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Sweden's enormous, hidden unemployment rate

How reliable is the official Swedish statistic that 5.4% of Swedes are unemployed? Every single day, one in every 20 employed Swedes is "out sick". That, as bizarre as it sounds, is just the tip of the iceberg: one of Sweden's leading leftist economists has broken through the blue line to tell the truth. True Swedish unemployment is in the range of an obscene 20-25%. So much for the Socialist paradise. Full employment is a pipe dream when you give people incentives not to work, and disincentives to work.

Estimating the true unemployment rate
Below is a calculation of true unemployment in Sweden. All figures are from the Swedish Statistical Agency (SCB) Labor survey, first quarter 2005, except the number of individuals only on welfare, which have been taken from Tax researcher Dane Nordlings homepage. The number on Sick Leave have been adjusted for the number of working hours.

Population 16-64 - -- - - 5.755.000

Not in labor force - - - - - - 1.365.000
Early retired - - - - - - - - - (494.000)
Seek work - - - - - - - - - - - (150.000)
Get Welfare - - - - - - - - - - (84.000)

Labor Force - - - - - - - - - 4.391.000
Unemployed (5.6 %) - - - - - (245.000)
unemply programs - - - - - (130.000)
Employed in Real job - - - - 4.016.000
Absent from work - - - - - - (554.000)
Of which on Sick leave- - - (216.000)

Actually work - - - - - - - 3.469.000
Some 4.0 million (70 percent of adult population) are in productive activity rate, while 1.2 million (20 percent of adult population) are living of welfare and Health or Unemployment insurance alone. The remaining 10 percent of adult population are supported by the state by other means (such as parents leave and absence from work due to care of sick children).

Range of estimate of true unemployment: 8.5%-26%
So how high is Swedish unemployment? The question hinges on who we include, and especially in Sweden’s case on how much of early retirement and sick leave is hidden unemployment. Even the Swedish government acknowledges that the 130.000 in “Labor market political programs” are simply unemployed, so we start from a low estimate of 8.5 percent unemployment.

For international comparisons we probably should not include the students and other’s who want to work but cannot find a job, since this category exists in all countries. This figure is however interesting for policy matter in Sweden. Also including welfare recipients we get 13.2 percent unemployment. A difficult question is what to do with all the absentees. If we include all of them we end up with 26 percent unemployment. Note that we are not including absentees for any other reasons than Sick Leave and are also excluding the underemployed.

Now this last figure is clearly too high. Many people who report sick are of course really too sick to work. This latter figure does however show us the range of the unemployment figure, and is probably closer to the actual number than 8.5 percent unemployment. An important question is how many who could go back to work if they did not have the option to stay home and live of government welfare. An international comparison might be interesting.

Sweden had some 26 dayslost per worker in 2002. In Canada, also a large welfare state, the corresponding figures (2004) were 7.5 daysper full time worker lost every year due to sick leave. Britain had a similar figure, 7.2 dayslost per worker and year in 2003.

Our best estimate of true unemployment figures in Sweden
A plausible estimate of how much of early retirement that is due to inability to work can be attained by using the rates of early retirement in Sweden in 1960. This is an exaggerated figure, since people are much healthier today and have less demanding jobs. Also, Sweden had a welfare state even back then. The sick leave that is due to inability to work can be estimated by using a figure slightly above that of Canada. Also this is an exaggerated figure, as Canada is also a welfare state.

By using these estimates and not counting the forced student, the underemployed or all other absentees, the Swedish unemployment rate would be 19.8 percent. This is fully 962.000 out of work of a workforce of 4.848.000.
Quote is selective; read the whole thing.

Posted by evariste on Apr 17, 2006 2:00 pm

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