The real Swedish jobless rate is 15 percent

by on June 15, 2006 at 8:30 am in Data Source | Permalink

You might think this post is "libertarian cackling with glee," but in fact I was surprised to see this.  The problem is also expected to get worse, read the whole thing.

1 Jake June 15, 2006 at 9:24 am

I wonder how much the government’s reported rate would differ from an independent study in the U.S.?

2 mike June 15, 2006 at 9:47 am

I wonder what percentage of the unemployed are immigrants? Muslims immigrants, from what I understand, have a very high rate of unemployment in Scandinavia.

This site points out the phenomena in neighboring Denmark:
http://drhelen.blogspot.com/2006/02/need-welfare-check-just-threaten-to.html

3 Javier June 15, 2006 at 10:01 am

As much as I’d like to join in the cackling with glee, some perspective first. Sweden’s labor force participation rate is 63.7 percent (see here). This compares with a labor force participation rate of around 66 percent for the United States. So no cackling just yet.

4 Barkley Rosser June 15, 2006 at 11:30 am

This is one of those periodically appearing articles that
trumpets that the Swedish model is about to commit suicide,
doom and gloom, etc. The quick overview is that in some sense
the Swedish model died 20 years ago when their nationwide
collective bargaining arrangement broke down, arguably up
until then a successful form of Post Keynesian policy. Their
macro performance had been spectacular, very low unemployment
and inflation by any measure on a world scale. The main
problem had been a gradual downward drift of real per capita
income from being in the top three (with US and Switzerland)
into the teens or even 20s where they are today.

After this breakdown, inflation soared triggering a political
shift in 1990. There were major fiscal cutbacks and tax changes
and the unemployment rate soared. Sweden became a “normal”
country in which inflation is at least partly tamed by the
threat of unemployment. At the time there were many articles
along lines very similar to this one predicting doom and gloom
and that the unemployment rate would not come back down again
(it was well over 10% officially at one point).

Well, the unemployment rate came back down and Sweden began
growing fairly respectably again, although it has not regained
its high real per capita income status. That there are people
on retraining and makework programs was true then and is not
more true today.

Most of the scary part of this article is about projected job
losses due to possible outsourcing. But why is Sweden in any
more danger from this than the US or any of the other high
income European countries? Nothing is stated along those lines.
Indeed, compared to most of the rest of Europe, Sweden looks
pretty good on the unemployment front these days, although it
did not in the early 1990s.

Finally, maybe it is on the edge of a cliff and will fall off,
as has been predicted so many times over the last several decades,
but Sweden still sits pretty high up. The summary had it falling
from 5th to “112th” in “welfare,” whatever that is, although probably
that should have read “12th.” But that does not accord with the
numbers I see. According to the latest UN Human Development
Report, Sweden is still in third place on the overall Quality of
Life index (Human Development Index), that combines life expectancy
with education with real income. It was behind only Norway and
Iceland. It is still Number One on quality of life for women
and Number One on the probability that a five year old male will
live to 65. However, it has fallen to second place in having the
world’s lowest poverty rate, behind neighboring Finland, who is
more vigorous about keeping out immigrants.

I do hear anecdotes. So, I have a good friend who is one of
the few conservative economists in Sweden (he is from Estonia
originally). He complains that he is on a waiting list to get
his back problem fixed, and that his son cannot get a job. The
son composes very esoteric modern classical music. I wish him
the best, but also suspect he might be having trouble getting a
job in that field in the US as well.

5 Dan K June 15, 2006 at 11:59 am

Barkley,
Arguably, the relative downward drift in the real per capita income in Sweden (in absolute terms, real per capita income has increased, at least sinced 1999) has been caused by a preference in trading work hours for leisure, no?

6 John June 15, 2006 at 12:16 pm

This number is totally bogus. It includes people on disability and sick leave. Granted generous payoffs may encourage people to take these, but this isn’t what’s going on. As the labor to employment ratios suggest, Sweden still manages to have more jobs. The comparable “employment rate” as defined by McKinsey would probably be about the same for the U.S. For one, there are 6 million people on disability insurance (Gruber, JPE 2000) that the U.S. government doesn’t count as unemployed but McKinsey would.

7 Robert Speirs June 15, 2006 at 2:05 pm

It would be more to the point to consider how people live in Sweden. Has their standard of living increased in the last ten years as it has here? Also, how about the ability to start a business, to work for oneself? I’ve heard that’s almost impossible in Sweden, because of the bureaucracy and employment taxes. But maybe a lot of those people on “sick leave” are really fixing cars or designing websites on the side, without telling anyone, to avoid the stupid regulations. It’s a lot easier to have a “black economy” job if you’re getting welfare or disability payments and have free health care. Even governments cannot keep everyone from bettering themselves.

8 Barkley Rosser June 15, 2006 at 3:18 pm

Robert Speirs,

Actually Sweden is up there with Finland as being one of the most
highly rated countries in the world for “competitiveness.” They
do not have lots of regulations. It is much easier to start a
business there than in most countries. The big problem they have
is high taxes. That is where they stick out.

I am not going to wade into the numbers debate on jobs. Yes, they
have big retraining programs. Yes, they also have a very high
labor force participation rate, higher than the US on numbers I have
seen. Almost nobody beats them on female lfpr. And, of course, the
US has a much larger chunk of its working age population in prison
than Sweden or pretty much any other high income country.

It remains not obvious to me that Sweden is all that bad on the
employment front, maybe in comparison with the US, but certainly
not in comparison with say France or Germany or Italy. And as for
this outsourcing threat, one advantage of the decline in real wages
is that they do not look nearly as endangered on this front as higher
wage countries like Germany.

9 Noah Yetter June 15, 2006 at 3:51 pm

I for one don’t pay 60%+ of my income in taxes and premiums, I don’t know about you.

10 MjrMjr June 15, 2006 at 5:02 pm

Here’s a diary on DailyKos from this morning where a blogger attempts (or claims to attempt, anyhow) to apply the same methodology to the U.S. labor market:

http://www.dailykos.com/story/2006/6/15/82034/1813

Whether it’s apples to apples I can’t really say.

My own read on the U.S. situation is that labor force participation rate might tell a more accurate story than the unemployment rate. While the unemployment rate looks great right now I do believe that LFPR has fallen by at least a few percentage points since the late 90s. That might indicate that there’s more slack in the labor market than the unemployment rate would convey.

As a recent graduate(degree in Econ from GMU, no less) currently looking for work right now my gut feeling is that the labor market is significantly weaker than it was in the late 90s. When I hear “unemployment is 4.7%” I don’t think that tells the full story.

11 Mark Amerman June 15, 2006 at 6:55 pm

MirMir,

Too bad Colman at DailyKos doesn’t give us the links so we can
go see what he’s looking at for ourselves. I wonder why?

Why would someone who just looked it up this morning not
include those links?

His two biggest factors contributing to his estimate for
higher U.S. unemployment are involuntary part-time at 2.7%
and employment disability at 3.7%. He admits his numbers
on employment disability are an estimate. How he made the
estimate is interesting, he imagined two scenarios. The
first where everyone who had an employment disability was
unemployed and a second where 40% of those with an employment
disability are unemployed. Then he took the average of those
two scenarios.

Where’d the 40% figure come from? Well the only number he
was able to come up with on the subject (and of course no
source) was a claim of 40% unemployment.

Well in that case doing the math — except wait — the math
is hard because Colman doesn’t actually give us any numbers,
only percentages, and we are not told what number of people
constitute his definition of full employment so we can back
it out and add things up.

Still we can do some math. The net effect of his manipulations
are to assume an unemployment of 70% among those with employment
disabilities. Curious.

When by his own account the only piece of data he had was
an assertion of 40% unemployment.

Another thing frustrating about Colman’s piece is that he includes
a link to the chart he’s criticizing, and yet nothing to the report
that’s obviously around it. Could it be that Colman doesn’t
want his readers to read what it is he’s talking about, except
as a brief news report?

Well as out-of-context as ‘Exhibit 6’ is it does manage to include
the actual number of people alleged to fall in different categories.
One column Colman didn’t try to imitate was that of “Latent job
candidates”. Some 140,000, aka a percentage point or two of the
Swedish labor market, are people who are “want to work and can
start within 14 days.” Why in the world isn’t that included in
the official Swedish labor statistics? What’s the story here?

12 Robert Speirs June 16, 2006 at 9:29 am

As to “excess incarceration” it would be well to remember that many of the imprisoned – even those nominally incarcerated for “drug crimes” – pose threats of violent criminality and have limited productive skills. In Sweden they’re walking around, threatening people. And many of the incarcerated in the US are producing some value, working at various jobs within their skill levels. Freeing violent criminals may not be the best tactic to stimulate the economy, unless you’re in the funeral business.

13 Colman June 17, 2006 at 10:57 am

Well Mark, among the possibilities for the bad linkage could be rushing to produce the diary in a short time and the fact that the links to the other info were at most a click or two away from the links given. I wasn’t writing an academic paper and I sort of assumed anyone who really cared would be able to work it out for themselves. Sorry about that.

The excess military and excess incarcerated are of course arguable, but so is assuming that anyone in a government training programme would otherwise be unemployed. There are two points here: the FT headline claiming a 15% joblessness rate in Sweden is meaningless if you don’t know that (say) France and Germany would be comparable while the US wouldn’t be that far behind: I don’t see how you could possibly do a similar calculation for the US and not arrive at 10% given the BLS figures above. The second point is that attempting to compare unemployment figures without regard for the structural choices made by the economies in question is nonsense. The US chooses to provide a lot of employment for poor young men and women through its military. It also locks a lot of them up. Those choices affect the labour market and need to be taken into account when comparing figures.

I’m not even going to attempt to defend the disability figures – they need a lot more thought before I’d be happy with them. It could be 2%, it could be 4%. Of course, it also raises the issue of how disabled is disabled enough that the society chooses to support that person instead of forcing them to work?

14 Dave Barnes June 17, 2006 at 10:38 pm

How can I “read the whole thing” when the article is behind the registration wall at the FT?

I hate it when people run a teaser for an article and then I am taken to a website where I CAN NOT READ the article.

15 flash games May 10, 2009 at 1:28 am

The US chooses to provide a lot of employment for poor young men and women through its military. It also locks a lot of them up. Those choices affect the labour market and need to be taken into account when comparing figures.

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