OECD labour markets are characterised by their dynamism. Each year, more than 20% of jobs, on average, are created and/or destroyed, and around one-third of all workers are hired and/or separated from their employer. These large job and worker flows are driven by a continuous process of labour reallocation, both across industries and between declining and growing firms within the same industry. This reallocation is an important source of productivity gains, since more productive firms expand at the expense of less productive firms and earnings rise on average for workers changing jobs, particularly workers who voluntarily quit one job in order to move to another. However, high job turnover is also a source of insecurity for workers, especially those who are displaced from their jobs because their employer downsizes its workforce or goes out of business altogether. A common challenge facing OECD governments is thus to nurture labour market dynamism while keeping the adjustment costs that are borne by displaced workers as low as possible.

Workers who lose their jobs, as firms close or downsize in response to fluctuations in demand and production, face substantial economic and non-economic costs. On average, each year around 2.1% of Swedish workers with at least one year of tenure involuntarily lose their job. In an international comparison, Sweden has been relatively successful in minimising the adverse consequences for workers who bear the brunt of structural adjustment. This is mainly due to the longstanding tradition of collaboration between the social partners to share responsibility for restructuring, which has resulted in special arrangements and practices that provide help to workers affected by economic change much faster than in most OECD countries. As a result of this approach, at over 85% the share of retrenched workers who find a new job within one year is higher than in any other OECD country. The Swedish strategy not only has a distinct advantage in the way firms adapt to change but also underpins public acceptance of economic restructuring.

As in other OECD countries, job displacement as a consequence of economic restructuring is a prominent feature of the Swedish labour market. On average during 2002-12, 2.1% of employees lost their job each year due to economic reasons such as firm downsizing and establishment closures. There is no indication that displacement rates in Sweden have risen permanently since 2000, but they increased during both the severe economic crisis of the 1990s and in the recent global financial crisis (GFC). Like in some other OECD countries, displacement rates in Sweden are higher for men, young and low-skilled workers than they are for, respectively, women older and better-skilled workers.

This chapter examines the prevalence and consequences of job displacement in Sweden. The risk of job displacement in Sweden does not appear to have increased during the past decade, and it is quite low in comparison to other OECD countries but some groups of workers are more vulnerable to displacement than others. Although re-employment rates of displaced workers are high in Sweden, the negative impact of displacement on wage, working arrangements and skills can be more long-lasting. The costs of being displaced vary widely and can be persistent for some groups.

This chapter provides an overview of the main authorities and institutions in Sweden in charge of the design and implementation of employment policies dealing with displaced workers and the main interaction between the key stakeholders. It presents the institutions involved in the restructuring process, focusing on the marginal role of the government as opposed to the leading role of the social partners and collective agreements.

This chapter analyses the most important policy measures in Sweden that take effect prior to workers being dismissed, in order to prevent excessive job displacements. Such measures assess the role of the social partners in the early stages of the restructuring process and include employment protection legislation, which determines the process through which employers can dismiss workers and short-time work and wage adjustment policies, in turn helping to limit excessive lay-offs.

This chapter examines the effectiveness of counselling services, job-search supports and training programmes in Sweden to help displaced workers find a new job quickly. It focuses on both the services provided by Job Security Councils early on, especially in the period between notice and dismissal, and the support available from the public employment service, after a worker has been dismissed. Particular attention is given to the growing gaps in re-employment support in an evolving labour market and to differences in the system and outcomes between blue and white-collar workers.

Although most displaced workers in Sweden find a new job quickly, providing adequate income support to workers following displacement is crucial, especially when the economy is weak and job growth limited. A good income support system should help to compensate the major costs borne by workers following job displacement without reducing their incentives to move quickly into new jobs. This chapter examines the different sources of income support available to displaced workers in Sweden and to unemployed people in general, with particular attention to the coverage and generosity of the support for displaced workers. Overall, displaced workers with stable work histories have relatively good access to income support through both unemployment insurance and supplementary top-up schemes. The main challenge is to strengthen financial provision for more vulnerable groups of displaced workers such as younger workers with short tenure and blue-collar workers.