NCPA - National Center for Policy Analysis


August 8, 2006

Recently, the so-called Swedish model -- that is, the Swedish economic system with high taxes and a big welfare state -- has been celebrated again in the press.  However, if we look beneath the aggregate production figures, we can see deep structural problems, says economist Stefan Karlsson.

  • The number of people employed is now 6 percent lower than in 1990, a weaker development than in any other western economy.
  • By contrast, even with the weak job growth in recent years (by American standards), employment in the United States is 20 percent higher than in 1990.

And the number of people employed in Sweden is actually lower than in 1980, too, says Karlsson:

  • You have to go back to the mid-1970s to find employment numbers lower than the current ones.
  • While total employment has been roughly unchanged since 1975, it masks a significant decline in male employment.
  • And if you look only at the private sector, employment is now at a level lower than in 1950.

Supporters often claim that Sweden has a comparatively high employment rate, but this is based on deceptive employment statistics that count as employed many who are on long-term sick leave or who don't actually work, says Karlsson.

  • Many unemployed are sent to so-called "labor market political activities" -- activities whose only purpose is to reduce the official unemployment rate; if we ignore this ruse, unemployment is 8 percent.
  • And if you also include the enormous number of early retirees and people who live off sickness benefits, the real unemployment rate is more like 25 percent.
  • The number of early retirees is 540,000, more than double the number of officially unemployed.
  • Among non-Western immigrants, the real unemployment rate is higher than 50 percent.

Source: Stefan Karlsson, "The Sweden Myth," Ludwig von Mises Institute, August 07, 2006.

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