Social policies spur Swedes to keep working

The Stockholm Cathedral is seen in Gamla Stan or the Old Town district of Stockholm. Sweden's canny social policies are the reason so many of its baby boomers are choosing to keep going to the office. --PHOTO: REUTERS
The Stockholm Cathedral is seen in Gamla Stan or the Old Town district of Stockholm. Sweden's canny social policies are the reason so many of its baby boomers are choosing to keep going to the office. --PHOTO: REUTERS

Pension reform, lavish parental leave lead to EU's highest employment rate

STOCKHOLM - Like most of Europe, Sweden is struggling with an ageing population.

But in fact Sweden's canny social policies mean many of its baby boomers are choosing to keep going to the office.

The country's pension reform and generous parental leave have resulted in Europe's highest employment rate - with a strong showing among women and the elderly - meaning more working people pay taxes to fund the welfare state.

Ms Malin Engstedt, 65, worked all her life and could now afford to retire if she wanted to. But her pension will be higher if she retires later, and she enjoys work.

"I thought half a year ago that maybe I could quit by the end of the year. But the closer to that I got, the less I felt like stopping working," said Ms Engstedt. So she plans to take on a new job in communications.

Sweden's employment rate last year was 74.4 per cent versus the European Union average of 64.1 per cent, according to Eurostat.

Its 73.6 per cent employment rate for people aged between 55 and 64 dwarfs the EU average of 50.1 per cent.

The country is also helped by a population that is rising as numbers in other European nations dwindle: By 2050 Swedes will number 11.4 million from today's 9.7 million. The median age will rise to 43 years, says Eurostat.

By contrast, Germany's 82 million residents will fall to 74.7 million by 2050 and the median age will rise to around 50.

"(Sweden) is doing much better than almost everyone else, both because of the demographics and because of the policy settings," said economist Christophe Andre.

Sweden provides incentives to keep people employed for the length of their working lives.

Parents are able to share childcare because they get 480 days of leave per child, and subsidised day care costs no more than 1,260 kronor (S$221) a month.

As a result, employment among women is 72.5 per cent - the highest in the EU - and no one criticises the armies of dads nicknamed "Latte Pappas" who look after the children during the day.

For older Swedes, the right to take sabbaticals from work in order to study helps to keep people learning - and employed.

And when people start to think about retiring, the recently reformed pension system tempts them to keep going a little longer.

A person who retires at 63 gets 12 per cent less than someone who waits till 65, the most common retirement age. But those who work until 69 are rewarded with a pension almost 30 per cent bigger than that of the 63-year-old.

"It does not pay to retire early but it is rather punished," said Professor Anders Forslund, assistant director-general of The Institute for Evaluation of Labour Market and Education Policy, a government agency.

REUTERS