The UK could learn lessons from Sweden’s response to financial crisis in the mid-1990s, according to a new report published by the think tank IPPR and written by Sweden’s former Finance Minister.
IPPR analysis shows that despite recent employment growth, long-term unemployment in the UK remains worryingly high, up 13,000 in the last quarter to a total of 897,000. People who have been out of work for more than a year now make up a third of the total number unemployed.
But it says the UK could draw lessons from how Sweden tackled a high deficit in the late 1990s while retaining a relentless focus on tackling unemployment. Former Swedish Finance Minister, Pär Nuder, argues that key to Sweden’s success in halving unemployment and cutting its deficit in four years was investment in education and employment programmes designed to tackle long-term unemployment and ensure the country’s long-term economic competitiveness.
In the aftermath of the early 1990s recession, Sweden’s Social Democratic government invested heavily in creating employment, training and work experience opportunities for unemployed people, introducing a raft of innovative schemes. Women were encouraged to learn or work through extensive low-cost childcare and a major workforce training programme raised skill levels. As a result, Sweden had achieved the second-highest employment rate in the EU by the mid-2000s, with an unemployment rate of just 4 per cent.
Kayte Lawton, Senior Research Fellow, said:
“There are some big lessons for the UK to learn from Sweden’s deficit reduction programme in the second half of the 1990s. Sweden was hit by a major financial crisis in the early 1990s, which pushed the deficit up to 10 per cent of GDP, the highest in the OECD, while unemployment tripled. But between 1994 and 1998 the Social Democratic government turned a large deficit into a surplus while investing heavily in programmes to tackle unemployment.
“Key to the government’s strategy was the drive to raise the employability of the long-term unemployed through innovative employment and training programmes. The Social Democrats prioritised investment in education, training and job subsidies over spending on benefits.
“These policies improved the skills base of Swedish workers with an eye to the long-term and gave unemployed people a chance to gain real, paid experience and a recent reference. The UK can learn a lot from the Swedish experience.”
