Sweden
While Sweden is a country with low inequality, the COVID-19 crisis is exacerbating difficulties for some and risks scarring youth working prospects. Inequality in educational outcomes risks widening further, as students from disadvantaged social backgrounds may face greater difficulties to adapt to distance learning. These are top priorities for a more resilient and equitable recovery.
Economy: Percentage gap with respect to the population-weighted average of the highest 18 OECD countries in terms of GDP per capita (in constant 2015 PPPs).
Inequality: The Gini coefficient for disposable income measures the extent to which the distribution of disposable income among households deviates from perfect equal distribution. A value of zero represents perfect equality and a value of 100 extreme inequality.
Environment: Greenhouse gas (GHG) emissions include emissions or removals from land-use, land-use change and forestry (LULUCF). A high exposure to air pollution refers to above 10 μg/m3 of PM2.5.
Source: Economy: OECD, National Accounts, Productivity and Labour Force Statistics Databases; Inequality: OECD, Income Distribution Database and World Bank, World Development Indicators Database; Environment: OECD, Environment Database and United Nations Framework Convention on Climate Change (UNFCCC) Database.
Recovery policies to boost skills and employability of disadvantaged groups
Integration of low-skilled workers, particularly foreign-born, into the labour market is challenging (Panel A). In the wake of the 2015 refugee crisis, Sweden introduced a range of integration measures, which along with strong economic growth, allowed significant progress in foreign-born employment. Additional resources for integration and extensive support for employment in the context of the COVID-19 crisis have been introduced. Nevertheless, further investment in vocational education and training, and job counselling, would help the low-skilled and immigrants move towards growing sectors. The impact of such policies could be reinforced by the introduction of a new type of subsidised jobs, combining employment and education. However, implementation of this measure has been delayed.
Even though average school results have improved in the latest vintage of PISA tests, differences between students from different social-economic backgrounds continue to increase, and gaps are likely to widen further following the COVID-19 crisis. Strengthening the governance and steering of the school system and better targeting funding to pupils’ needs would help reduce educational inequalities and raise employment and productivity. Reinforcing continuous teacher education and instigating more cooperation, feedback and support between colleagues would raise teacher quality and the status of the profession. Continued monitoring of results at the school level is necessary to ensure that struggling students get appropriate support.
1. Share of tenants in the bottom quintile of the income distribution spending more than 40% of disposable income on rent.
2. Households in the bottom income quintile. In Sweden, the whole rental market is considered as private.
Source: Panel A: OECD, Migration Database; Panel B: OECD, Affordable Housing Database.
A better functioning housing market would facilitate labour mobility, as housing in big cities is often unaffordable or restricted by long rental waiting lists (Panel B). The pandemic highlighted housing shortages, as people living in overcrowded dwellings were disproportionately affected by the disease and experience poorer conditions for working and studying from home. Loosening planning and rental regulations would improve access to adequate housing and facilitate labour mobility. Support for housing construction should be revised to improve its efficiency and target it towards rental housing throughout the country. A more stable housing market would also reduce macroeconomic and financial stability risks associated with high household debt. Reducing the bias towards homeownership resulting from low property taxation coupled with generous mortgage interest deductibility, would both enhance stability and reduce inequality. Reforming the dual income tax system, which allows tax shifting from labour to less taxed capital income, would also reduce income inequality. Any tax increases need to be phased-in gradually over the medium term in order not to hamper the recovery.
Stringent job protection for permanent contracts still hampers labour mobility and reallocation as well as productivity growth. Reforming job protection for permanent contracts would enhance the resilience of the labour market and boost productivity growth. The platform economy is also gaining ground, which requires labour legislation to evolve to ensure the right balance between flexibility and protection for all workers. New rules should be designed in close cooperation with the social partners. While recent tax reforms have aimed at enhancing work incentives or reducing inequality, further improvements to the tax structure would support inclusive and green growth.