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The following OECD assessment and recommendations summarise Chapter 3 of the Economic Survey of Sweden 2005 published on 9 June 2005.
Reducing sickness absences is the single biggest labour market challenge
On a normal day, nearly a fifth of the potential workforce is on sick leave or receiving a disability benefit. The sickness rate has soared since 1998, especially among long term absences, and is close to an all time high (it has edged back from its peak more recently, but much of the improvement is because people have moved onto disability benefits instead). The causes of the problem are not hard to find. Compared with other OECD countries, sickness insurance is both generous and easy to get. Swedes have a legitimate social goal of protecting sick people from undue hardship. However, the more generous the system, the more vigilant policymakers must be about ensuring that benefits are reserved only for those who need them. In this respect, Sweden falls well short of international best practice. However, an overly hard line is not necessary. Simply moving towards the middle of the pack would help a great deal. By doing so, the sickness problem may be largely solved without having to directly reduce benefit rates.
The number of working days lost due to sickness is the highest in the OECD
Working days lost per full-time equivalent employee per year, 2004
Source: OECD
The government has set a target of halving the number of sick listed people by 2008. It has taken some steps to try to tighten up administration, especially by bringing local offices under its wing. But tougher enforcement of a soft system is not enough. It needs to develop the sort of “mutual obligations” approach that is already used for the unemployed, which means placing greater responsibilities on the sick person, the employer and the social insurance office:
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Eligibility criteria need to be tightened further. Despite attempts since 2003 to tighten up, almost everyone who requests sick leave is granted it. There are several options for dealing with this, most of which are common practice in other countries. In the initial stages, doctors need to be more thorough in assessing a person’s work capacity and should be given greater support by the social insurance office if they feel that a request should be denied. To ensure that short spells do not become long ones, extending a medical certificate should be less easy (for instance, not over the telephone), and benefits should have a maximum duration of one year. Independent medical assessments by a social insurance doctor should be introduced for long term sickness and disability recipients. It would also help if the ultimate decision to grant long term benefits were made in a regional or central office and by a panel of experts, rather than, uniquely, by local politicians. Once a benefit is granted, work capacity should be regularly re assessed (the government is trying to do this, but it is not clear how rigorously the policy is being implemented in local offices). A full scale review of the existing stock of long term recipients may also be warranted, and occasional random checks could be re introduced.
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Receiving a benefit should entail certain obligations for the sick person. In most cases, benefit receipt should depend on participation in vocational rehabilitation or other integration measures. In general, the earlier this starts the better. The new policy of having a meeting after a few weeks among the various parties is a good one, but it is important that this is done on time. Moreover, the social insurance office needs greater powers to act when a beneficiary refuses rehabilitation.
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Increase incentives on employers. From this year, employers are required to pay the first two weeks of sick pay plus 15% of sickness benefits for the rest of the spell unless the individual is working part time or undergoing rehabilitation. The aim is to get people into rehabilitation earlier, but it is unclear whether this is the best way of going about it. The government should monitor the response of companies to this new regime; if it is not having the intended effect, it could be replaced with a higher up front cost for employers but with a limited duration (for example, covering sick pay for the first two to three months). Employers’ incentives could also be sharpened by introducing industry or firm experience rating. As a first step, different sickness insurance premiums could be set for public and private employers. Introducing a clearer division between workplace injuries and the general sickness insurance scheme would also help, as it would separate out the conditions over which companies have some influence. Steps may also be needed, however, to minimise any adverse selection problem if firms were to respond by not hiring high risk groups (although this has not been a major problem in the Netherlands).
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Monitor partial or part time sick leave. The government is encouraging partial benefits as a way of keeping people attached to the workforce. However, they can be unhelpful if they invite a higher inflow and are used merely as an income top up for workers who want to scale back their hours for lifestyle reasons. Sweden will need to rethink its approach if it finds that partial benefits are being used in this way.
Taken together, these proposals would imply a radical shift in Sweden’s approach to sickness and disability insurance, making it more similar to approaches elsewhere.
Return to the OECD Economic Survey Sweden 2005 homepage
Go to Chapter 4
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A printer-friendly Policy Brief (pdf format) can also be downloaded. It contains the OECD assessment and recommendations, but not all of the charts included on the above pages.
To access the full version of the OECD Economic Survey of Sweden:
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Readers at subscribing institutions can go to SourceOECD, our online library.
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Non-subscribers can purchase the PDF e-book and/or printed book at our Online Bookshop.
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Government officials can go to OLISnet's Publication Locator ( subscribe).
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Accredited journalists can go to their password-protected website.
For further information please contact the Sweden Desk of the OECD Economics Department at webmaster@oecd.org. The OECD Secretariat's report was prepared by David Rae and Martin Jørgensen under the supervision of Peter Jarrett.
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