Sweden: Government scraps contested labour market reforms

Sweden’s coalition government (Social Democrat and Green Party) has reversed changes to the welfare system made by the previous centre-right government. It has removed a cut-off point of 2.5 years for claiming sickness benefit and scrapped a scheme for mandatory workplace activities for the unemployed. The decision to reverse rather than reform the policies could be interpreted as a determination to show political direction.

Background

Like many EU countries, Sweden has struggled with high levels of sick leave. Since the 1980s, there have been discussions about the extent of sickness benefits and the system has been scaled back several times to control costs and sick leave rates. However, after a downward trend in the number of sick days taken between 2003 and 2010, levels and costs have risen significantly. Another labour market issue has been persistent long-term unemployment rates, and bringing these down has been a challenge for policymakers.

As of 1 February 2016, and as promised before the 2014 general election, the current government has reversed two reforms made in these areas by the previous government: the 2.5 year cut-off point for claiming sickness benefit (in Swedish); and the scheme for mandatory workplace activities for the unemployed (in Swedish). The reactions to the removal of both reforms have been varied and the debate at times intense, with government agencies and social partners also expressing their opinions.

Sickness benefit cut-off point

In 2008, Sweden’s then centre-right government controversially capped the duration of sickness benefit – sick leave with income insurance – at 2.5 years, which had previously been extendable indefinitely. Those receiving this benefit had to either: return to work; turn to other social benefits such as social welfare or early retirement; or enrol in a three-month return-to-work programme. However, half of those who had reached the cut-off point started a new period of sick-leave (in Swedish) after a short rehabilitation period. Some even reached the cut-off point three times in succession (in Swedish), re-applying for sickness benefit during the eight-year lifetime of the reform. Opinions were split on the introduction of the cut-off point.  Opponents – concerned about people who were forced to apply for social welfare or participate in activities while still sick – found the reform to be harsh and misdirected, while others claimed it was, and still could be, crucial to help curb rising sick leave levels, motivate recovery among those on sickness benefit and discourage abuses of the system.

The Swedish Social Insurance Agency (Försäkringskassan), the Swedish Social Insurance Inspectorate (ISF), and Arbetsförmedlingen – the three agencies involved in the planning, administration and evaluation of benefits – have raised concerns about its removal, the main argument being that already rising costs will become unmanageable. The ISF has also analysed the effects of the system that controls sickness benefit (consisting of several fixed control points at given intervals), which concluded that lack of such control slows people’s return to work. It also noted that costs began to rise under the system, but said that this was not the fault of the system itself, more the increasingly lax way it was applied by civil servants (in Swedish). It has also been argued that the cut-off provided an impetus for the agencies to handle cases efficiently and for beneficiaries to engage in rehabilitation.

Social partners’ perspectives

Sweden’s social partners have expressed differing opinions, with both the union confederations and employer organisations being split on the issue. On the union side, the Swedish Confederation of Professional Associations (SACO), the main trade union confederation for academics, has echoed the opinion of government agencies, saying the cut-off point was a flawed but basically sound reform (in Swedish). However, blue-collar confederation The Swedish Trade Union Confederation (LO) disagrees. It also referred to the rising costs of the cut-off point system and argued that financial insecurity for the sick hinders rather than motivates recovery (in Swedish). On the employer side, the Swedish Association of Local Authorities and Regions (SKL) supports removing the cut-off (in Swedish, 116 KB PDF). The SKL, who represents both an employer and local authority perspective for the Swedish regional and local public sectors, points to the problem of rising costs in (locally funded) social welfare due to people turning from sickness benefit to other benefits when they reached the cut-off point. Meanwhile, the Swedish Agency for Government Employers (Arbetsgivarverketargued against the removal of the cut-off (in Swedish, 1.26 MB PDF) for similar reasons to those of other government agencies and SACO.

Workplace activities for the unemployed

In 2007, the same government reorganised the activity schemes for the long-term unemployed through the Swedish Public Employment Service (Arbetsförmedlingen). After spending 1.5 years in the principal programme, unemployed people would automatically be assigned workplace activities. These, however, could not be, or compete with, actual jobs. They were also unpaid and were organised mainly by businesses and civil society organisations which were paid by the government to provide such roles. Some critics claimed that the mandatory workplace programme forced unemployed people to do menial tasks for free, instead of improving their skills or helping them to find a real job. The measure never shook off this criticism, even though it was reformed several times during the previous government’s term.

Social partners’ perspectives

Removing the workplace activity scheme has proved popular, but it has not been without criticism. Some people feel that social enterprises (which offer work training for those furthest from the labour market) will not survive and the main Swedish employers’ confederation, the Confederation of Swedish Enterprise (Svenskt Näringsliv), has been sceptical. An opinion piece on its blog site argues that the new government programmes cannot handle the large number of people involved in the scheme (in Swedish). The efficiency of the programme has also been debated. Although most participants said they were satisfied with their assignments, few thought the activities brought them closer to getting a proper job. The Institute for Evaluation of Labour Market and Education Policy (IFAU) speculated that the activities might also have a lock-in effect (in Swedish) if they provided indefinite work without actually leading to paid employment. At the same time, those sceptical about ending the programme say a better alternative is unclear considering how far from the labour market many participants are.

Commentary

The reversal of both policies could signal a shift in Swedish welfare politics, corresponding to the shift in government. Even in the face of criticism by several government agencies, the government has decided to reverse, rather than to reform the contested policies, which could be interpreted as a determination to show political direction and to create political distance between the current and previous governments.

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