Sweden - Domestic policy



Persson demonstrated his ability to gain support from across the political spectrum by adopting a major old-age national pension reform in June 1998 after years of planning and discussion. The new program is one of the first national pension schemes to move in the direction of "defined contributions" rather than relying on other public revenues to guarantee benefits. Although it will be phased in over many years, the new system ties benefits to economic performance and demographic changes. Moreover, it invites citizens to make individual investment decisions with a modest portion of their obligatory pension contributions. While voluntary pension plans have long allowed such personal discretion, extending it to the entire public system is a radical reform.

After the 2002 election, Persson addressed the high sickness rate in Sweden. In the rest of Europe, 1.9% of employees are off sick for a week or more in the year. In Sweden, that figure stands at 4.5%. Any weekday, near 10% of the workforce is off sick, and the total of days lost this way has doubled in five years. The 2003 budget spends nearly $12 billion for sick pay and disability pensions—more than 10% of the government's total spending. The incentives to call in sick are strong because the sick employee can expect to receive 80% of his or her pay, paid by the employer, after the first day of sickness; after two weeks, the percentage climbs to 90%. Persson created a new ministerial post just to deal with the problem. The aim is to cut sick leave in half by 2008.

More money is to be spent on rehabilitation and improving workplace environments, but the government also proposed to tighten the verification of illness among those on sick leave. In spring 2003, the weak international economy and uncertainty caused by war in Iraq hit the country's biggest exporters, with companies such as Ericsson, Electrolux, and SAS shedding thousands of jobs. The 2004 budget was the first since 1996 that featured a tightening of fiscal policy. Households will see no increase in real disposal income in either 2003 or the following year. The cabinet also increased childcare fees; delayed road, rail, and defense projects; and shelved an election promise to raise the ceiling in the sickness and parental insurance systems.

Several noneconomic issues remain prominent as well. The presence of 12 nuclear power plants has been a contentious issue for more than 20 years. Promises to phase out nuclear power by the year 2010 have been postponed repeatedly as economic and other environmental issues have intruded. Both the Left and the Green parties want to accelerate the phasing out of nuclear power.

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