Look at What’s Going to Happen to Sweden’s Fabled Welfare State

Home Featured Look at What’s Going to Happen to Sweden’s Fabled Welfare State

Sweden’s got a major supply and demand problem.

Its fabled welfare state is forecast to need an extra 208,000 employees by 2025 just to keep up with growing demand. Trouble is, only 207,000 workers are projected to join the country’s entire labor force (comprising both the private and public sector) over the same period.

The mismatch is one of the biggest headaches facing Sweden’s next government. Past precedents don’t bode well. The workforce rose by 488,000 between 2007 and 2017, with less than a third of that increase absorbed by the public sector.

Local authorities recruiting 208,000 workers is “not a credible scenario,” said Annika Wallenskog, chief economist at the Swedish Association of Local Authorities and Regions. The real risk is that the public and private sectors end up competing for the same workers, she said.

The government is going to have to come up with some seriously big ideas on how to make up for future labor shortages. Immigration has also become an especially sensitive topic since the country re-imposed border controls in the wake of the 2015 refugee crisis.

Sweden needs to accelerate the speed of automation, increase employment and reform its welfare state, Wallenskog said. Otherwise “we won’t have enough people to continue working the way we do.”

Financial Hurdles

There are also financial hurdles. So far, a fast-growing economy has come to the rescue, helping Finance Minister Magdalena Andersson run a budget surplus and slash public debt to its lowest level since 1977.

But with the economy now expanding at a more traditional clip, whoever governs after the Sept. 9 general election will not be able to ignore the conundrum. Andersson has so far promised 5 billion kronor ($580 million) a year to local authorities, which run welfare services such as schools, hospitals and care centers for the elderly.

That is far from enough.

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