Photo from the archive of "Zagranitsa"
The main element of Swedish welfare social policy is social insurance. Its purpose is to provide a person with economic protection in case of illness, medical care, childbirth and old age (universal insurance), in connection with accidents and occupational diseases (occupational accident insurance), unemployment (unemployment insurance and cash labor market assistance). At the same time, the final guarantee, regardless of the reason for application, is considered cash benefit known as public assistance.
Perhaps the key point in this approach should be considered universality: such protection extends to all residents of Sweden regardless of occupation and is therefore called "universal social policy." However, the right to a number of social payments depends on an assessment of their need, employment, and voluntary participation.
Sweden's social policy flourished for several decades, when the country took first place in the world in terms of the share of social spending in GDP. But after the crisis of the early 1990s, unemployment jumped sharply and the social insurance system underwent changes: benefits began to be paid for fewer days in health and unemployment insurance, benefit amounts decreased, and pension indexation was not carried out in full. However, the subsequent economic recovery made it possible to partially restore what was lost.
On the labor market
In the Swedish model, full employment of the population was always achieved through an active role of the state with a more passive role of trade unions, since unemployment cannot be dealt with by lowering wages, and when demand for labor increases, trade unions cannot ensure price stability with moderate wage increase demands. Therefore, the central point in the original version of the Swedish model (back in the 1950s) became that the government bears responsibility for full employment and economic stability, while trade unions together with employers' organizations are responsible for wage formation.
In the formulation of Gösta Rehn, a leading economist of the Swedish Trade Union Confederation and one of the creators of the Rehn-Meidner model, the solution to the "unemployment-inflation" dilemma is as follows: apply a set of universal fiscal and monetary restrictions that keep prices at such a low level relative to wages that entrepreneurs themselves effectively resist inflationary wage increase demands. Then ensure full employment through special measures called labor market policy. It was precisely the combination of general economic measures to maintain aggregate demand somewhat below the level that guarantees work for everyone everywhere, and an active selective policy in the labor market and in the field of capital investment, aimed at supporting weak groups, industries and regions, that became the essence of the Swedish model.
This point of the model also explains the role that was intended for labor market policy, whose task is to help those seeking work to fill vacant positions. It is therefore natural that the Swedish labor market is highly developed and flexible, and the share of spending on this area in the state budget is very high. Moreover, it is characteristic that the main part of expenditures goes to measures involving mainly training, retraining, public works, sheltered (from competition) jobs, etc., while much less money goes to unemployment benefits.
Buy health
The right to free medical care or to payment of part of the cost of treatment is guaranteed in Sweden by bodies not included in the health care system. Each landsting (regional authority) is responsible for ensuring that every resident has free access to good medical care, and about 80% of collected income taxes go to health care financing.
The state pays from 30 to 100% of the costs of medical care and medicines. At the same time, the national insurance system covers two types of expenses: payment for medicines prescribed by doctors and dental services. True, there are limits. Currently, during the year a patient pays no more than 900 kronor (about $120) for medicines, and insurance covers expenses above this amount, but no more than 1,800 kronor over 12 months. Moreover, money is not given in cash but is transferred from insurance funds to pharmacies. Since January 1999, Sweden also introduced new rules for subsidizing dental treatment, which encourage people to regularly engage in prevention and not neglect diseases.
In addition, all residents of the country with an annual income of at least 6,000 kronor are covered by the national insurance system guaranteeing sickness benefit. The temporary disability benefit today is 80% of the lost income, although not so long ago its amount reached 90% of the salary. Alas, this led to the fact that many simply began to abuse "sick leave." However, this problem is still relevant now, and the government is looking for ways to solve it. Usually, for the first three weeks of illness, employees receive compensation from employers, and only then - a benefit from the state (in the amount of 77.6% of the lost income, but no more than 598 kronor per day). True, the number of days covered by the benefit is not limited.
Finally, Sweden has a parental insurance system that gives equal rights to both the mother and the father of a child. There are two types of parental benefits. The first is the childbirth benefit, which is usually paid for 480 days. If the mother and father share care of the child, then 60 days out of 480 are reserved for each parent, and either of them can claim the funds for the remaining period. Moreover, for the first 390 days, the benefit paid is equal to the sickness benefit (that is, 80% of lost income), and then only 60 kronor per day is provided. The other type is the benefit for caring for a sick child, which is usually paid for no more than 60 days per child per year. These benefits are taxable.
New pensioners
For decades, Sweden had two interrelated pension schemes. The first, which came into force back in 1913 (and modernized in 1946), was designed to guarantee social security for every resident and provided for the payment of the so-called basic (people's, or primary) pension. In 1960, a decision was made to pay state pension supplements, or an additional (service, occupational) pension, which guaranteed a link between the pension and previous earned income. Old-age pensions, disability pensions (“early pensions”) and survivor pensions were paid in accordance with the provisions of both schemes.
However, from 1999 a pension reform began, driven by the current state of the country: according to the authors of the reform, it will help solve urgent demographic, financial, and political problems. The fact is that the previous system of financing old-age pensions began to face difficulties due to demographic problems (the share of pensioners is continuously growing), and the funds of the General Pension Fund could soon be in deficit. This meant that either pension payments had to be reduced or contributions increased. In addition, the system infringed on low-income individuals. And after a long discussion, in 1994 the Riksdag decided to carry out a reform that began five years later.
The new pension system, firstly, takes into account income earned over the entire lifetime. Secondly, it provides a guaranteed pension for those who received very low incomes or none at all. And thirdly, it includes a system of mandatory contributions to private pension funds with individual accounts (pension system contributions amount to 18.5% of income, including 2.5% to individual accounts). Unlike the previous system, the new one now includes time spent at home caring for a child or spent on education and military service.
All who received the old basic pension will receive the new guaranteed pension (albeit smaller in size). The service pension now includes all income earned over a lifetime, but it is calculated using a very complex formula. The timing of retirement has also been changed, although the retirement age remains the same - 65 years. Before the reform, one could retire between the ages of 60 and 70 (if before 65, the pension is smaller, if later - larger). In the new system, early retirement is possible only upon reaching age 61, and the latest age for retirement is 67 years. The current system also provides for pensions for the disabled and widows.
These innovations sparked a wave of debates in the country that have not subsided to this day. Supporters of the reforms believe that the new system guarantees a higher level of stability in the event of economic shocks. Speaking about the system's shortcomings, its opponents note the growing differences in pension amounts, which leads to increased inequality among pensioners and a decrease in the system's transparency. At the same time, this radical reform attracted the attention of other countries and stimulated similar processes there.
Out of work, but with money
In modern Sweden, there are other types of social insurance. For example, occupational accident insurance supplements other benefits. In the event of illness or disability caused by an occupational injury, general benefits are issued first, and then (as an additional benefit) a special insurance related to the occupational injury may be paid - it applies to all employed persons in Sweden. If the injury leads to complete disability, the victim is entitled to a benefit of 100% of lost income until retirement age. Medical treatment costs are also paid if they are not covered by the health insurance fund. The occupational accident insurance fund is financed by contributions amounting to 1.38% of the income of all working persons.
Sweden also has two systems of unemployment benefits. The first (voluntary and long-standing) is called unemployment insurance and is financed (with state support and supervision) by special insurance funds linked to trade unions. Almost 90% of all workers belong to these funds.
Conditions for receiving benefits are membership in an insurance fund for at least a year for employees and six months of work over the past year, as well as registration as unemployed at the employment exchange. In addition, the unemployed person participates in creating an individual action plan and is obliged to take a proposed job or participate in a labor market program. Retraining of the unemployed is also considered employment.
Since January 1998, a new state insurance fund has been operating in Sweden, where anyone can receive unemployment benefits. This system is called material support for the labor market and includes those not covered by the insurance fund upon loss of employment. In this case, the unemployed person must be registered at the employment exchange and have worked for at least six months before dismissal.
In addition, benefits are paid for all children living in Sweden under the age of 16 (at the rate of 950 kronor per child per month). Moreover, unlike most other benefits, this benefit is not taxed, and its amount is determined by a decision of the Riksdag. Families with more than three children receive additional payments. Another form of financial support for families with children is compensation for part of utility payments. Its amount depends on the number of children, the size of income, and the payment for utility services.
The Price of Stability
Having chosen the principle of universal welfare, the Swedes gradually expanded the public sector of the economy to a size that made the country unique in this area: employment in the public sector reached one-third of the self-employed population. Naturally, this was reflected in extremely high tax rates. Total government expenditures, including both public sector costs and transfer payments, exceeded 60% of Sweden's GDP, putting it in first place in the world in terms of expenditures (in the 1980s, the share of social expenditures in GDP ranged from 31-35%, and social insurance payments in 1994 accounted for 30% of the population's total income).
Today, the social insurance system is financed from state and local taxes, contributions from employers, employees and self-employed persons, interest income and deductions from the capital of various funds. The main source (over 40%) is employer contributions calculated from the wage fund. During the 1970s, all individual social insurance contributions paid by workers were replaced by employer contributions (from 1970 to 1989, according to the law, they increased from 14 to 37.5% of the wage amount, and taking into account collective agreements, to 43.6% for workers and 46.4% for employees). The only exception was unemployment insurance contributions, which are also supplemented by employer contributions. Moreover, these payments are considered business expenses. At the same time, all those who are not employed pay for their own social insurance.