Labour Market Measures in Sweden 2008–13: The Crisis and Beyond

In the wake of the global financial crisis, the Swedish economy started to deteriorate rapidly in the second half of 2008, and in 2009 Sweden’s real GDP decreased by 5 per cent. With this severe drop in aggregate demand and output, employment decreased by around 100,000 between 2008 and 2009 (a decreased employment rate of 2.1 percentage units), while the unemployment rate increased from 6.2 per cent to 8.3 per cent of the labour force. The fall in output and employment was particularly marked in manufacturing and construction, with decreases of 14 per cent and 6 per cent of employment respectively (Statistics Sweden). With regard to Swedish manufacturing, the fall in employment was particularly marked in export-oriented industries. Due to the sharp increase of unemployment, local plant closure and the overall reduction of economic growth, the recession led to a reduction of tax revenues for local authorities that are responsible for the provision of social services, health and education. In a first phase, this situation led to severe budget cuts at the local level and decline in public employment, mainly among public employees on short-term contracts.