Economic Prospects by the LO Economists

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Continued drop in the number of jobs requires measures to hamper marginalisation
Unemployment continues to soar during the coming two years and is calculated to be as high as 9.9 per cent in 2011 (according to ILO standards). In the present situation, Sweden’s biggest economic problem is the shortage of jobs, not the shortage of labour. The major problems are to be found within the export industry, as the international crisis seems to linger. The Swedish economic policy cannot entirely prevent the plummeting of employment during the next few years, but there is, according to the LO economists, reason for the politicians to alleviate the effects of the crisis by introducing more fiscal policy measures measures.

In this fall’s Economic Prospects, the LO economists want the Government to conduct a still more expansive policy in order to stimulate demand in the economy and prevent people from being permanently excluded from the labour market. Among other things, it is necessary that the Government, already this fall, announces a temporary state subsidy for the year 2011 of some 15 million SEK to municipalities and county councils, aimed at safeguarding jobs and welfare services.

In the present situation, there are no acceptable economic arguments for giving priority to tax benefits to those having a job as the Government now does. The tax benefits needed are temporary deductions for renovation, rebuilding and additional building of apartment blocks. An effective policy which safeguards job opportunities consists primarily of increased expenditures for public investments, jobs in the municipalities, more generous unemployment benefits and active measures for the jobless, Lena Westerlund, LO chief economist, says.

In the prognosis, the LO economists describe the Swedish economy as divided into two. The export industry is in a severe crisis, while the rest of industrial life goes through a “normal” recession. Owing to a too high productivity in Swedish companies, the number of employees is estimated to be cut by 210 000 persons between 2009 and 2011. Industry, in particular, will be hit and it is estimated that 140 000 jobs, i.e. almost 20 per cent of all those employed in industry, will be lost during the next two years.
It is, during the on-going crisis in the Swedish economy, difficult to decide whether the hardship is the result of short-term circumstances or of general structural changes. This uncertainty justifies, according to the LO economists, extraordinary solutions to which society as well as industrial life and employees will have to make their contributions. It is suggested, among other things, that employees within industry are offered one day’s education per week with economic compensation equivalent to that of the unemployment insurance. This would strengthen employees’ competence and offer more qualified jobs in industry once the crisis is over.

The income gaps in Sweden are now the widest since 1975. In the view of the LO economists, these gaps will continue to swell further as a consequence of the extremely high unemployment rate during the crisis, the tax credits granted those employed and the fact that the unemployment insurance is most insufficient which have made many employees relinquish the unemployment insurance. Basic allowances to families with children have not been adjusted in several years and this causes difficulties for many families.

The economic gaps will widen during the crisis and these gaps risk to cling on. We know that this is negative both for the national finances and for the individuals. The Government, however, is of the opinion that increased gaps are positive for the economy, Lena Westerlund concludes.