EurWORK European Observatory of Working Life

Working poor in Europe – Sweden

About

Country: 
Sweden
Author: 
Lisa Olsson
Institution: 
Oxford Research

Disclaimer: This information is made available as a service to the public but has not been edited or approved by the European Foundation for the Improvement of Living and Working Conditions. The content is the responsibility of the authors.

In-work poverty is not considered a significant problem in Sweden. As a result, little research has been conducted on the issue, and the social partners are more interested in reducing the number of unemployed people. However, some of those interviewed for this study state that in-work poverty might be an issue in the future, due to an increasingly divided labour market, separating the mainstream workforce and those on the periphery. The peripheral part contains employees who are most likely to be among the working poor and also made redundant in times of economic recession.

Definitions and aims of study

The ‘working poor’ are a section of the population that is difficult to define, not only due to a lack of specific data but also because the concept combines two levels of analysis: the working status of individuals and the wages that they earn from employment (individual level), and the extent to which they have a poverty-level of income within the household context (collective level).

The aim of the comparative analytical report is fourfold:

  • to obtain an insight into the extent of in-work poverty in different European countries and the characteristics of those affected;

  • to examine policies that are in place for tackling the problem of people in work with low levels of income and any assessments that have been carried out into the effectiveness of such policies;

  • to consider the views of social partners towards the working poor;

  • to investigate the effect of the current economic recession on the scale of in-work poverty.

For the purpose of the study, the working poor are defined in the same way as the indicator used by the European Commission to assess and monitor in-work poverty. Therefore, the working poor are those who are employed and whose disposable income puts them at risk of poverty. The expressions ‘working poor’ and ‘in-work poverty’ are thus used interchangeably.

‘Employed’ is defined here as being in work for over half the year. ‘Risk of poverty’ refers to having an income below 60% of the national median earnings. Income is measured in relation to the household in which a person lives and covers the income of all household members, which is shared equally among them after being adjusted for household size and composition. Accordingly, if persons are at risk of poverty, this may not be simply because they have low wages but because their wages are insufficient to maintain the income of the household in which they live. Equally, a person can earn a very low wage but not be at risk of poverty because the income of other household members is sufficient to raise the overall household income above the poverty threshold. The study covers people on low wages, or low earnings in the case of self-employed persons. Low wages, defined in an analogous way as low income – that is, below 60% of the median earnings of those in full-time employment – potentially puts individuals at risk of poverty. The risk is likely to increase in the current economic crisis as companies introduce various measures to try to cut wage costs while keeping people in employment by reducing their working hours, giving them extended leave or simply cutting wages.

The characteristics of the people concerned are also important – particularly their age, with young people and, in some cases, older workers, being more likely to be employed in low-paid jobs. Women are more likely than men to be employed in low-paid jobs, even allowing for the relatively large numbers of women working part time. However, the statistics show that if they are in work, women are on average across the European Union less likely than men to live in households with a poverty-level of income. Nonetheless, women are more likely than men to live in circumstances that put them at particular risk of poverty, such as being a lone parent in many countries. In addition, migrants are particularly vulnerable to being among the working poor, since they tend to combine various adverse characteristics, such as working in low-skilled jobs with low rates of pay and living in single-earner households.

A set of tables containing the data available at EU level on the working poor and on those on low wages was included in an annex to the questionnaire (see Annex 1 of the overview comparative analytical report). The data concerned derive from the EU Statistics on Income and Living Conditions (EU-SILC) for 2007, which are the latest available data and which relate to the position in 2006. The national correspondents were asked to comment on the table findings for their country and to supplement the data included with data from national sources where possible and where this helps to interpret the situation or to add to the information included in the tables. The EU-SILC tables, for example, do not cover the position of migrant workers. The correspondents were also asked to specify the source of any additional data and the definitions used where these differ from those on which the table is based.

1. Scale and nature of in-work poverty

1.2 Please comment on the figures for the working poor for your country shown in the attached tables and what they indicate about the scale and nature of this. Please refer to any additional data available from national sources or any studies which have been undertaken if these provide additional information in this regard and help to give an insight into the issue.

When considering the figures on risk of poverty as well as in-work poverty for Sweden and comparing them with the other European countries presented in the tables of Annex 1 of the overview comparative analytical report, it is clear that the problem is relatively limited in Sweden.

However, a few variables stand out, illustrating the poverty structure in Sweden. Regarding in-work poverty, Sweden shows the highest risk-rate of poverty among highly educated people. This could be related to the fact that the Swedish welfare model reduces income discrepancies, making the difference between high and low education less relevant. The risk of in-work poverty in Sweden is, according to the findings, just as high for the lowly educated as it is for highly educated persons, supporting that hypothesis (see Table A3 of Annex 1 in overview report).

The difference in the in-work poverty risk between people with different types of employment contracts is also interesting. While the risk of being working poor among those on a permanent employment contract is fairly in line with the other Member States, the risk among persons with a temporary employment contract is the highest in Sweden among all the EU countries. These numbers correspond to the ongoing debate in Sweden about the increasing incidence of atypical contracts and a growing insecurity in the labour market in general, confirmed by the researchers interviewed for this study. The trend in the Swedish labour market, as in many European countries, is a divide between mainstream employment – that is, those with typical full-time open-ended contracts – and those on the periphery of the labour market, with atypical part-time, temporary contracts. The latter group are more exposed to the risk of unemployment in times of crisis.

Another interesting characteristic is the fact that family workers’ risk of in-work poverty is non-existent in Sweden. However, this is probably due to the virtual non-existence of such workers in the country. A further noteworthy fact, revealed by the findings, is that self-employed people in Sweden show a fairly low risk of in-work poverty compared with the other Member States: 13.9% compared with an EU average of 36% (see Table A6 of Annex 1 in overview report).

From a gender perspective, the proportion of working poor among women compared with men corresponds to the trend in most parts of Europe, with similar characteristics emerging for both sexes.

1.2 Please comment on recent trends, giving any data or other evidence available to indicate whether the number of working poor has tended to increase or decline, between 2000 and 2007, especially considering women, young and older workers, self-employed persons and migrants.

The incidence of the working poor in Sweden seems to have declined during the period between 2000 and 2006, according to data from Sweden Statistics (Statistiska Centralbyrån, SCB). The discrepancies between men and women are, however, generally persistent. The proportion of the working poor among female blue-collar workers in 2006 was 10% compared with 7.2% for men (Figure 1). In the period 2000–2001, the corresponding figures were 11.3% and 6.3% for women and men respectively.

Figure 1: Proportion of blue-collar workers defined as working poor, by gender, 2000–2006 (%)

se0910029q.tmp00.jpg

Note: The poverty line in these data is drawn at a calculated social allowance norm, defined by multiplying the number of consumption units by the basic amount and adding actual childcare costs, local transport costs, trade union charges and fictive living costs. Households with an income below the norm are defined as poor. The figures are therefore not to be seen in parallel to the data from the annexed tables and should only be regarded as a measure for analysing changes over time.

Source: SCB, 2007

Among the category of white-collar workers, however, the gender discrepancies show a different pattern (Figure 2). In this instance, a higher proportion of men rather than women are more likely to be among the working poor.

Figure 2: Proportion of white-collar workers defined as working poor, by gender, 2000–2006 (%)

se0910029q.tmp01.jpg

Source: SCB, 2007

In relation to self-employed persons, the gender discrepancies reappear and even widen, with a higher proportion of women than men being categorised as working poor (Figure 3). A noteworthy finding in this case is that the proportion of men who are among the working poor has actually declined substantially from 2000 to 2006, falling to just 1.9% at the last measurement, while the proportion of women in this category was substantially higher at 20%.

Figure 3: Proportion of self-employed people defined as working poor

se0910029q.tmp02.jpg

Source: SCB, 2007

1.3 Please outline the main findings of any research studies which have been undertaken in your country on the working poor or on low pay, more generally, and what they reveal about the characteristics of the people concerned and the jobs that they do and how these might be changing over time.

Since the issue of the working poor is a recent field of interest in Sweden, it was not possible to identify more than one research article written on this particular subject. The latter research (Halleröd and Larsson, 2008) analyses the characteristics of the working poor in Sweden and the actual reasons for their poverty. Halleröd and Larsson conclude that in-work poverty is a growing but relatively uncommon phenomenon in Sweden. They find a clear connection between blue-collar service workers and in-work poverty – one that seems to be increasing over time. Other characteristics of the Swedish working poor are, according to the study, as follows.

  • Women with temporary employment contracts have an increased risk of in-work poverty.

  • The highest rate of in-work poverty risk is found among self-employed persons – however, these figures should be interpreted carefully since there is a risk of measurement problems due to the tax system. Swedish self-employed persons may gain other resources from the company other than what is measured as income in the statistics.

  • In-work poverty in Sweden is mainly a problem for single-person households with no children.

  • It is predominantly the younger section of the workforce that is affected by in-work poverty.

Halleröd and Larsson finally conclude that the majority of working poor in Sweden are in this situation because they have been partly out of work during the year in question. The problem of the working poor is therefore one of unemployment rather than low wages.

The study does not provide any evidence of whether or not in-work poverty is mainly a problem affecting migrants or Swedish workers.

2. Policies towards the working poor

2.1 Is the issue of in-work poverty seen as an important problem in your country for the government to address? Has the issue become more or less important in the policy debate over recent years? To what extent is there seen to be a conflict between reducing the number of working poor in your country and increasing the number of people in work?

There has been little or no debate on the issue of in-work poverty in Sweden, since it is not really regarded as a problem. In this country, poverty issues are still mostly discussed in relation to unemployment. However, some of the experts interviewed for this study believe that it might increasingly become a subject for debate, but that it is still not regarded as a problem. Hence, the conflict between reducing the number of working poor and increasing the number of jobs is also rather non-existent. The low interest in these issues in Sweden is related to the compressed wage system, with small differences being evident between the wage segments. Where the working poor is an issue, it is discussed in terms of unemployment rather than low wages.

2.2 What kinds of policy have been devised to address the Working poor issue in your country? On which particular area have national policies tended to focus: labour market, social protection, fiscal policy or some combination of these policy areas? Which particular groups are policies targeted at: workers, employers, families?

No direct policies have been launched to reduce the number of working poor in Sweden because, as already outlined, the phenomenon is not regarded as particularly problematic in the country. Indirectly, the inclusive collective agreement system can be regarded as a way to reduce the amount of working poor, since many agreements provide for minimum wages and hence reduce the proportion of people on very low salaries.

Another indirect policy devised to increase the net income of those with the lowest income is the in-work tax credit, which was launched in January 2007. The purpose of this tax credit is to create an incentive for people to work rather than to be dependent on allowances (SE0810039I).

2.3 Please describe the main measures taken for improving the income situation of the working poor. Are there any fiscal measures in place, in the form of tax credits, or in-work benefits more generally, for maintaining/raising the income of those in employment with low earnings? Are there any social transfer schemes in place to ensure that income of households exceeds a minimum level, even if the people in the household are in work? If so, please outline their main features, including whether or not they apply to the self-employed as well as employees.

There are no statutory regulations in place to reduce the number of working poor in Sweden. Nevertheless, minimum wages are often negotiated in many low wage risk agreements. In addition, unemployment insurance covers temporary periods of unemployment – corresponding to the idea that in-work poverty is actually an unemployment problem – as well as supplementing the wages of people only working part time. The regulations concerning unemployment insurance have however changed recently. Since 1 January 2008, part-time workers have only been entitled to receive unemployment benefits for a maximum of 75 days, as opposed to the previous maximum of 300 days (SE0711029I). This could therefore imply an increased risk of in-work poverty for the individuals affected.

2.4 Please assess the role minimum wage legislation plays in limiting the number of working poor. Please indicate the nature of the regulation (statutory/legislative/collectively agreed/sectoral) in your country and how the minimum wage varies between different groups of worker.

As mentioned, the minimum wage is not regulated by law in Sweden but is often collectively agreed upon, especially in low wage risk sectors. The researchers interviewed for this study have somewhat different opinions about whether the minimum wage plays a role in reducing the number of working poor. Halleröd believes that the minimum wage is the reason why there is a low proportion of working poor in Sweden today. Conversely, Larsson does not think that a raised minimum wage would mean fewer working poor since there are so many other factors affecting the phenomenon – such as the income of one’s partner or spouse and frequency of temporary employment. However, he adds that it could become a problem if the minimum wage was to be reduced.

2.5 How effective are the policies in place for reducing the number of working poor? Please refer to any survey, research studies or policy evaluations which have been undertaken to assess the measures in place.

Since there are no policies to this end, no research has been conducted on their potential efficacy.

3. Attitudes of the social partners to the working poor

3.1 What is the attitude of the social partners in your country to the issue of in-work poverty? Is there any debate on the relative priority to be given to the quality of jobs and working conditions as against the quantity of jobs? What has been the impact of the current economic recession on their positions and on the actions taken towards reducing in-work poverty?

In general, the debate on in-work poverty among the social partners is rather limited. The problem is discussed mainly through the agreement negotiations, where the issue of minimum wages is in many cases central. In the Swedish Trade Union Confederation (Landsorganisationen, LO), which represents the sectors at greatest risk of low wages, it is regarded as a particularly difficult question: employers want to set wages after productivity, that is, a wage that is often much lower than today’s minimum; on the other hand, LO wants to maintain the salaries and prefers taking initiatives to raise productivity, such as education and in-work training.

The Confederation of Swedish Enterprise (Svenskt Näringsliv) has made no reference to the issue of the working poor. The main problem, according to the confederation, is that many people are being shut out of the labour market because of the high initial salaries, which do not correspond to employees’ productivity; at the same time, the tax system and labour market regulations are keeping young people and migrants out of work.

3.2 Do trade unions have explicit policy proposals for reducing the number of people on low wages? If so, please outline the main features of these. Do such proposals include complementary schemes on healthcare, pensions and family support to help increase the effective income of workers? Do trade unions see a specific role for themselves in implementing and managing such schemes? What level of importance is attached to reducing the number of working poor in relation to creating more jobs or keeping more people in employment?

All of the trade unions believe that it is one of their main tasks to ensure that everyone can receive wage increases and that those at the lowest level of the income scale can make ends meet. It is in the Swedish trade unions’ interest that wage differences remain as low as possible. The trade unions also believe that such issues should be collectively negotiated and not statutorily regulated. However, none of the umbrella organisations for trade unions in Sweden has outspoken policy proposals for the working poor as a group, which is most likely due to the fact that the phenomenon is not that common in Sweden.

3.3 Do employers generally support measures for reducing the extent of in-work poverty? If so, indicate the principal measures they support and implement themselves such as respecting minimum wage levels, ensuring adequate basic rates of pay, paying suitable amounts for working overtime or in bonuses.

Since in-work poverty is not really considered a problem in Sweden, opinions are divided about whether or not the employers support the cause of reducing the number of working poor. Some of the trade union representatives state that the employers seem to be supportive because of their willingness to negotiate minimum wages. Others believe that there is no response among the employers and that their general attitude is that wages are too high and do not correspond to the employees’ productivity.

While the Confederation of Swedish Enterprise concedes that it does want to offer as high wages as possible, it argues that the wages must correspond to productivity. Otherwise, the high initial salaries will prevent young people and migrants from entering the labour market, something that will result, for example, in the high levels of youth unemployment that are evident today.

4. Effect of present recession on in-work poverty

4.1 Is there any evidence that the number of working poor has tended to increase during the present recession (as a result of reduction in wages and/or working time)?

There is no research or statistics in this area thus far. Hence, there is no evidence that in-work poverty has increased due to the economic recession. However, according to the researchers interviewed for this study, the trend might actually be the opposite. Since the working poor are most likely those with low wages and temporary employment contracts, they probably face a higher risk of unemployment during times of economic crisis. This does not mean that these individuals are no longer poor but that they are no longer ‘working poor’.

However, it is often argued that the current economic recession has affected men foremost, due to the heavy layoffs in male-dominated sectors. According to Larsson, in-work poverty is often determined by the employment status of the person’s partner or spouse. Therefore, if men are unemployed, their spouses – often women with low salaries, working for example in healthcare or other service occupations – might end up as working poor, due to the household context. In this way, the economic crisis might cause an increase in the number of working poor – although there is no direct proof of such a development.

Nonetheless, in some collective negotiations, the social partners have reached compromises in order to avoid dismissals as an effect of the economic recession. One example is the recent agreement between the Union of Metalworkers (IF Metall) and the Association of Swedish Engineering Industries (Teknikföretagen), where reduced wages are compensated by one day’s extra vacation. Such examples could potentially affect the number of working poor (for more information on the temporary layoff agreements, see SE0903019I and SE0904029I). However, as Hallröd outlines: ‘the Volvo workers will have to see their wages go down a whole lot before they become subject to in-work poverty and the industrial workers are far beyond that’ [free translation].

4.2 Have any surveys or studies been launched since the crisis started to assess the effect on the working poor and to monitor the numbers involved? Please give details of such surveys or studies (their objectives, the approach adopted, the institution in charge, the main findings and so on).

No such surveys or studies exist thus far.

4.3 Have any policy measures been taken to reduce the possible effect of the recession on the working poor?

No policy measures have been adopted to this end.

Commentary

Since the debate on in-work poverty is quite rare in Sweden, and mostly regarded as a problem for the United States (US) and in some respects also other parts of Europe, the in-country research in this area is limited. As a result, for the purpose of this study, it was decided to gather information from the only two researchers that have actually dealt with the issue. The sparse material in this comparative report is therefore due to the lack of material.

One important aspect not covered by this report is the incidence of working poor among illegal immigrants, which is virtually impossible to uncover but nevertheless just as interesting. However, the researchers interviewed for this study do not believe that there are very many people in this category in Sweden, although they do exist and are probably often very poor. Another group of interest concerns foreign workers coming to Sweden, who are not covered by Swedish collective agreements and hence by the minimum wages negotiated in such accords (see, for example, the Laval case SE0905029I). As this study indicates, studies on migrant workers at risk of being among the working poor are non-existent. There are also no statistics on this issue.

References

Halleröd, B. and Larsson, D., ‘In-work poverty in a transitional labour market: Sweden, 1988–2003’, in Andreβ, H-J. and Lohman, H., The working poor in Europe – Employment, poverty and globalisation, Cheltenham and Northhampton, Edward Elgar, 2008.

Moderaterna (Moderate Party) ‘Skattechock – frågor och svar om jobbskatteavdraget’ [Tax chock – questions and answers about the job tax deduction].

Sweden Statistics (SCB), Survey of living conditions (ULF), SCB, various years.

Lisa Olsson, Oxford Research