Sweden: Improving the labour market situation of people with disabilities

Three recent reports investigate the issues faced by workers with disabilities in Sweden. Their findings indicate that people with disabilities who lose their jobs are likely to suffer much greater income loss than people without disabilities who are laid off. Although participation in labour market programmes can lead to a higher income, it can also result in the recipients  being stuck in such programmes.

Background

People with disabilities face considerable difficulties in the labour market in many countries. However, three recent report show that social and labour market policies in Sweden designed to reduce the social and economic differences between people with disabilities and the rest of the population could have important consequences at both individual and national level.

The problems faced by people with disabilities on the Swedish labour market were addressed in three separate reports published in October 2014 by the Institute for Evaluation of Labour Market and Education Policy (IFAU).

The first report, Factors associated with occupational disability classification, investigates the importance of the criteria used by the Public Employment Service (PES) to determine whether a person has an occupational disability.

The second study, The differential earnings and income effects of involuntary job loss on workers with disabilities, investigates the different impacts of involuntary job loss on earnings and income for people with disabilities.

The final study, The effects of targeted labour market programmes for job seekers with occupational disabilities, assesses how labour market interventions could improve the prospects of work for people with disabilities. It looks at areas such as wages, disposable income, and sickness pay.

Methodology and data

The three studies are all quantitative and are based on statistics from the Swedish authorities. All focus on people classed as occupationally disabled by the PES.

The study dealing with the classification of occupational disability looked at everyone aged 18–64 who was registered as a jobseeker with the PES between 2003 and 2008. The authors also set out to explore whether there was a correlation between being classified as occupationally disabled and the peson's individual characteristics and the year they registered.

The study dealing with the differential earnings and income effects of involuntary job loss looked at these effects on people who lost their jobs between November 1999 and October 2005. Exact covariate matching is used to construct a sample of job losers without disabilities who have identical socio-demographic characteristics to the sample of job losers with disabilities. The authors then compared the different effects of job loss on earnings and income on the people in the two samples.

In the third study, on the effects of targeted labour market programmes, the sample group consists of individuals with occupational disabilities who started participating in targeted labour market programmes during 2004. Using propensity score matching, the average treatment effect is estimated for participants in wage subsidy schemes, in sheltered public employment, and employment at Samhall – a Swedish state-owned company whose aim is to provide employment for people with disabilities. To estimate the effects of these programmes, each participant was matched with a jobseeker who was occupationally disabled and who had the highest predicated probability (calculated through various socio-demographic characteristics) of being eligible for such a targeted programme, but who did not participate in any of them. The effects were measured five years after the programmes were initiated.

Key findings

Indicators for classification

The analysis shows that being classified as occupationally disabled by PES is associated with particular indicators, such as:

  • educational level;
  • previous earnings;
  • receipt of means-tested social assistance;
  • previous unemployment.

Men are more likely than women to be classified as occupationally disabled. The likelihood of being classified as occupationally disabled because of physical impairment has largely decreased (although for some kinds of physical impairments this has remained unchanged) while the likelihood of receiving a disability code for mental and learning impairment has grown. These results are in line with the government’s goals for prioritised groups which were introduced in 2006 and 2007.

Gap in earnings

The results also show that incomes vary for people with and without disabilities who lose their jobs. In the two groups studied, earnings had begun to diverge seven years before they lost their jobs. This is because people with disabilities showed a greater incidence of long periods of absence due to sickness or rehabilitation, which might suggest that these factors not only result in the differential impact of job loss but also the impact of becoming classified as occupationally disabled by the PES. The growing divergence of earnings between the two groups slowed at the moment of job loss, but did not reconverge. This may be because many of those who lose their jobs then retire due to their disabilities. However, between 61% and 90% of the gap in earnings between the two groups was replaced by social insurance claimed by those with disabilities. There are also differences in income and earning loss between different disability groups. Those with the largest income differentials are people with mental or cognitive disabilities who have lost their jobs.

Transition to employment

The third report shows that labour market programmes have positive effects on income, disposable income and employment. This was expected because participation in all three programmes entails, by definition, employment and pay. However, the programmes also seem to lead to some negative effects. The participants’ chances of obtaining unsubsidised employment five years after the programme started is, on average, seven percentage points lower than for the control group. Two possible explanations for this are:

  • less effort by jobseekers to find a ‘regular’ job while they have subsidised employment;
  • the PES makes less effort to find regular employment for this group than they do for workers without disabilities.

Two official government reports (Sänkta trösklar högt i tak; Arbetshjälpmedel och försäkringsskydd för arbete på lika villkor) published in 2012 suggest improvements for these programmes. In December 2013, the Swedish Parliament’s Labour Market Committee urged the Government to act on the reports’ recommendations, one of which is to help private social enterprises create meaningful jobs for people with disabilities. However, the Swedish Trade Union Confederation (LO) has criticised this proposal, suggesting that placing people in labour market programmes should be done in consultation with them. LO and the Swedish Confederation of Professional Employees (TCO) also argue that collective agreements should be demanded for persons participating in these programmes.

Commentary

The data used for the studies do not analyse jobseekers’ actual reduced work capacity. It is also stressed that the definition of disability is highly contentious. Jobseekers may have different incentives for accepting a disability code. Having such a code could give the jobseeker the right to particular benefits, but being labelled as occupationally disabled may also lead to lower incomes, unsubsidised employment and stigmatisation. It would therefore be of interest for policymakers to try to tackle the lock-in effects that occupational disabled persons face.

The authors stress that labour market programmes have positive effects on jobseekers’ wages and disposable income. Since these programmes are very costly, a cost-benefit analysis would be valuable.

 

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