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OPINION AND ANALYSIS

‘Inflexible welfare model keeping young Swedes out of work’

An excessively rigid labour market is at the root of Sweden's high youth unemployment and helps explain the recent proliferation of young people in early retirement schemes, argues Nima Sanandaji, CEO of the Captus think tank.

'Inflexible welfare model keeping young Swedes out of work'

There are those who believe that Sweden has a low level of unemployment. This is far from the truth. The combination of high taxes, generous government benefits and a regulated labour market has led many Swedes to rely on handouts rather than work. The system does succeed in one thing: hiding true unemployment figures.

A few years ago, Swedish economist Jan Edling noted that the number of people on sick leave and early retirement tended to correlate strongly with unemployment figures. The reason, Edling explained, was that many of the unemployed were hidden from the statistics through these measures.

Far from being a right-leaning economist, Edling at the time worked for LO – an influential labour union with strong official and unofficial ties to the then-ruling Social Democratic party. The claim that the Swedish welfare state hid actual unemployment through various measures was unpopular among Swedish socialists. So unpopular in fact that Edling’s report was not published, causing him to resign after 18 years faithful service.

Four years ago a centre-right government was elected with the promise to reduce visible and hidden unemployment. The government has had some success in this, at last before the financial crisis hit and again raised unemployment. Tax cuts and reduced generosity of government benefits have promoted work over dependence. However, among one group reliance on government has not decreased: young people who rely on early retirement for their living.

The concept of relying on early retirement among the relatively youthful might sound a bit strange. Swedish politicians have even changed the term “early retirement” into “activity and sickness compensation” to make it sound more acceptable. And it has oddly enough become more or less an accepted fact that many young Swedes who cannot find a job instead rely on early retirement – often on a permanent basis.

Since 2004 close to 70,000 Swedes in the ages 20-39 have been supported by early retirement. This represents close to three percent of the total population among this age group living in the country. In the Stockholm region, where the labour market is strong, two percent of the young population is living on early retirement. In regions where jobs are scarcer, the figure is four percent. Even among the youngest group – those between 20-24 years – more than two percent of Sweden’s population is being supported by early retirement.

One reason for the popularity of early retirement stems the fact that is increasingly difficult for young Swedes to find employment. According to Statistics Sweden, unemployment among those between 15-24 years was fully 24 percent in the beginning of 2009. Although Sweden does not have minimum wages set by the government, the vast majority of employers have to follow labour union contracts and these contracts in turn include very high effective minimum wages.

Not only is the price of youth labour set too high for demand to meet supply, but employers find it too risky to hire inexperienced young people since rigid labour market regulation makes it difficult to fire those who do not perform well on their job.

High unemployment among young people is not only an economic, but also a social issue. Many young people feel depressed since they cannot find a meaningful purpose and cannot contribute to society. This feeling, strong among young people who are not even officially employed, but rather hidden from the statistics through early retirement, sick leave or other systems.

The OECD measures the percentage of those who are officially declared to be outside of the workforce but view themselves as being unemployed. This group is referred to as “discouraged workers”. In countries such as Denmark, Germany and the United Kingdom only 0.1 percent of the labour force of 15-24 year olds is composed of discouraged workers. In Sweden, the figure is almost a hundred times higher.

The Swedish welfare system is seen by many as a role model. When it comes to creating opportunities for the young however, Sweden could learn much from free-market systems. Or, for that matter, it could learn from neighbouring welfare state Denmark, which has combined welfare mechanisms with a dynamic labour market. The combination, coined by previous Social Democratic Prime Minister Poul Nyrup Rasmusson as “flexicurity”, is far superior to the system of high effective minimum wages and rigid labour regulations introduced by the Social Democrats and their labour union allies in Sweden.

Nima Sanandaji is CEO of Swedish think tank Captus, and author of a report on early retirement among young people for the think tank Timbro. This article has previously been published in The New Geography

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OPINION AND ANALYSIS

OPINION: Why Germans’ famed efficiency makes the country less efficient

Germans are famous for their love of efficiency - and impatience that comes with it. But this desire for getting things done as quickly as possible can backfire, whether at the supermarket or in national politics, writes Brian Melican.

OPINION: Why Germans' famed efficiency makes the country less efficient

A story about a new wave of “check-outs for chatting” caught my eye recently. In a country whose no-nonsense, “Move it or lose it, lady!” approach to supermarket till-staffing can reduce the uninitiated to tears, the idea of introducing a slow lane with a cashier who won’t sigh aggressively or bark at you for trying to strike up conversation is somewhere between quietly subversive and positively revolutionary – and got me thinking.

Why is it that German supermarket check-outs are so hectic in the first place?

READ ALSO: German supermarkets fight loneliness with slower check outs for chatting

If you talk to people here about it – other Germans, long-term foreign residents, and keen observers on shorter visits – you’ll hear a few theories.

One is that Germans tend to shop daily on the way home from work, and so place a higher premium on brisk service than countries where a weekly shop is more common; and it is indeed a well-researched fact that German supermarket shopping patterns are higher-frequency than in many comparable countries.

Bavarian supermarket

A sign at a now-famous supermarket in Bavaria advertises a special counter saying “Here you can have a chat”. Photo: picture alliance/dpa | Karl-Josef Hildenbrand

Another theory is that, in many parts of the country (such as Bavaria), supermarket opening hours are so short that there is no other way for everyone to get their shopping done than to keep things ticking along at a good old clip.

The most simple (and immediately plausible) explanation, of course, is that supermarkets like to keep both staffing and queuing to a minimum: short-staffing means lower costs, while shorter queues make for fewer abandoned trolleys.

German love of efficiency

Those in the know say that most store chains do indeed set average numbers of articles per minute which their cashiers are required to scan – and that this number is higher at certain discounters notorious for their hard-nosed attitude.

Beyond businesses’ penny-pinching, fast-lane tills are a demonstration of the broader German love of efficiency: after all, customers wouldn’t put up with being given the bum’s rush if there weren’t a cultural premium placed on smooth and speedy operations.

Then again, as many observers not yet blind to the oddness of Germany’s daily ‘Supermarket Sweep’ immediately notice, the race to get purchases over the till at the highest possible rate is wholly counter-productive: once scanned, the items pile up faster than even the best-organised couple can stow away, leaving an embarrassing, sweat-inducing lull – and then, while people in the queue roll their eyes and huff, a race to pay (usually in cash, natch’).

In a way, it’s similar to Germany’s famed autobahns, on which there is theoretically no speed limit and on which some drivers do indeed race ahead – into traffic jams often caused by excessive velocity.

Yes, it is a classic case of more haste, less speed. We think we’re doing something faster, but actually our impatience is proving counterproductive.

German impatience

This is, in my view, the crux of the issue: Germans are a hasty bunch. Indeed, research shows that we have less patience than comparable European populations – especially in retail situations. Yes, impatience is one of our defining national characteristics – and, as I pointed out during last summer’s rail meltdown, it is one of our enduring national tragedies that we are at once impatient and badly organised.

As well as at the tills and on the roads, you can observe German impatience in any queue (which we try to jump) and generally any other situation in which we are expected to wait.

Think back to early 2021, for instance, when the three-month UK-EU vaccine gap caused something approaching a national breakdown here, and the Health Minister was pressured into buying extra doses outside of the European framework.

This infuriated our neighbours and deprived developing countries of much-needed jabs – which, predictably, ended up arriving after the scheduled ones, leaving us with a glut of vaccines which, that very autumn, had to be destroyed.

A health worker prepares a syringe with the Comirnaty Covid-19 vaccine by Biontech-Pfizer. Photo: John MACDOUGALL / AFP

Now, you can see the same phenomenon with heating legislation: frustrated by the slow pace of change, Minister for Energy and the Economy Robert Habeck intended to force property owners to switch their heating systems to low-carbon alternatives within the next few years.

The fact that the supply of said alternatives is nowhere near sufficient – and that there are too few heating engineers to fit them – got lost in the haste…

The positive side of impatience

This example does, however, reveal one strongly positive side of our national impatience: if well- directed, it can create a sense of urgency about tackling thorny issues. Habeck is wrong to force the switch on an arbitrary timescale – but he is right to try and get things moving.

In most advanced economies, buildings are responsible for anything up to 40 percent of carbon emissions and, while major industrials have actually been cutting their CO2 output for decades now, the built environment has hardly seen any real improvements.

Ideally, a sensible compromise will be reached which sets out an ambitious direction of travel – and gets companies to start expanding capacity accordingly, upping output and increasing the number of systems which can be replaced later down the line. Less haste now, more speed later.

The same is true of our defence policy, which – after several directionless decades – is now being remodelled with impressive single-mindedness by a visibly impatient Boris Pistorius.

As for the check-outs for chatting, I’m not sure they’ll catch on. However counterproductive speed at the till may be, I just don’t see a large number of us being happy to sacrifice the illusion of rapidity so that a lonely old biddy can have a chinwag. Not that we are the heartless automatons that makes us sound like: Germany is actually a very chatty country.

It’s just that there’s a time and a place for it: at the weekly farmer’s markets, for instance, or at the bus stop. The latter is the ideal place to get Germans talking, by the way: just start with “About bloody time the bus got here, eh?” So langsam könnte der Bus ja kommen, wie ich finde…

READ ALSO: 7 places where you can actually make small talk with Germans

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