Government to impose mandatory membership of unemployment insurance fund

The government continues its efforts to intensify the criteria for obtaining unemployment insurance. Due to stricter rules in terms of unemployment insurance and reduced insurance levels, membership of unemployment insurance funds has fallen dramatically since January 2007. Thus, the government will speed up the policy process to introduce mandatory membership of an unemployment insurance fund by 2008, but the social partners are critical of this move.

Declining membership

According to the Swedish Unemployment Insurance Board (Inspektionen för arbetslöshetsförsäkringen, IAF), since 1 January 2007, the number of members in the unemployment insurance funds has fallen by about 210,000 people to 3,576,001 members at the end of April. The main explanation for this development is the increased insurance fees introduced by the new government (SE0702029I). As a result, some of the trade unions’ insurance funds have merged to meet the new development.

More flexible labour force

The new government regulation was mentioned in the 2007 spring budget (in Swedish) and is part of the government’s plan to intensify the rules relating to unemployment insurance. The proposal implies that the right to apply for jobs only in one’s ‘immediate surroundings’ will no longer apply from 2 July 2007. This does not mean that jobseekers have to accept any job in any location, but to obtain basic insurance benefits jobseekers have to search for ‘appropriate jobs’ related to their education. They must thus be ready to move to other parts of the country to take up a position. However, all cases will be based on individual assessment. This policy aims to encourage jobseekers to be more active and flexible in meeting labour market demands.

Mandatory membership of fund

This initiative planned by the government was in fact revealed before the elections last year. It was introduced because the government considered it a problem that 700,000 people are not members of any unemployment insurance fund. The Minister for Employment, Sven Otto Littorin, believes that decreasing membership levels today causes problems. The response seems to be to speed up the policy process of making membership of such funds mandatory. However, according to the minister, the main challenge lies in dealing with the large number of people outside the insurance system. The government’s objective is to have the expert enquiry regarding mandatory membership ready by next year, allowing for a proposition to be handed over to parliament next spring, and, finally, to be implemented by 1 July 2008. The guidelines for the mandatory insurance will be prepared as soon as the legislation is agreed.

Critical reactions

The opposition party in parliament is critical of how the new initiative is being handled. The party considers that the whole process is moving too fast and is undemocratic. Since the government initiative represents a fundamental change in the current welfare system, it is demanding a parliament enquiry where all parties can have their say. In addition, the Social Democratic Party (Socialdemokraterna) and the Left Party (Vänsterpartiet) disagree with the introduction of mandatory unemployment insurance, due to the fact that such insurance is historically linked to trade union density and is an important part of the Swedish model. The Swedish Trade Union Confederation (Landsorganisationen i Sverige, LO) takes a similar view to these parties. The Confederation of Swedish Enterprise (Svenskt Näringsliv) is also critical of the proposition and believes that unemployment insurance should continue to be voluntary, thereby remaining with the individual to choose whether or not to sign up for unemployment insurance.

Commentary

At present, the Swedish economy is experiencing an economic boom and the unemployment rate is falling. Some of the government reforms or reform proposals have created new situations for the Swedish labour market. The reform on mobility will probably create increased flexibility on the labour market resulting in greater possibilities to meet supply and demand. Concerning the reform on mandatory membership of unemployment insurance funds, the government will actually define legislation in an area previously managed by the social partners. It will probably also decrease some of the unions’ influence on the labour market.

Thomas Brunk, Oxford Research

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