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Sweden's central bank building in downtown Stockholm. (BOB STRONG/REUTERS)
Sweden's central bank building in downtown Stockholm. (BOB STRONG/REUTERS)

Economy Lab

Sweden an economic star, but don't tell that to youths Add to ...

Record growth rates coming out of the global downturn. Public debt sinking below 35 per cent of GDP. Regular recognition as one of the most innovative countries on the planet.

Sweden has been a star performer in troubled Europe, sidestepping nearly every major economic pitfall burdening the region save one: youth unemployment.

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At 22.8 per cent, Sweden’s youth unemployment rate isn’t the highest in Europe – that distinction belongs to Spain, where just over half of all young people are out of work – but it is higher than the European average and the highest in Scandinavia.

What’s more, with general unemployment at 7.3 per cent, the country has one of the highest ratios of youth to overall unemployment in the OECD, suggesting the problem is less a side effect of the euro zone crisis than the result of a serious structural problem in the economy.

“It’s pretty bad,” said David Bell, an economist at Scotland’s Stirling University. “With any country that has a high ratio like that, somehow or other the chance of a young person gaining entry into the labour market is much lower than for an older person. So something about the way the labour market is working is extending particular difficulties to the young.”

Even before the crisis, youth joblessness was particularly high in Sweden. Analysts say the issue dates back to mid 1990s, when Sweden prolonged vocational high school training to three years and increased academic requirements within the program. The purpose was to make everyone who finished high school eligible for university. The result was a limited impact on university enrolment and an immediate increase in the high school drop out rate, particularly among boys, working class students and immigrants, said Thomas Carlen, an economist with LO, the largest organization representing Swedish trade union workers.

“Parents’ social and economic background suddenly had an impact on students’ results,” he said. “That’s obviously not in line with the Swedish model, which tries to even out all background differences.”

Though academic requirements have recently been lowered for vocational programs, observers say the school system isn’t the only problem. Opportunities for summer jobs that provide basic work experience and a chance to build employment networks are in short supply. And like some of its southern European neighbours, Sweden’s employment laws provide substantial protection for permanent workers while offering little for those in temporary jobs. According to the OECD, Sweden exhibits the starkest gap in protection between regular and temporary work – a phenomenon that hits young people and unskilled workers particularly hard. These groups tend to be overrepresented in temp jobs, where they often receive less training than their permanent counterparts and are particularly vulnerable to layoffs.

Youth joblessness has stirred enough debate inside this wealthy nation of 9.5 million that in a televised debate Sunday evening, Prime Minister Frederik Reinfeldt suggested it would be a central issue leading up the 2014 parliamentary elections. Indeed, there is much disagreement about how to improve the situation, with Mr. Reinfeldt recently rejecting a proposal for a “youth wage” of 75 per cent of entry-level earnings for young people.

The bright spot in the Swedish situation is that unemployment spells for young people tend to be relatively short, said Stefano Scarpetta, head of employment analysis at the OECD.

“But the fact that the youth unemployment rate is so much higher than the adult rate, the fact that it is now above even the OECD average, which is very high, is a certainly a source of concern,” he said.

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