEK 680 (about €73) a day.

Reactions to amendments

Both the Swedish Confederation of Trade Unions (Landsorganisationen, LO) and the Swedish Confederation of Professional Employees (Tjänstemännens Centralorganisation, TCO) criticised the government for the short response time allowed to react to the proposed amendments. On 27 December 2006, the Social Democrats reported the government to the Standing Committee on the Constitution (Konstitutionsutskottet, KU) for not adhering to existing practice, by allowing sufficient time for others to respond to the proposed amendments.

At the same time, trade unions have criticised the amendment regarding stricter qualification levels for receipt of unemployment benefits; among other things, they are concerned about the negative impact it will have on part-time employees, who could face difficulties in fulfilling the eligibility requirements, particularly following periods of absence from work due to illness or childcare. TCO and the Swedish Confederation of Professional Associations (Sveriges Akademikers Centralorganisation, SACO) believe that women working part time could be left particularly vulnerable.

Commentary

Although it is too early to assess the effects of stricter eligibility requirements and decreased compensation levels in relation to unemployment insurance, some early indications regarding the impact of increased membership fees have emerged. In particular, the loss of members from unemployment funds is being attributed to the increase in insurance fees. For example, the unemployment fund of the Swedish Union of Local Government Officers (Svenska Kommunaltjänstemannaförbundet, SKTF) has lost twice as many members between the end of December 2006 and the beginning of February 2007 as it did in the entire previous year.

The increased membership fees pose a new problem for many trade unions. In the past, the majority of trade unions have required members to pay unemployment fund membership fees as well as general membership fees. Given the recent hike in unemployment insurance fees, and in order to avoid loss of members, trade unions are now looking into the possibility of making the unemployment fund membership mandatory.

However, whether or not this will pose a long-term problem to trade unions has yet to be fully determined either this year or in 2008. The government has suggested that unemployment fund membership be made mandatory for all employed people - a possibility which is set to be investigated this year.

Jenny Lundberg, Oxford Research

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