How many Swedes does it take to make a toilet? It doesn’t matter because they cost too much to employ anyway.
It sounds like an old joke but Sweden is losing jobs to cheaper areas such as Eastern Europe and China.
“If you go east to Hungary, you can get about six workers for the price of one worker in Sweden … in Bulgaria even more and China even more,” says Fredrik Blomer, the plant manager of a bathroom products maker near Stockholm.
“Even with good productivity it is difficult to compete.”
His company has already moved part of its production to Eastern Europe with the loss of about 35 per cent of its Swedish workforce. And it is not alone.
Last month Electrolux, the world’s biggest domestic appliance maker, moved production of vacuum cleaners to Hungary with the loss of 500 jobs.
“The labour cost in Hungary is one-ninth of the labour cost in Sweden,” said Electrolux press officer Fredrik Trahn.
Economists blame the huge tax burden in Sweden – one of the world’s highest at more than 50 per cent of gross domestic product.
High taxes – needed to support a generous welfare system – mean companies have little incentive to expand employment.
“No net new jobs have been created in the private sector in the last 50 years,” says Professor Nils Karlson, head of independent economic research group The Ratio Institute in Stockholm.
High benefits also mean Swedes have little to gain from working. One-fifth of the country’s five million potential workers are unemployed, on sick leave or have taken early retirement – a sharp contrast to official unemployment figures of 5.4 per cent, says Karlson.
Welfare spending has helped to push the Government’s finances into the red. And with the workforce shrinking as Sweden ages, something has to give.
Central bank deputy governor Villy Bergstrom says the country needs to cut sick leave and unemployment and get more of its immigrant population into jobs.
Leif Ostling, Scania’s chief executive, said the social security system gave people too little incentive to work..
“I believe that a radical and effective measure would be, for example, to cut the level of benefits in half.” he said. “That would get many more people into the workforce.”
Even the central bank is becoming worried. Deputy governor Villy Bergstrom said despite high growth, Swedish employment was low.
“The problems will be aggravated when the population ages and the dependency burden for the economically active population rises sharply.”
Sweden needed to cut sick leave and unemployment and get more of its immigrant population into jobs, he said.
The International Monetary Fund (IMF) says Sweden needs to boost employment if it wants the higher levels of growth necessary to keep the main parts of its much-loved welfare system intact.
To do this, Sweden should reduce labour taxes, trim benefits and privatise some services, the IMF says.
Swedes complain about the large chunk the tax man takes from their wage packets, but few Swedes want to change a system that has ensured social stability amid one of the highest standards of living in the world
Nor does the Government seem likely to act.
“I disagree that there is a fundamental conflict between economic growth and a large welfare state,” Joakim Sonnegard, director of planning at the Ministry of Finance told a conference on the welfare state last month.
Although reforms were needed these should not compromise Sweden’s social agenda, he said.
“It looks as if the government is not concerned,” said Blomer “They are more worried about keeping the present system functioning.”
From NZ Herald