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The following OECD assessment and recommendations summarise chapter 4 of the Economic survey of Sweden published on 3rd December 2008.
By international standards, educational attainment in Sweden is high. Over 90% of the younger cohorts have completed upper secondary education, a share among the highest in the OECD and above the other Nordic countries. However, youth unemployment is widespread, even if it has declined from 22.8% of the labour force in 2005 to 19.2% in 2007 on the back of buoyant economic growth. In Denmark, Iceland, the Netherlands and Norway, where social preferences are similar, youth unemployment is just a third of the Swedish rate. Unemployment is particularly high among youth with poor schooling and among immigrant youth. This indicates problems both in the education system and in the labour market. An education system that helps children and youth from all backgrounds realise their full potential is vital for continued prosperity and for reducing labour market exclusion among youth and the low skilled – notably in the context of relatively generous income benefits and a narrow wage distribution.
Youth and adult unemployment compared, per cent 2006
Compulsory school must ensure a stronger start for all
Learning outcomes in compulsory education are not as good as they used to be. At age 15, student proficiency measured by PISA is above the OECD average for reading but not for mathematics and science. Moreover, 15 year olds’ interest in learning about science, time spent on science-related activities outside school and interest in working with science later in life are well below the OECD average, raising questions about how children’s natural curiosity and interest in science can be nurtured. The continued development of tests to better monitor progress during school would help. So would the proposed system for accreditation of teachers, with more weight given to their specific competences when allocating tasks among staff. Once the accreditation scheme is well established, greater wage flexibility could reward the best teachers.
Upper secondary schooling should prepare students better for labour-market entry
Upper secondary vocational education needs to better prepare students for work. The introduction of apprenticeships is a promising route, emphasising more hands-on practical learning and perhaps giving immigrant and second-generation youth a better understanding of relations in a Swedish workplace. However, apprenticeships must avoid being so specific that students miss the more general skills they might need to reorient professionally later in life. Independent private upper secondary schools have expanded remarkably fast, with the share of students enrolled rising from 3% to 17% in just ten years. The competition they generate is welcome, not least because it shows where the public system could improve. Lack of scale, for example, may hold back vocational programmes from developing well in public secondary schools. Given the deficiencies of vocational programmes, it could be of interest to analyse the consequences of moving responsibility of upper secondary education from the municipalities to the State. Such an analysis could also look at other levels of schooling. To support choice, there should be more transparency for potential students about the labour market prospects associated with alternative options, for instance by publishing data for employment outcomes of recent school leavers.
Higher education also faces challenges
Swedish higher education has a number of strengths. However, a particular weakness of the Swedish system is that students complete higher education late. In order to speed up labour market entry, financial support for students’ living costs could be altered with loans replacing grants when studies get prolonged, or with explicit rewards for early entry and completion on time. Quality could be enhanced by basing the allocation of funding for core research and higher education on more transparent criteria and by giving universities more freedom to develop their own strengths. Relying solely on tax-financing of higher education might be a hindrance in this context. One approach would be to move gradually towards a system where students pay for tuition, while extending government loans available for students in order to finance tuition costs. This is done in a growing number of OECD countries to meet both efficiency and equity objectives, inter alia in the light of growing high-skilled mobility. In Sweden, legislation to introduce fees for non EU students is currently being considered. Reducing the state income tax, as recommended above, would boost the returns to higher education, which are rather low by international standards.
Education enrolment drops sharply at age 19 as many Swedish youth take several “gap years” before starting tertiary education, per cent 2006
Labour market institutions are too rigid
Shortcomings in the education system cannot alone account for high youth unemployment: Denmark and Norway have PISA scores similar to Sweden’s, but much better youth labour market outcomes. Education reform is needed, but the rigidities in the labour market must also be addressed. High minimum wages and a compressed wage structure make the entrance on the labour market difficult for youth, especially for immigrants and those with incomplete education. Labour demand has been stimulated by a general reduction of the employer contribution for individuals younger than 26. The rebate makes it easier for youth to enter the labour market, but the deadweight costs are presumably large, and its positive effect on youth employment might be offset by demands for higher wages. Active labour market policies are being improved with the Job Guarantee for youth, shifting the focus onto enhancing job-search coaching in the early phase of youth unemployment spells, and reducing the statutory replacement rate after 20 weeks, compared with 40 weeks for others. Still, benefits are effectively more generous for youth than for prime-age adults as, for example, the ceiling on unemployment benefits is less frequently binding for youth. Dualism in employment protection is of particular concern. The recent extension of the maximum duration of temporary contracts may allow employers to better “try out” young job applicants. However, there is a risk of youth being locked into temporary contracts rather than regular employment. One approach would be to clear the pathways to regular employment by easing the definition of a fair dismissal and lengthening the trial period for regular contracts. The complexity of these issues would call for a review of the broader implications, including with respect to collective wage bargaining.
How to obtain this publication
The Policy Brief (pdf format) can be downloaded in English. It contains the OECD assessment and recommendations. A Summary in Swedish (pdf format) is also available.
The complete edition of the Economic survey of Sweden 2008 is available from:
For further information please contact the Sweden Desk at the OECD Economics Department at email@example.com. The OECD Secretariat's report was prepared by Jens Lunsgaard and David Turvey under the supervision of Vincent Koen. Research assistance was provided by Roselyne Jamin.