Swedes Chip Away at Cradle-to-Grave Welfare : Social services: The government’s program is intended to make the economy more open, competitive and productive.

The government has concluded that Sweden’s social welfare system, built over generations to protect citizens from cradle to grave, now threatens the national well-being.

Trimming began even under the Social Democrats, who dominated Swedish politics for six decades, and the pace has quickened under a center-right government that took over in September, 1991.

Many beneficiaries are disgruntled. Sweden has Western Europe’s largest per-capita public payroll, and its citizens are accustomed to benefits ranging from free hospitalization, job retraining and subsidies for child care and home mortgages.

Constantly rising productivity provided the money to pay for it all until, in recent years, the incentive to work was eroded by high taxes and generous vacations, parental leave and sick pay.

Prime Minister Carl Bildt’s government is cutting taxes so Swedes will have more money to take care of themselves. Bildt wants to eliminate some public jobs through attrition and encourage private business to expand payrolls.

Although the Swedes voted for change last year by turning out the Social Democrats, many are ambivalent about cutbacks that affect them directly.

“Interest rates have increased; rents increased,” said Britt-Marie Persson, who runs a day-care center. “The sales taxes increased, so I have had to lower my standard of living.”

She acknowledged, however, that “we have been living beyond our means in Sweden.”

The Swedish welfare formula was a blend of capitalism and socialism.

For many years, big companies producing high-quality exports enjoyed protection and stability. High taxes redistributed wealth and a growing government payroll guaranteed virtually full employment.

By the late 1980s, the economy had begun to falter and the Social Democrats had cautiously begun to pare the welfare program.

To foster competition in state monopolies and improve efficiency, patients were given free choice of hospitals and some students could pick the school they wanted to attend. The idea was that people would flock to the best-run institutions and the inefficient ones would close.

The Social Democrats also lowered taxes, but it was not enough to keep them in power.

Bildt’s program is intended to make the economy more open, competitive and productive before Sweden joins the European Community in 1995, but trimming or eliminating cherished benefits is not a popular course.

One example is the welfare state’s promise of unlimited sick leave at full pay.

Until January, 1991, Swedish workers had the highest rate of reported illness in Europe. Sick leave declined when the Social Democrats cut the reimbursement for the first sick day to 80% of regular pay.

Now, Bildt seeks to eliminate sick pay for the first two days, in hopes of raising productivity by discouraging malingerers.

Opponents say that will force truly ill people to go to work and thus infect others because they cannot afford to lose the pay. The idea that someone must work when he is sick goes against the heart of the welfare-state philosophy.

City and town governments, which levy most of the taxes in Sweden, also are cutting back.

“We can do with fewer personnel, but quality may suffer,” said Persson, who has five employees at a day-care center for 47 children. One worker, leaving for paid maternity leave of up to 15 months, will not be replaced.

Taxes and inflation must be reduced by trimming services and state jobs, Bildt says. One of his goals is to make private enterprise healthier so it can absorb workers the state no longer hires.

Business taxes have been reduced and regulations eased. Monopolies in taxis and airlines are ending, and foreign ownership of Swedish banks and companies has been approved. Bildt wants to sell some state enterprises, such as the telephone company, mines and forests, to private investors.

Subsidies are under scrutiny. Individual contributions to the cost of prescription drugs have been raised and the reimbursement for mortgage interest is being trimmed.

Among the welfare fundamentals that remain untouched are up to 60 days off per year at full pay to care for sick children, guaranteed access to medical care and a vast system of retraining and benefits for the unemployed.