February 3, 2010

The unemployment debate we need in Sweden

Part 2: The way forward

There is an alternative more pragmatic way forward that recognizes the limits of government programmes to create jobs, and instead tries to capture the political momentum in the employment debate to address the strategic long-term challenges that governments interventions do have the power to influence.

The first of these is social exclusion. This is a very real concern, with 5000 people under 30 permanently leaving the labour force every year, and with 10% of high school students having such poor educational record to be considered “at risk”. Social exclusion is related to employment. But the inability of groups ”at risk” to get a job is more a consequence of broader social and educational failures, than the result of unemployment. In simplified terms: it is not the inability to get a job that is the problem, it is the sense of exclusion that makes you stop looking for one. If this is recognised, new policy instruments, new actors and a new tools can be brough in to address the challenge. Furthermore, the business of social integration - alternative education, afterschool activities, etc - is in itself an emerging sector with large employment potential which must be encouraged.

The second question is the sustainability-imperative. We are facing a structural transformation of our economy of a dimension hitherto unseen in peacetime. But so far politics has failed to build anything even resembling adequate political support for the interventions required. And unless it can be shown that sustainability policies could be the way to provide the employment of the future, the support for change is certain to stay elusive.

Since employment is so central to people’s lives, that debate will always have the political centre stage. This puts a particular responsibility on politicians and interest groups to help frame the debate so that it also addresses long-term strategic issues. Politicians need to tell new stories that help voters see unfamiliar challenges in familiar terms. So far this is not happening, unfortunately.

The unemployment debate we need in Sweden

Part 1: The Problem

Yet again, the election campaign ahead will be fought over jobs. With an unemployment rate approaching 10% this would always be the case. Unfortunately, the debate is already getting stuck in yesterday’s ideological conflicts, rather than pragmatically addressing the strategic issues of tomorrow. This failure to renew the debate matters, because how we tell stories matter. We are now losing an opportunity to use the political momentum around unemployment to address the two most important long-term challenges to Swedish society: social cohesion and sustainability. Rather than populistically promising to ”create jobs”, the parties should instead argue over how to prevent groups at risk from falling into long-term exclusion, and how to stimulate long-term job growth that will meet the sustainability demands of tomorrow.

The problem with the current debate is this: what voters ask for is not really in the power of governments to give. There is very little evidence that, so called, “labour market policies” - eg. employment protection, tax incentives, job matching schemes, etc - impact aggregate employment figures. In short, jobs are not “created” as the result of government policies, at least not in the quantities and time frame relevant to elections. But the debate is framed in those terms because it serves the ideological interest of groups like the main Labour Union and the Swedish Association of Enterprise. Their interest is not really unemployment numbers as such, but rather how much of the problem their members should pay for.

This of course is not to say that labour market policies don’t matter. They do, but not by affecting aggregate unemployment numbers. They provide crucial support to people who have lost their job (eg. unemployment benefits); they help redistribute the burden of unemployment between young and old (employment protection legislation); in the best of instances they help instil hope and meaning in the life of young people who may otherwise fall into crime and deprivation (eg. coaching and training schemes). Labour market policies do not however “create jobs”.

There is, in other words, a mismatch in the debate between policy instruments used and purported results, which is generally a recipe for not achieving much in any area at all.