UNEMPLOYMENT IN SOCIALIST PARADISE

Sociedad Bastiat

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Received: Mon, 30 May 2005 10:15:50 AM CDT
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Subject: UNEMPLYMENT IN SOCIALIST PARADISE

ECONOMY


Sweden's Hidden Jobless

Labor Economist Asserts
Unemployment Near 20%
By TERENCE ROTH
DOW JONES NEWSWIRES
May 27, 2005

STOCKHOLM -- Jan Edling, a little-known labor-union economist, is suddenly in the policy spotlight with his assertion that Sweden's real jobless rate is really closer to 20% than the official 5.5% rate.

He resigned last week from the big LO blue-collar union where he worked after the association declined to publish his research project into Sweden's hidden joblessness. Instead, he posted it online.

"My suspicion is that we are putting people into other benefit categories that other countries would put into the unemployment column," Mr. Edling said.

That Sweden has far more people out of work than detailed in the official 5.5% unemployment rate isn't totally new. Beyond the official rate, an additional 4.4% of the working-age population are parked in the government's elaborate array of job-creation and training programs, according to a study by Skandinaviska Enskilda Banken AB with data from Statistics Sweden.

But Mr. Edling calculates that another 10% of working-age people can be identified as unemployed, using correlations between unemployment, long-term sickness and early retirement among Sweden's municipalities and regions. This makes the actual unemployment rate closer to 20% of the work force, he said.

The paper kicked up a storm in left-wing politics, making him an overnight celebrity among Sweden's lonely free-market advocates. The LO union called for a quick debate on the issue Wednesday, featured prominently on national television. Another of its economists wrote a quick refutation of Mr. Edling's theory and methodology. It denied that the report was suppressed. It said Mr. Edling's paper needed more evidence to show that large ranks of Swedes on sick leave and in early retirement are unemployed by another name.

The tempest Mr. Edling has caused will likely subside before his theory can be conclusively proven or dismissed. But it has made unemployment a big issue in time for the 2006 elections. It is the social-democratic government's hot-button policy issue, with the jobless rate steadily rising in recent years.

Finance Minister Paer Nuder said Wednesday that Sweden's unemployment data are collected according to international standards. But, without discussing the additional numbers, he acknowledged that Sweden's jobs issue goes further than the number of registered unemployed.

"We have two problems here. We have a problem with unemployed people and we have a problem on sick leave. But you shouldn't mix these problems," he said.

Mr. Nuder also defended the government's recent additions to jobs programs and new plans to help return the long-term unemployed to the work force.

"Obviously, the market is not able to find these kinds of jobs," he said. He observed that in other countries such job candidates will need to work two jobs to make ends meet. "That's not the Swedish way."

"You're not allowed to say that in the unions," said Johnny Munkhammar, an economist at the Timbro free-market think tank. "The Social Democrats and the unions are very close. Employment will be the government's biggest issue ahead of the election, but the reality is against them."

Mr. Edling, pointing out that similar numbers to his had been under discussion behind closed doors, said that the Social Democrats and unions are "afraid of having a debate that right-wing parties will take advantage of."

The LO union denied that the report was suppressed. It said Mr. Edling's paper needed more evidence.

"There are some people who are early retired that are so because they were unemployed. The question is how many," said Mats Morin, another LO economist who wrote the union's rebuttal. "It raised more questions than answers," he said.

But government critics see other signs as the drumbeat of major companies shifting jobs overseas continues. Electrolux AB, General Motors Corp.'s Saab unit and the Swedish operations of International Business Machines Corp. are only the most recent to have joined the list.

Mr. Edling, a union employee of 18 years, doesn't relish his notoriety, nor does he see himself breaking party ranks.

"I'm still loyal to the LO and the Social Democratic party. I'm still the same person I was," Mr. Edling said. "I didn't expect this to happen."

He also believes he is being misunderstood. Instead of urging the overhaul of the labor market and welfare and tax regime, his aim was to show that regions investing heavily in infrastructure, research and education for job mobility did better than regions that didn't. Typically, he said, the latter had more hidden unemployment.

"The public debate is about statistics, but they are only a symptom of something that is wrong in this country," Mr. Edling said. "What we see are people at Electrolux who lose their jobs and don't know anything else than how to make vacuum cleaners. Chances are they will soon be in early retirement."

Write to Terence Roth at terence.roth@wsj.com