Relative poverty in Sweden has doubled
Real wages have risen steadily, but so has relative poverty. This means that more and more people are finding it difficult to make ends meet. Photo: Getty Images
Real wages have risen steadily in Sweden, which has led to most Swedes having more money at their disposal. But at the same time, the gaps in society have widened. Vulnerable groups have had a tougher time since the 1990s, as compensation levels in the social security system have failed to keep pace with developments. This is something that political scientist Sebastian Sirén has observed in his research.
“The differences between those who work and those who need to rely on public safety nets to support themselves have increased over time. We can see this clearly when we look at what is known as relative poverty,” says Sebastian Sirén, Postdoctoral Fellow at the Department of Government.
Relative poverty is defined as having an income below 60 percent of the country’s median income. According to Sebastian Sirén, the proportion of people in Sweden who fall below this threshold has doubled since 1995, when the proportion was seven percent.
“The social security systems of the 1980s and 1990s went a long way towards protecting households from relative poverty in the event of unemployment or illness. Today, we see that the risk of falling below the relative poverty line is significantly higher for households that rely on unemployment insurance and health insurance than for households that mainly support themselves through work. That difference has increased dramatically,” says Sebastian Sirén.
Sebastian Sirén is currently working on a research project comparing the development of the Swedish welfare systems with those of other countries. Photo: Mikael Wallerstedt, Uppsala University
In a new research project, he is studying changes in welfare policy and how they have affected households at risk of lower incomes. The groups he is studying are single parents, the unemployed, young people and migrants. He compares how incomes have developed over time in Sweden and in several other welfare states around the world from the 1980s onwards.
“I am also studying the extent to which changes in welfare policy can explain the outcomes for different groups. In part, this involves placing Sweden in a comparative perspective and seeing how developments here differ from other comparable countries. As a method, we can also use comparisons to understand how policy design affects people in different countries, because if we only study Sweden, it is quite difficult to draw conclusions about the role that national policy design plays in the outcomes we are interested in, such as inequality or poverty,” explains Sebastian Sirén.
The 1980s a turning point
He is focusing on the following systems: sickness benefit, the pension system, occupational injury insurance, unemployment insurance, child allowance and parental insurance. He is also looking at means-tested support for vulnerable households with no other income, such as income support and housing allowance. He chose to use the 1980s as a jumping off point because it was a turning point in the development of the welfare state.
“Throughout the Western world, we can see a period of development and expansion of the welfare policy until around 1980. It was at that time that the expansion phase came to a halt and gradually gave way to a period of cutbacks. This is an international trend, and you could say that we can see it clearly in Sweden after the crisis of the 1990s,” says Sebastian Sirén.
Compensation levels began to fall
In connection with the financial crisis in the early 1990s, Sweden also began to lower the compensation levels in its social security systems, which until then had been among the most generous in the world.
“They were restored to some extent, but not to the same levels as before. We’ve also seen development, which is most evident in unemployment insurance, where we have a ceiling for insurance that is not adjusted upwards at the same rate as real wage increases. This has resulted in more and more employees hitting the ceiling for these insurance policies. In a way, the compensation that ordinary employees receive in the event of unemployment – and now also in the event of illness and, to some extent, retirement – has increasingly been determined by the maximum compensation set in the systems,” says Sebastian Sirén.
Sweden around the average
With the cuts made to the systems, Sweden has fallen behind several other countries in recent decades, as they have maintained their compensation levels to a greater extent or beefed up their welfare systems.
“Yes, that’s definitely the case when it comes to the generosity of social security systems and assistance for vulnerable people through income support. If we look at the OECD countries, Sweden is in many cases around the average and in some cases slightly below, for example when it comes to the level of income support and compensation for the financially vulnerable. We are around the average when it comes to pensions and unemployment benefit, and slightly above when it comes to sickness benefit,” says Sebastian Sirén.
Private insurance policies available
Insurance negotiated via collective agreements and the insurance that trade unions offer their members have become increasingly important in covering lost income due to illness and unemployment. There are also private insurance policies available for those who can afford them. Sebastian Sirén believes that, in the long term, this poses a risk of undermining confidence in the welfare state.
“Having more comprehensive public safety nets is equalising. There is clear evidence in research that it is the more comprehensive welfare states that are more equal. The willingness of medium- and higher-income groups to contribute to the same system has been a cornerstone of the general welfare policy we have had in Sweden. And there is a risk that the interest in contributing to the common good will be lost if we end up with a more stratified welfare policy in which more affluent groups rely on private or other systems rather than the public system,” he says.
Åsa Malmberg