Unemployment Benefits Policy: A Comparison Between the US and Sweden

Unemployment benefits are payments that are made to unemployed people by the
state and other authorized bodies. The UK was the first country to institute unemployment
benefits in 1911 (Lenaerts et al., 2017). Since then, many other countries have implemented
the policy. Even though both the US and Sweden have unemployment benefits, there are
significant differences in the scope and manner of implementation of the policy in the two
countries.

Policy Differences and Key Stakeholders

In the USA, there is no federal policy guaranteeing unemployment benefits to all
unemployed workers. Rather, unemployment benefits are part of compensation scheme that
employers negotiate with employees (Lenaerts et al., 2017). Thus, it is the responsibility of
the employer rather than the government to provide unemployment benefits except for a few
states where unemployment benefits are provided by the government.
The situation in the US contrasts sharply with that of Sweden. In Sweden
unemployment benefits are primarily provided by the state rather than the employer. There
are two forms of unemployment benefits in Sweden. The first one is basic insurance.
Unemployment benefits under this scheme are granted to anyone who is unemployed but
meets the basic requirements for work, such as being over 20 years, actively seeking for a
job, and being enrolled at the employment office (Landais & Spinnewiin, 2019). As long as
one meets these work requirements, they are guaranteed to receive unemployment benefits.
The second scheme is voluntary income-related insurance. The country has 36
unemployment funds that are independently run (Landais & Spinnewiin, 2019). Workers are
required to join one of these funds. As long as they work for more than a month, they are
entitled to unemployment benefits as long that they register with the public employment

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service as job seekers. Unlike in the basic insurance where everyone gets the same amount of
unemployment benefits, unemployment benefits provided under the voluntary income-related
insurance are proportional to the salary that one was getting before they became unemployed.
From this analysis of the manner in which unemployment benefits are implemented in
the USA and Sweden, it is clear that while the government is the main stakeholder in the
policy’s implementation in Sweden, in the US it is the employer who is the key stakeholder.
In other words, the private sector has more control over the policy of unemployment benefits
in the USA than in Sweden.

Implementation Challenges

Both the basic insurance and voluntary income-related insurance schemes are
primarily funded by the government. In the voluntary income-related insurance, just around
9% of the funds come from membership fees (Landais & Spinnewiin, 2019). Thus,
unemployment benefits constitute a significant strain on the finances of the government in
Sweden. The strain is especially significant during times of economic downturn, such as
recessions. Compared to the Swedish model, there are fewer implementation challenges in
the US model because it is primarily done by employers using a portion of the earnings of
employees and employer contribution.

Policy Dynamics and Planning Issues

The Swedish government-run unemployment benefits policy essentially covers
everyone over the age of 20. Even there some people have called for implementation of such
policy in the US, it is highly unlikely that the US will adopt such a model in the near future.
Unlike in Sweden, years of demonization of socialist policies as antithetical to the American
way of life has created deep hostility against any large-scale government-run programs
(Lenaerts et al., 2017). Apart from public hostility to such programs, the sheer size of the US

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also makes it hard to run effective government-sponsored unemployment benefits scheme,
such as the one in Sweden. While Sweden has just around 10 million people, the US has over
330 million people. It is difficult to have an unemployment benefits plan that covers such a
large number of people. It is also worth noting that Sweden’s generous unemployment
benefits scheme has been made possible by extremely high taxes that citizens pay to the
government. Given Americans’ traditional antipathy towards high taxes and big government,
it is unlikely that such a scheme could be accepted (Lenaerts et al., 2017).
Current Events Related to the Policy

An influx of immigrants in Sweden in recent times has put a strain on the
government’s ability to continue funding. A large number of the immigrants are poorly
educated refugees from war-torn countries, such as Syria, Iraq, and Afghanistan. Their lack
of Swedish language skills and poor education means that they find it difficult to find jobs in
the Swedish economy which is centered on high-skills jobs (Gordon, 2019). Due to the large
number of immigrants who are unemployed, around half of unemployed people in Sweden
are immigrants (Gordon, 2019). The immense strain that they have put on the unemployment
benefits scheme has led to calls for revision of the plan so that it is only open to people who
have been previously employed.

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References

Gordon, J. C. (2019). The Perils of Vanguardism: Explaining radical cuts to unemployment
insurance in Sweden. Socio-Economic Review, 17(4), 947-968.
Landais, C., & Spinnewijn, J. (2019). The Value of Unemployment Insurance. CEPR
Discussion Paper No. DP13624
Lenaerts, K., Paquier, F., & Simonetta, S. (2017). Unemployment Insurance in America: A
model for Europe? CEPS.