Sweden Confronts High Cost of Welfare State

Sweden exudes good health and well-being in summer. The air smells of pine trees, and people of all ages bicycle and stroll well after dinner under the late-setting sun.

But as Swedes return from country cottages and Mediterranean beaches and prepare for an election Sept. 15, they are grappling with a vexing problem: one of every six working-age Swedes is off work because of illness or injury.

The number of people on government-paid sick leave has doubled in five years, and welfare benefits for the sick and disabled now exceed the government’s military and education budgets combined.

In all, about 340,000 Swedes -- one in every 26 of a population of 8.9 million -- are getting sick pay from the National Social Insurance Board, a third for longer than a year.

An additional 470,000 are on disability pensions -- early-retirement benefits paid by the government to those who stop working before the age of 65. These often are bigger than regular pensions.

Sick Swedes -- and what makes them sick -- are one of the main election issues.

The governing center-left Social Democratic Party, seeking to extend an eight-year spell in office, has commissioned studies and written reports saying that job conditions are getting harder and more stressful.

Opponents, led by the center-right Moderate and Christian Democratic parties, say the government is looking for a cure in all the wrong places. The problem, they say, is not workers’ health but cushy welfare policies that are eroding the work ethic.

Whatever the explanation, the cost -- about $12 billion a year, or 16% of this year’s national budget -- worries officials.

“I don’t think we can accept any higher costs. Then we risk having to change compensation levels, and the sickness insurance loses its function and legitimacy,” said Rolf Lundgren, chief economic analyst at the National Social Insurance Board, which picks up the tab from the employer after a worker’s second week of sickness.

Sweden has long been viewed as a model welfare state, characterized by high taxes, extensive government benefits, and a relatively narrow gap between rich and poor.

Although social benefits were scaled back somewhat during a recession in the mid-1990s, subsidized health care and compensation for unemployment or parental leave remain in place. The system is financed by some of the highest taxes in the world on income, wealth, property and purchases.

Sick leave amounts to 80% of a worker’s pay. The maximum benefit is 623 kronor a day, or about $65. After taxes, that adds up to about $1,500 a month -- about what many workers get for four 40-hour weeks. Sick leave pay is subject to income tax, which ranges from 30% to 60%.

Workers who have taken time off contend that the pressures and strains of the job are legitimate reasons for going on sick leave.

“The wheels are spinning too quickly,” said Anna Eriksson, 29, a nurse who took off two months last year, calling herself burned out. “The working environment simply has become tougher. You have to do twice the work you did before.”

Anbritt Ludvigsson, a 60-year-old payroll administrator who has been on paid leave for 18 months, said a combination of family problems and a heavy workload disabled her.

“I couldn’t log onto the computer. I had forgotten everything,” she recalled, struggling to hold back tears.

Opponents of the generous policies say that paid sick leave has come to be seen as an entitlement rather than a benefit and that frivolous claims are partly to blame for the abrupt rise in sick leave claims since 1997, when only about 170,000 Swedes received such payments.

Swedes “need to be pampered, placed on treadmills and surrounded by fruit baskets to cope with work,” book publisher Helena Riviere wrote in an opinion article for the newspaper Svenska Dagbladet.

Riviere said the generous leave policies invite people to abuse the system simply because they’re “fed up with work or dissatisfied with their lives in general.”

A recent survey of 2,000 Swedes by the polling institute Temo found that 60% believe that it’s acceptable to call in sick for reasons other than illness -- for family problems or stress, for example.

“If people continue using sickness compensation like this, there won’t be much left over for those who really are sick,” said Eric Jannerfeldt, a spokesman for the Confederation of Swedish Enterprise, which represents employers.

The business group estimates the value of lost man-hours at $16 billion a year.

Economists Magnus Henrekson and Mats Persson say the high sick pay may be part of the problem. In an article for an academic journal, they linked variations in sick leave over the last five decades to changes in the compensation system.

Their theory doesn’t explain why sick leave numbers started growing in 1997 after a steady decline in most of the ‘90s. But Henrekson and Persson note that the surge intensified in 1998 after the Social Democratic government raised compensation levels to 80% of wages from 75%.

“One thing is certain. When you raise compensation levels, more people take advantage of the system,” Henrekson said.

Sick leave also is high in neighboring Norway, which has higher compensation than Sweden.

However, it’s lower in Denmark and Finland, where compensation is less generous. Other European countries report lower rates than Sweden, but direct comparisons are difficult because of variations in data.

Labor Minister Mona Sahlin blames the problem on too much work and too few workers. She says job cuts and restructuring throughout the Swedish economy during the recession in the early 1990s increased the strains on workers.

Other experts concur that an aging work force, economic globalization and public-sector cutbacks explain some of the surge in sick leave claims.

Still, Sweden remains a world leader in labor safety and social welfare. Most employees have a 40-hour week -- and get overtime if they work more -- and the law guarantees five weeks of vacation a year.

Work-related deaths are among the lowest in the world, and workplace safety is closely monitored. Life expectancy has increased over the last decade by 2.5 years for men, to 76.9, and by 1.6 years for women, to 81.8.

“They really take care of you here,” said Samantha Budd, a British researcher who works for drug maker AstraZeneca in Soedertaelje, south of Stockholm. Her move to Sweden from the United States allowed her more time off, a slower work pace and ergonomic office furniture tailored to her body.

“If it has slipped in standards, what was there before? It’s hard to imagine,” she said.