Table Of ContentPopulation Economics
Editorial Board
John Ermisch
Bengt-Arne Wickstrom
Klaus F. Zimmermann
Titels in the Series
Jacqnes J. Siegers • Jenny de Jong-Gierveld
Evert van Imhoff (Eels.)
Female Labour Market Behaviour and Fertility
Hendrik P. van Dalen
Economic Policy in a Demographically Divided World
Dieter Bils . Si.jbren Cnossen (Eds.)
Fiscal Implications of an Aging Population
Klaus F. Zimmermann (Ed.)
Migration and Economic Development
Nico Heerink
Population Growth, Income Distribution,
and Economic Development
Tommy Bengtsson (Ed.)
Population, Economy,
and
Welfare in Sweden
Springer-Verlag
Berlin Heidelberg New York London Paris Tokyo
Hong Kong Barcelona Budapest
Associate Prof. Tommy Bengtsson
University of Lund
Department of Economic History
P.O.Box 7083
S-22007 Lund
Sweden
ISBN-13: 978-3-642-85172-8 e-ISBN-13: 978-3-642-85170-4
DOl: 10.1007/978-3-642-85170-4
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© Springer-Verlag Berlin· Heidelberg 1994
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Contents
Chapter 1. Introduction 1
Tommy Bengtsson
Chapter 2. The Demographic Transition Revised 13
Tommy Bengtsson and RolfO hlsson
Chapter 3. Combining Market Work and Family 37
Christina Jonung and Inga Persson
Chapter 4. Internal Migration 65
Tommy Bengtsson and Afats Johansson
87
Chapter 5. Immigration and Economic Change
Christer Lundh and Rolf Ohlsson
Chapter 6. The Pension System 109
Agneta Kruse
Chapter 7. Social Care and the Elderly 135
Per Gunnar Edebalk and Bjorn Lindgren
Chapter 8. Health care and the Elderly 155
Per Broome. Bjorn Lindgren. Carl Hampus Lyttkens
and RolfO hlsson
The Authors:
Tommy Bengtsson, Associate Professor, Economic History, Lund University
Per Broome, BA, Stockholm
Per Gunnar Edebalk, Associate Professor, School of Social Work, Lund University
Mats Johansson, Associate Professor, Expert Group on Regional and Urban Studies
(ERU), Ostersund
Agneta Kruse, Senior Lecturer, Economics, Lund University
BjOrn Lindgren, Professor, Community Health Sciences, MalmO, and Economics,
Lund University
Christer Lundh, Associate Professor, Economic History, Lund University
Carl Hampus Lyttkens, Associate Professor, Community Health Sciences, MalmO,
and Economics, Lund University
Christina Jonung, Lecturer, Economics, Lund University
Rolf Ohlsson, Professor, Economic History, Lund University
lnga Persson, Professor, Economics, Lund University
The book has been written as part of the research programme The Aged and the
Economy at the School of Economics and Management, Lund University, with
support from the Council for Social Research (SFR), Sweden.
Chapter 1
Introduction
Tommy Bengtsson
The Swedish welfare model of the 1960s and 1970s excited great interest among
many other countries. Today it still is an ideal image for some but a warning for
many others. The reason why opinion about the Swedish welfare model has changed
is primarily Sweden's financial problems, which are associated with a badly financed
and excessively large public sector. It is argued that the size of the budget deficit is a
great problem in itself, but also, and perhaps more importantly, that the large public
sector has negative effects on the entire economy since it lead to inefficient allocation
of resources. A first step in order to solve these problems is to examine how they
arose. The questions then are to what extent the large public sector which Sweden has
today results from social entitlements which have come into existence since the
1960s, from the maturing of welfare systems decided upon earlier, from unfavourable
demographic developments, or from economic stagnation, and how these factors are
interlinked.
What is quite clear is that Sweden has had very low economic growth during the
1970s and 1980s compared with the preceding period. But so have many other
industrial countries, without their having in consequence found themselves in diffi
culties as great as Sweden's. Therefore economic stagnation alone cannot explain
Sweden's situation.
Have demographic developments, then, been specially inauspicious for Sweden?
In an international perspective Sweden stands out as a country different from others
in this respect. Sweden have the highest proportion of old people in the world, the
highest proportion of cohabiting couples, the highest proportion of children born
outside wedlock, and the highest proportion of refugees in relation to population.
Sweden is among the countries with the highest average lifespan and the highest
living standards, and also one of the industrial countries with the highest fertility
despite the fact that we also have the highest female labour force participation rates.
However, these peculiarities do not set us totally apart from other industrial countries
in all these fields -they merely mean that developments were earlier or more extreme
in Sweden and that this has quite serious implications for public sector expenditure.
As regards the development of the welfare system during the 1970s and 1980s,
certain new entitlements did appear, including increased parental insurance and
lower pensionable age. Nevertheless the main structure of the welfare system dates
further back in time. In addition to individual and political rights its citizens received
social rights or entitlements, and step by step these became more and more extensive,
2 Tommy Bengtsson
including rights to high compensation for lost income (for example during illness and
unemployment).
The welfare ideology has its roots in late nineteenth-century industrial society.
The first steps towards a welfare society were taken in the period around the tum of
the century when legislation was enacted covering such matters as compensation for
industrial injuries, state subsidies for the voluntary friendly society movement, and a
national pension system. The latter in fact was the first pension system in the world to
cover the entire population. On these questions there was a considerable measure of
agreement between the great political parties, as was also the case on the majority of
the sociopolitical issues on which decisions were taken subsequently.
At first, the evolution towards a welfare state did not proceed any faster in Sweden
than in other West European countries. In 1960 public expenditure in Sweden formed
31 per cent of GOP, which was not unique but was somewhat lower than in France,
Germany, Great Britain and Austria. By 1970 the proportion of GOP absorbed by
public expenditure had risen to 43 per cent -only Holland had higher public expendi
ture - and during the 1970s Sweden took the top position in the expenditure league.
In the 1980s Sweden not only retained but even increased its lead. Public expenditure
today, including transfer payments, accounts for 75 per cent of GOP, which places
Sweden in a unique position compared with other countries. Now a transfer payment
is not a cost in itself. Nor is it certain that private solutions are better than public. The
main point, rather, is that such a large part of incomes is channelled through the
public sector and that the financing creates inefficiencies. Thus the cost of a high
level of transfer payments results from inefficient allocation of resources.
When the welfare ideology burst into full bloom in the 1960s, social and economic
developments were favourable. With the high birth figures of the second half of the
1940s it was believed that the population crisis of the 1930s was already past. The
demographic transition was over and done with, and a future free of population dis
turbances now awaited. Nor was there any disquiet over economic trends. Total pro
duction was increasing by around 4 per cent a year, industry by 5-6 per cent. The
1960s were a golden age for Swedish households. It was then normal to be able to buy
a telephone, TV, car etc. Social entitlements were being expanded in one area after
another: child care, child allowances, education, education allowances, unemploy
ment insurance, social welfare allowances, industrial injuries compensation, disability
compensation, early retirement pensions, partial retirement pensions, housing allow
ances, supplementary pensions and so forth.
The underlying idea was that the individual should be able to live at a tolerable
standard of living whether he or she was working or not, and that a pensioner should
have almost the same standard which he had when working. This was to be accom
plished by means of transfers, chiefly from wage-earners to other groups but also
from high-and medium-income earners to low-income earners. The market economy
was to be controlled, modified and supplemented so as to implement the distribution
desired by the majority. In order to achieve the declared goal of guaranteeing all citi
zens a good standard of living, a healthy economy and an active state were required.
The policy and the institutions which gradually emerged came to be called "the
Swedish model" later on. The expression is not precise, and there is a handful of dif
fering interpretations of the concept. The term really refers to the system of collective
Introduction 3
wage negotiations which came into use during the 1960s. Today it has a broader con
tent and includes all the most important forms of state intervention in the economy
for the purpose of implementing the transfers needed to create social justice.
One of the cornerstones of "the Swedish model" is a strong economy. Labour
market policy is an important feature in this, and from the historic settlements arrived
at between trade unions and employers during the 1930s and 1940s a new type of
active labour market policy was formulated in the late 1940s and early 1950s. In
order to create a mobile labour force capable of moving into expanding sectors of the
economy, the assistance provided for the temporarily unemployed was very generous,
and special allowances were given to make internal migration easier.
Another important feature of "the Swedish model" is the size of public consump
tion. Transfers of resources between individuals should not only take place as trans
fers of cash but also, and perhaps principally, through the consumption of public
services. Most of these are produced today under local authority auspices, and in most
municipalities the public sector is far and away the largest employer.
Even though the major part of the sociopolitical system was already fully devel
oped by the 1960s, the great growth of public expenditure did not happen until the
1970s, and 1980s, and then as a result of the maturation of the systems and to demo
graphic changes. The pension system is an example of this. Today pension benefits
are bigger than pension contributions. The deficit is defrayed from pension funds and
tax receipts. Under today's rules the gap is expected to widen in the future. Therefore
a new pension system has seen the light of day. The new system on which the Riks
dag (the Swedish parliament) has just resolved is characterised by more direct links
between payments in and payments out. i e a reduction of redistribution effects. In
many areas of the public sector the charging element of finance is being increased in
order to improve efficiency and freedom of choice. This applies to health care, for
example, in which charges have hitherto covered only a very small proportion of
costs. The transfer system is also criticised for leading to a number of undesirable
distortions of the economy. Voices are being heard calling for a return to the
"minimal state", which probably cannot become all that small because of, among
other things, the promises already made. Bearing in mind the intensive current debate
concerning the financing of the welfare system, for example the new pension scheme,
it is interesting to note that the financing of the predecessors of such schemes was not
properly analysed and debated in advance but in some cases has came as an unpleas
ant surprise afterwards.
Sweden has experienced one long demographic cold shower because of the matu
ration of social welfare systems and the growing proportion of elderly, and other
industrial countries are moving towards one as well. Another one is accordingly
awaiting us within a relatively near future because some way into the twentyfirst cen
tury, the proportion of pensioners is going to increase further as the bulge of children
born during the 1940s come up to retirement age. This certainly is one of the reasons
why Sweden recently has adopted a reform of health and social care of the elderly and
introduced a new pension system. Sweden has in some respects been a forerunner in
the development of social entitlements. In a way it has also been a forerunner in terms
of demographic trends. Is it now to become a forerunner in the discovery of new
forms for developing and/or redefining the role of the welfare state?
4 Tommy Bengtsson
There are certain areas which it is important to analyse in order to understand the
changing role of the welfare state. One of these areas, analysed in this book, is that of
population trends in Sweden in a long-term perspective - the so-called demographic
transition. It is argued that it is not over and done with at all but still going on.
Another area is that of women's economic status, where both the paid and unpaid
work: of women is analysed. The number of women in the labour force in relation to
the total number of women of working age in Sweden today is almost the same as that
of men. But women work fewer hours outside the home than men, though more inside
the home. Another area which also impinges on the labour market is migration, both
within the country and in relation to foreign countries. Internal short-distance migra
tion has increased while long-distance has decreased. The fonner immigration of
labour from abroad has turned into refugee immigration. Still another area of impor
tance which is discussed in the book is the economic aspects of the elderly: their
ftnancial situation as well as the organisation of social and health care.
Altogether it is intended that these articles should give the foreign reader an
insight into the way in which different social systems have emerged in Sweden during
the twentieth century and what problems the country faces today in maintaining
social security, problems that have come earlier and are more severe than in other
countries. We hope that a reading of this book will not only lead to an increased
understanding of what is going on in Sweden but may indicate what will happen in
other industrial countries, too, thus showing what lessons can be learned from the
Swedish experience.
Population and labour market
Sweden's transformation from an agricultural country with large-scale production of
raw materials such as timber and ore to an industrial country occurred rather late -
the industrial revolution came around 1870. It was not until the 1930s that industrial
workers outnumbered those working in agriculture. Industrialisation transformed
Sweden from a small, poor country on the margins of Europe to one of the richest
countries in the world. According to the classical view of the demographic transition,
the country's modernisation led fIrst to a fall in mortality, then to a decrease in family
size simultaneously with a substantial reduction of the variations in death and birth
rates. This transition was considered to have been completed during the 1930s. The
reason for the decrease of family size was partly an adaptation to reduced child mor
tality and partly an adaptation to the changes in economic conditions brought about
by modernisation. With the rise of modern society the direct costs of raising children
increased in consequence of factors such as compulsory education. The need for chil
dren as security in old age diminished, and so on. When family planning then became
a social norm, family size decreased rapidly.
According to Bengtsson and Ohlsson (chapter 2) a great deal of this is a miscon
ception. The decline in mortality which started at the end of the eighteenth century
took place prior to the modernisation of the Swedish economy - before real wages
rose. Accordingly there is no connection, during the initial phase of the decline in
mortality, between that decline and the economy. However, better living standards
